Posted on 20th May, 2019 | Category: Business | 2 min read
Have you been hounded by a telemarketer offering pre-approved personal loans? Or received a slew of e-mails regarding the same? My guess is that your answer is yes to both! You may pay heed to these offers or write them off as a mere gimmick, but the fact of the matter is that more and more people are actually availing these personal loans today. Gone are the Malgudi days in which people had to work hard to save money to afford a vacation or even a mobile device for that matter. We live in a fast-paced world driven by ‘click-of-a-button’ convenience.
What is driving this phenomenon?
Advertising: The advent of social media and increased connectivity has increased marketing reach and has provided a portal for advertisers to connect with their consumers with ease. Advertisers spend an unfathomable amount of money on understanding consumer sentiment and mapping behavioural patterns. They come up with innovative (and often intrusive) ways to push their products. We have moved from a world of mass marketing through newspapers, magazines and television to targeted marketing through the internet. Subliminal and perceptible messaging through advertising has had a marked effect on consumer spending.
Financial Institutions (FI) are leveraging technology to acquire and analyse data, to build better risk models and to make quick and responsible lending decisions. They are now able to offer credit to consumers who might not have the financial qualifications to access a loan through traditional means. By serving this vast unbanked population, FIs can finance people’s latent aspirations which will, in turn, boost the economy. Digital channels improve the reach of FI at a low cost.
There is a constant need for better products. Consumer culture is dynamic and centred around market innovation and creativity.
Consumers are always looking to improve their living standards and lifestyles – they strive for extravagant homes, expensive vehicles, trendy clothing, exclusive schools and exotic holidays. By offering easy financing, companies are aggressively competing for customers. This has led to decreased pocket pinch for the consumers.
As per data from the Reserve Bank of India, the share of retail loans in total outstanding non-food credit of banks has increased from 18% in March 2014 to 25% in March 2018 and is set to account for most of incremental growth in the bank credit in the near term. This pattern of increased consumer spending is beneficial to Suppliers, Consumers, Financial Institutions and the Indian Economy.