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  • Writer's pictureAnushka Trivedi

The Psychology behind the Growth of Digital Lending in India

I asked my boyfriend to give me a pair of shoes I liked a lot, after all, it was my birthday month. 

When he looked at the price, he totally refused to buy them. After pushing harder, he finally gifted me the same pair of shoes on my birthday. 

Obviously, he didn't earn so-called quick money from trading in the stock market!!! 

But, when I asked about the money, he said, "It's Buy Now Pay Later, baby." 

Are you getting my point? Access to credit has become so easy these days that one does not have to think about spending. You can even buy at credit at the point of sale.

Earlier, the iPhone was considered a luxury in middle-class society. But, now, every other person is able to buy a mobile phone worth Rs 50,000 to Rs 60,000 only because of easy accessibility to credit via digital lending platforms.

Here I want to explain 3 psychological factors that are pushing hard toward the growth of digital lending in India. These psychological aspects of consumers are as follows-

1. Overexcitement among Youth

India has among the highest young population in the world, with almost 808 million young people. While taking credit, almost 33% of the credit is taken by millennials aged between 18-25 years, a study conducted by Freo (a neo-banking platform).

It clearly indicates that the younger generation is more likely to buy commodities, party hard, or live on credit. It means if young generations get excited about spending on something, it could be anything, whether traveling or spending on raising their lifestyle like branded apparel, they will definitely go for availing credit facility.

2. Lack of Patience

I saw a really cute purse in my colleague's hand. It made me feel irresistible to buy the same. As usual, it was the month's end, and I was left with very little money. The very next day, a notification pinged my phone where the same product was on discount and available to be bought on EMI. How could someone resist when the offer was for 1 day only?

Everyone deep down knows that it is a trick by companies (both lending apps and brands), but none has that much patience to wait for the salary day and end up buying "wants" on EMI.

According to an RBI report, less than 30 days of loan tenure takes up the maximum portion of NBFCs, making up more than 37% of their portfolio. It clearly indicates that borrowers tend to buy impulsively due to a lack of patience.

3. Wants feels like Needs

There is always a point in time when the decision of differentiating between want and need becomes impossible because of social media presence and the attitude of unsettlement.

The iPhone must justify its feature as no other mobile phone provides it. But in your mind, the premium quality product is the need of the hour. Not because you have evaluated the differentiation but because social media and your friends have hyped it.

These above-mentioned psychological reasons are enough to lead the growth of India's digital lending industry. Let's understand how big the market is-

Behind every buyer, there is a seller earning profits. According to a report by Inc42, India's skyrocketing digital lending market growth is set to hit $1.3 trillion by 2030, four times today's growth.

On the other hand, a report by Pwc stated that India is going to witness a 48% growth rate in 2023. It might be one of the most significant reasons why venture capitalists, angel investors, and seed funder capitals are looking forward to investing in the industry. In Q2 of 2022, Indian FinTech companies working in the digital lending space saw the highest inflow of funding – $902 million across 28 deals, according to Financial Express.


Individuals will never compromise on their dreams and the ultimate happiness they will get by possessing materialists in their hands. There is also a justifiable reason for that. India has already suffered a lot due to the gap between rich and poor. Now is the time when the gap is the lowest, and people have started to live their lives in a way that they can raise their standard of living.

As per the basic economic concept, when someone takes a shift from one income category to another (higher one), initially, the expenses are higher, but after a point of time, the expense chart draws a horizontal line. Even if it is an increasing chart, the rate will be significantly lower than the initial expenses.

The increasing standards of living of individuals are leading to the vast success of the digital lending industry in India. However, it is my theory to understand the psychology behind the drastic growth of the lending industry in India, which includes many other factors like the growth of MSMEs and SMEs.

These psychological factors might be helpful in engaging with your customers while planning a marketing strategy for the digital lending platform.

Let me know if such factors are helpful for you.

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