Hello reader,
There's an old joke about a fellow who, when asked why he robs banks, says simply: "Because that's where the money is." Simple logic, right? But it seems the money in today's world isn't just in banks but in the ease of accessing credit right from our pockets, aka, smart phones.
Remember when borrowing money was reserved for the big emergencies in one's life, be it a medical bill, some unexpected repair for the house, or possibly the education of a child? Fast forward to today, and the landscape has changed dramatically. According to Home Credit India's latest report, How India Borrows, 44% of borrowers in 2023 took out loans for consumer durables like mobile phones and home appliances. RBI data confirms this shift.
It's as if we've decided that owning the newest smartphone is as essential as food and shelter. But what's driving this shift from borrowing out of necessity to borrowing out of desire?
Well, for one, digital lending platforms are making loans feel less like a financial burden and more like an opportunity. 30% of consumers now prefer taking loans through digital platforms, with mobile apps emerging as the go-to medium for seamless transactions. This trend is particularly strong among Gen Z and Millennials in India’s Tier 1 and 2 cities, who are embracing the ease of digital credit.
Of course, it’s not just about technology. There’s also the powerful pull of aspirational consumer culture—we see something on Instagram, we want it, and now we have the means to get it. Add to that the pandemic-driven shift in spending priorities, where we all decided it was time to upgrade our home entertainment systems or buy the latest gadget, and you have the perfect storm for lifestyle-driven borrowing. It's the classic present bias in action: we overvalue immediate rewards (a shiny new phone) and underestimate future costs (those pesky EMIs).
But there's a darker reality. The same report shows that despite the widespread use of digital platforms, only 23% of borrowers actually understand how their personal data is being used by loan apps. Think about that for a second—most people are handing over their sensitive information without knowing what happens next.
So, where does that leave us?
Are we just being nudged into a "borrow now, think later" mentality,
or are we in control of our choices? Perhaps the answer lies somewhere in between or perhaps not.
But one thing's for sure: borrowing has never been this easy—or this complicated. The challenge ahead is clear—can we truly understand what we’re signing up for, even as it gets easier to do so?
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