India's $550 billion shared credit market ripe for digital disruption

02 August 2021 Consultancy.in 3 min. read

Sharing money with friends and family is a bedrock of Indian society, although financial services providers have struggled to monetise this activity. Yet according to a new report by RedSeer Consulting, a major hidden value of the current market setup could be unlocked – with the help of technology. 

The researchers report that over $200 billion is loaned out informally – mostly in cash – to friends and family every year in India, topped off with more than $300 billion of spending power shared with dependents. As such, this adds up to nearly $550 billion in latent value. 

“The concept of sharing finances is very in-built in our society but there exists a pool of un-used credit limit which is untapped. This is essentially the portion of credit limit which card users do not end up utilising but it is not readily transferable to others who may need it,” explained the RedSeer Consulting report.

Untapped potential of India’s shared credit market

Technology could help monetise this market – aided by wider economic shifts. India’s smartphone userbase currently stands at a staggering 500 million people. By 2025, Boston Consulting Group predicts that online access will have spread to 850 million people

Among a host of other benefits, this paves the way for more digitally-backed financial inclusion, given that Indians are the world’s top adopters of FinTech products. RedSeer’s study highlights two examples of FinTechs – Xare and Fampay – that are using this conflation of factors to their advantage, specifically in the context of shared credit. 

Bangalore-based Xare has developed an app that allows users to repurpose the un-used credit on their debit/credit cards to provide financing for friends – who don’t have to be account holders. Benefits include instant remittances, sharing of finances with dependents, and a wider step towards financial inclusion.

FinTech fundraising is steadily on the rise in India

Also based in Bangalore, Fampay is designed specifically for parents looking to share money with their children. Account holders can issue prepaid credit and debit cards to children under the age of 18, allowing them to independently and securely conduct online and offline payments. 

And many more solutions are in development – spurred on by more than half a trillion dollars in untapped potential. The good news is that innovators have plenty of financing on offer. Per the researchers, FinTech fundraising in India rose from just over $500 million in the 2020 commercial year to a staggering $2.6 billion in the first half of this year alone.

For perspective, China is one of the world’s leading addressable FinTech markets – but has trailed India in FinTech financing since the 2019 commercial year, and has raised one ninth of India’s figure for the first half of this year. “This is a clear indication of the strong offerings that India is coming up with along with the increasing users base, increasing adoption especially after Covid along with other factors,” the report concluded.