India’s fintech ecosystem, especially the lending-tech one, spends exorbitant amounts of money on advertising and promotional activities to woo customers and drive business in a sector that operates on thin margins.

The top 28 Indian fintech startups have spent Rs 5,495 Cr ($670 Mn approx) in FY22 on advertising, promotions and other marketing activities, according to a report on the sector by a tech site.

Lending tech startups led the pack, indicates the data. Top spenders among them are Navi (Rs 223 Cr), KreditBee (Rs 157 Cr), Rupeek (Rs 130 Cr), ZestMoney (Rs 98 Cr) and Money View (Rs 40 Cr), with few spending much more than their annual revenue.

Their multimedia marketing campaigns primarily include commercials on TV, OTT, digital, and social media, industry experts say. They seek to ride on the popularity of cricket as well. ZestMoney, for instance, has Sachin Tendulkar as its brand ambassador while Navi has onboarded MS Dhoni. KreditBee has partnered with RCB, one of the Indian Premier League (IPL) franchises.

“Startups, especially those who are trying to induce new habits in customers, need to spend on advertising to attract and acquire customers to survive and grow. Ed-tech, health-tech and D2C apps have been doing so for a couple of years,” says an ad executive.

 Rise and Rise

Digital lending companies are getting increasingly popular as they are making lending money easy, sometimes within hours, with minimal documentation using the companies’ improved digital infrastructure. Many of them offer personalized repayment plans as well.

“These features have enabled easy access of consumer, personal and business loans,” says Lloyd Mathias, Business Strategist and Independent Director on Corporate Boards.

He added, “It is estimated that about 36% of these customers are new to credit. Growth in digital public infrastructure and good regulatory action have helped the sector grow exponentially. A report by Experian indicates that digital lending has helped in 85% reduction in costs thanks to the use of eKYC.”

Sajal Gupta, CEO of Kios Advertising agrees with Mathias. He explains, “The AI & ML technology allows online loan firms to assess the creditworthiness of the borrowers and also make a more focused loan offering that has helped in their growth. Moreover, they cater to smaller loan ticket sizes in large volumes focused on the urban individual consumer and the MSME sector, which have been underserved by the traditional financial channels.”

“The digital lending firms benefit from the better margins they are able to generate compared to other payment and financial services, which allows them to be more aggressive with their marketing,” Gupta adds.

 No funding winters

While the Indian startup ecosystem in general continues to face fund crunch, there is no dearth of investors when it comes to the burgeoning lending tech market which reached $270 billion in FY22 and is expected to cross $1.3 trillion by 2023.

Lending tech firms pocketed ? of the total investment ($896 Mn) coming to the Fintech sector in the Q2 of FY24, according to the report.

“Investors and venture capitalists are increasing their outlays for lending tech firms, thanks to the rapid growth of this sector,” says Mathias.

Post the pandemic, fintech lenders as well as large NBFCs have seen a massive jump in business, says Mathias, adding, “India is leading the way in the digital sector and financial inclusion on the back of robust digital public infrastructure.  Prospect for lending tech will be very bright in the foreseeable future.”

The lending tech segment, which includes firms that operate into B2B, B2C and market aggregator spaces, is growing at the CAGR of 22% and holds great promise in the coming days, the report stated.