One likely impact of the government’s decision November 8 to withdraw Rs 500 and Rs 1,000 notes from circulation is expected to be a greater push towards a cashless economy.
Alternative lending firms, digital payments companies and financial marketplaces are forecasting this will compel more people to transact online, including those currently outside the financial system, which in turn would significantly lower the costs of digital transactions.
“The first few unbanked segments that are likely to be forced to increase or begin their transactions through digital platforms will be the drivers, kirana stores, small retail shops and travel agent businesses,” said Gaurav Hinduja, Co-Founder of online lending platform Capital Float.
“The loan repayment process, which is through a digital format, will bring down the operational costs to nil, rather than relying upon collection of funds.” Hinduja anticipates an increase in borrower data since many small and medium enterprises such as travel agencies would be forced to transact on online travel platforms such as MakeMyTrip and Yatra.
“The percentage of travel agent businesses through online transactions will increase multifold, and it will be easier to give them largerticket loans with the increase in data. We expect at least a three-fold increase in transactions from the unbanked segment,” said Hinduja.
Capital Float expects to facilitate loans of Rs 50,000 to Rs 2 lakh for about 1,000 store owners a month, and car loans of up to Rs 6 lakh for at least 500 drivers a month by January, up from a few hundred loans being disbursed now.
“We will be offering products for other similar segments within the blue-collar working space in the months to come,” said Hinduja.
“The unbanked segments’ digital footprint is going to increase through this (government) move, allowing greater access to credit and increase in data availability,” said Rajat Gandhi, founder of peer to-peer lending platform Faircent.
Source: The Economic Times