Why fintechs are banking on co-lending partnerships for revival

Why fintechs are banking on co-lending partnerships for revival

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Pratik Bhakta

137 reads
author-image

Pratik Bhakta

137 reads

Digital lending players have been reeling from the double blow of Covid-19 and a bad asset pile-up. Co-lending with banks is currently their best bet for a turnaround. But are the legacy players as excited?

May 18, 2022

9 MINS READ

A relationship framed as the old guard versus upstarts in finance is shaping up very differently. Instead of competing, banks and fintechs are increasingly working together to co-lend, realising that life’s better with company. 

This marriage of convenience seemed unlikely just a few years ago as fintechs built large digital-lending books, handing out loans and absorbing risk all by themselves. The hard realities of the sector are now compelling them to seek the comfort of partnerships, where the exposure is shared.

Indifi, Lendingkart, Paisalo, LoanTap and others are tying up with major public-sector banks to co-lend. Multiple such pacts have materialised over the past 18 months. In this model, banks provide the bulk of the loan and pocket the cream of the interest. Startups make money by fetching borrowers through their apps, which is called origination business in industry-speak.

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