Challenges & Opportunities in the Indian Debt Relief Market
The Indian Debt relief market is very different to that of developed economies like the US & Europe because of the unique consumer behavior. Consumer intent, willingness to resolve and commitment are few major driving factors of a debt relief program and it is not easy for Indian consumers to realize the importance of staying committed to a debt relief program as they have not witnessed the success of such services.
Let’s look at few challenges that exist in the Indian Debt Relief Market -
1. Trust deficiency in consumers due to past experiences with collectors –
Due to non-existence of debt relief services and bad experience with collectors in the past, the Indian consumers operate from a trust deficient mindset while exploring debt relief services. Sadly, consumers are not to be blamed for this as they were on the receiving end of very harsh & coercive collection practices and even frauds in many cases which leave a bitter taste in their mouths.
2. Capturing/gauging consumer’s intent to resolve -
It is extremely important for a debt relief platform to gauge the consumer’s intent to resolve their debt as it is the most important driving factor for the entire program. Because no matter how precise or accurate the criteria for enrollment is, success of a debt relief program depends on the consumer’s willingness and commitment to resolve their debt.
At FREED, we have built robust algorithms and unique counselling techniques which enable us to gauge the consumer’s intent and willingness to resolve their debts.
3. Newly emerging space, no roadmap to follow -
Unlike many other industries which already exist, debt relief in India is a new category which is being built by FREED. With no roadmap to follow, it is challenging for a company to build from scratch while keeping the business, vision and mission intact.
FREED is totally aligned to its business goals, vision and mission of making the Indian consumers get rid of toxic debt and regain financial freedom.
4. Financial literacy -
Despite the increase in penetration of Mobile Phones which has led to rise in lending of credit via Application Loans and other digitally enabled/driven products, the Indian consumers are not really literate (financially). In fact, as per a 2023 press release of National Finance Olympiad, only 27% of the Indian population are tagged as FINANCIALLY LITERATE vs 67% of Indians have taken at least one personal loan in their life as per Saral Credit’s survey published in 2023.
The gap clearly indicates that less than 50% of the consumers currently availing credit are financially literate and hence are not good at servicing/managing debts let alone exploring a debt relief program once the debts pile up and become toxic.
While the Indian debt relief market comes with its own unique challenges, it also has a lot of opportunity areas. Let’s look at few -
1. Inefficiency of collection practices -
Despite the fluctuations in NPA rates of the unsecured debt in India, the distressed borrowers get close to no or hardly any relief from the currently existing methods/techniques of collection. The existing collection framework is not designed keeping in mind the borrower’s current situation/hardship/affordability/intent to resolve the debt. Hence, the efficiency of collection practices is very low in India.
Whereas a Debt Relief Platform like FREED, designs products/services while keeping in mind the consumer’s hardship, intent to resolve & affordability. Which not only provides a customized debt relief program to the consumer but also ensures that banks recover money from written off accounts where collection activities were hardly effective.
2. First Mover Advantage –
Debt relief as an industry does not exist in India’s post lending ecosystem, rather it is being built and is being built by FREED which is set to become the pioneer of this space. Being the first mover not only enables you to stay ahead and carve a path for future players but also brings an opportunity to be the most trusted and largest player in the industry.
At FREED, we are driven and truly live by Empathy, Passion & Service. Which are the most important traits to have while building a debt relief platform as the services being offered are not just a financial aid/tool but a form of help to a debt burdened consumer who has lost all hopes of getting out of this trap.
3. The market size is huge -
The opportunity in terms of market size that lies ahead of FREED is $44 Bn which as per latest reports is the estimated value of stressed unsecured asset in India. We are trying to build a platform that helps any debt burdened consumer resolve their debts and regain financial freedom. While the current TAM is huge, it is only growing given the uptick in retail unsecured lending.
While the Indian debt relief market comes with its own unique challenges and opportunities, the need of these services is quite evident and only increasing day by day. We at FREED are totally committed to our mission of making the Indian consumers become debt free and regain financial freedom.
