Fintechs focus on secure credit; New Jersey becomes an IT hub

Fintech startups, having established credibility as providers of unsecured loans, are now entering the secured credit market. Companies like PhonePe, Cred, and Paytm are partnering with non-banking financial institutions (NBFCs) to offer these secured loans.

Current Scenario: In the unsecured loan sector, fintechs handle a significant portion of the process, from underwriting to rapid approvals. However, in the secured loan sector, they currently function mainly as sourcing channels. Fintechs act as lead generators while the lending partners handle the complex task of assessing the underlying assets.

Customer Acquisition: Industry experts note that this shift is still in its early stages. Secured credit requires more thorough evaluation compared to unsecured lending, where borrowers might be pre-approved or quickly assessed.

“For us, fintechs are another sourcing channel; after all, prime customers are using these platforms extensively. Our direct-to-consumer channel is limited, so we aim to source high-quality customers through these fintechs,” said Sudipta Roy, CEO of L&T Finance.

Fintech Initiatives:

• PhonePe: First to launch secured loans in partnership with companies like Tata Capital and L&T Finance.

• Paytm: Has experimented with gold loans and is exploring micro-loans against property (LAP).

• Cred: Backed by Peak XV Partners, Cred, which has a strong presence in consumer credit, is also planning to enter the secured products market.

Top Indian IT firms are increasingly making New Jersey their base, with many top executives and a large number of Indian-origin engineers working in the US opting for the city.

Key Developments:

• India is New Jersey’s second-largest source of foreign direct investment, and a significant portion of New Jersey’s immigrant population is from India.

• The new CEOs of Wipro (Srini Pallia), Persistent Systems (Sandeep Kalra), and Coforge (Sudhir Singh) are based in New Jersey.

• HCLTech inaugurated its East Coast headquarters in New Jersey in June.

• Over the past two years, three of the top six Indian IT firms have expanded their operations in the state.

• Companies like Cognizant, Coforge, and CitiusTech have their headquarters in New Jersey.

Top IT Hubs in the US: New Jersey, San Francisco, Chicago, Dallas, and Atlanta are the leading hubs for IT companies.

“New York is very expensive, so people coming from India and even IT companies prefer settling in the Newark area. Proximity to New York also provides excellent flight connectivity to cover all of the US. A lot of IT company leadership is based in New Jersey,” said Avinash Vasishtha, an IT and technology globalization expert and chairman of Tholons.