A groundbreaking study done by RedSeer, which involves consulting, concludes that sharing finances is a mainstay of Indian culture, but still largely unmonetized. The report states that the informal lending among personal networks every year is more than $200 billion, mainly in cash. Furthermore, dependents have access to the shared spending power of more than $300 billion. The total of these “shared credit” resources is a jaw-dropping half a trillion dollars, which is an open invitation for fintech companies to come up with and offer legitimate, digitally-supported structures for these transactions that used to be carried out secretly.
Repurposing Unused Credit Limits via Technology
One consequence of the disruption that is most impressive is that it is, so to speak, an area of credit limits that are not used. At present, millions of cardholders only take advantage of a fraction of their allocated credit, which is a resource that cannot be easily transferred to others. Startups in fintech,h like Xa, are, along with Fampay are now working on the solutions to the problem. Xare enables individuals to share their unused credit limits with their relatives or friends who might not even have a bank account, thereby facilitating instant remittances and loans. Furthermore, Fampay gives parents the opportunity to create digital credit and debit cards for their kids, hence developing financial independence in a safe, regulated environment.
India’s Surge in Fintech Fundraising and Adoption
The move towards shared credit gets its momentum from India’s rapidly growing digital infrastructure, where 850 million is the projected number of smartphone users by 2025. Global investors have taken note of this potential; in the first half of 2021 alone, fintech fundraising in India reached an impressive $2.6 billion, which is much higher than the figure for other major markets, including China. According to analysts, the maturing of the “JAM” trinity (Jan Dhan, Aadhaar, and Mobile) is going to enable shared credit platforms to become one of the main drivers of Financial Inclusion’s next wave, which will convert informal social obligations into a regulated part of the digital economy.