Moneycontrol Pro Panorama | Fintechs are quietly winning the retail loan race

Fintechs are making credit decisions banks take much longer to arrive at.

Dear Reader,

Have you noticed the quiet but decisive shift that is reshaping India’s credit market? If not, observe any borrower’s financial journey today and you will sense a change that has been building for some time.

Retail customers--especially in metros and rapidly digitising smaller cities--are turning to fintech platforms for everything, from personal loans to quick, small-ticket credit.

No, this is not a temporary drift. This is altering the structure of the retail lending business gradually but surely.

Yes, banks still dominate the broader market, but the edges are wearing thin. For years, banks owned consumer lending through their branch networks, brand recognition and sheer financial heft.

But the new borrower is not swayed by these old advantages. What matters now is speed, convenience and an experience free of friction. On these measures, fintechs are miles ahead.

Their biggest strength is sheer immediacy. A borrower can apply, verify and have the funds in minutes. Compare this with the familiar bank routine that typically involves physical visits, repetitive paperwork, slow approvals and unclear communication.

It is a fact that many banks still continue to operate with sluggish workflows and legacy systems, while fintechs have used data, algorithms and seamless digital onboarding to compress the entire process into a few taps.

There’s more..

There is another shift underway that is less visible but equally significant. Fintechs understand today’s borrower better. They are comfortable serving gig workers, freelancers, first-time borrowers and customers with thin credit histories--groups banks often avoid because they do not fit traditional risk models.

With alternative data, behavioural insights and real-time analytics, fintechs are making credit decisions banks take much longer to arrive at.

Banks, of course, still have stronger balance sheets and regulatory weight. But increasingly, they function as back-end capital providers rather than front-facing lenders.

Much of fintech lending rides on bank money through partnerships and co-lending models. The customer rarely realises this. The fintech owns the interface, the relationship and, critically, the loyalty. Banks are at risk of becoming utilities in a market they once dictated.

There is bit of irony here..

Banks have the trust, the deposits and the brand value. Yet fintechs have captured the one territory that defines modern retail lending -- the customer experience.

As credit itself becomes commoditised, experience becomes the new currency.

This is where banks are clearly losing ground.

So, what next?

If traditional banks do not adjust course soon, banks may find themselves reduced to wholesale funders for faster, sharper fintech players. The moment for reinvention is now.

Banks need to rethink underwriting, simplify processes and invest in technology that actually transforms, not just patches over old systems. They must also adapt to the expectations of a digital-first borrower--something fintechs have already mastered.

India’s retail lending market is expanding quickly, and there is room for everyone. But leadership will belong to those who recognise where the momentum is heading.

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