Consumer borrowing patterns of 2020: Report by Algo360

By Leandra Monteiro

Algo360, an alternate data-based credit assessment platform launched a report highlighting consumer lending behaviours over the financial year 2020-2021. The platform, which analysed patterns of over 95,000 Indian users, found behaviour led financial patterns in the lending landscape of the country. These users were evaluated across demographics, income groups and varied financial histories. According to the paper, users have adapted to being conservative in their spending habits in the current course of FY.

According to Algo360, the year 2020 has seen a greater emphasis and need for alternative data, to widen old traditional data to bring more thin-filed, new to credit category people under the fold of financial inclusivity. Alternate data, as stated in the report also acted as a crucial catalyst to understand the financial behaviour of consumer and determine the credit risk associated with it. This is because there has been a lot of delay in financial reporting by banks, NBFCs, and other organizations. Thus, alternate data drives beyond traditional methods and takes a more holistic view of a user’s behaviour and their credit profiles.

Presenting the report, Amit Das, CEO and Co-founder of Algo360 said, “As the economy is adjusting to the current situation, we are always committed to driving data-based growth. This study’s data and analysis highlights that, leveraging this report can help individuals and institutes understand consumer behaviour over the year. This will guide the institutions in the direction to flow and manage best to their possibilities”.

Few key insights from the report are:

• In the month of Jan 2020, financial fluctuations were the same as last quarter of 2019.
• In the third financial quarter, there was a significant increase in salaried users compared to the start of the year.
• Post-lockdown (July 2020) there was an escalation in salaried users. The overall loan inquiry (loan applied by users) was 70%, more than in January 2020. However, during the lockdown, there was a decrease in new loan applications.
• In the month of February 2020, there were only 9.4% EMI defaults. This number saw a significant jump during the pandemic and it remained high throughout.
• In the Q4 of 2019-20, a large number of users had applied for credit cards. However, during the lockdown, there was a 98% decrease in the number of new applications.
• Untimely payment and/or defaults of credit card bills doubled in the month of March 2020 as compared to January 2020.
• With the loss of jobs, disruption in monthly inflows, and other factors reflexing in, a huge spike was observed in banking negative incidents in the month of May 2020 (where it reached a high of 38%) and the impact of the same continued even after the lockdown.
• Low (salaries less than Rs. 10k) and medium-low income (between Rs. 10,001-20,000) groups (which cover almost 80% of the sample population) were adversely affected and did not show many signs of improvement until December 2020.