1FEATURED INSIGHTS | UNDERSTANDING THE INDIAN SHOPPER-LOANS Copyright © 2014 The Nielsen Company

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F E AT U R E D I N S I G H T S

L O A N S: W H AT ’S T H E B OT TO M L I N E F O R C O N S U M E R S ?BY: SUBHASH CHANDRA, EXECUTIVE DIRECTOR, NIELSEN INDIA

• 71 PERCENT OF LOAN CUSTOMERS SOUGHT ADVICE FROM THEIR FRIENDS AND FAMILY BEFORE FINALISING THE DEAL

• ONE OUT OF EVERY FOUR CUSTOMERS DID NOT TAKE A LOAN FROM THEIR PRIMARY BANK BECAUSE OF LENGTHY PROCESSES, HIGHER INTEREST AND PROCESSING RATES

• 3 OUT OF 10 CONSUMERS AVAIL OF LOANS EARLIER THAN PLANNED BECAUSE OF PROMOTIONAL OFFERINGS

• AS MUCH AS 75 PERCENT OF CONSUMERS APPROACHED THREE DIFFERENT BANKS/NBFCS WHILE RESEARCHING LOAN PRODUCTS

DELIVERING CONSUMER CLARITY

In the age of consumerism, where almost everything is available on credit

and can be repaid in monthly installments, nothing seems unaffordable

to the urban Indian consumer. Considering that the Indian loan market

is expected to grow at a compound annual growth rate (CAGR) of nearly

19 percent between 2011 and 2016, financial institutions should pay

attention to the journey that the average consumer embarks on when

securing a new loan.

2 FEATURED INSIGHTS | UNDERSTANDING THE INDIAN SHOPPER-LOANS

Declining interest rates, faster processing times, income tax rebates,

reduced paperwork, flexible repayment options and attractive schemes

have all contributed to significant growth in the Indian loan market.

And among the various loan types, home loans account for the lion’s

share at around 46 percent.

As per a recent study conducted by Nielsen to understand the process

of availing loans, we looked at the customer’s pre and post purchase

journey.

GETTING IT RIGHT

Since loans are long-term commitments, consumers rely on their

most trusted associates before taking the plunge. Hence, they reach

out to their Friends & Family (71%) and Banks (68%) to help steer

their decision making.

While the discussion with friends and family mostly revolves around the

loan amount and interest rate, 66 percent of consumer queries centre

around choosing the bank, dealer or non-banking financial company

(NBFC) that will issue the loan. This implies that consumers like to

explore options in the market even if they trust their primary banking

partner.

ONE OUT OF EVERY FOUR CUSTOMERS DID NOT TAKE A LOAN FROM THEIR CURRENT BANK DUE TO LENGTHY PROCESSES, POOR INTEREST RATES AND HIGHER PROCESSING CHARGES. THIS HIGHLIGHTS AN OPPORTUNITY FOR NBFCS IN THE HOME LOANS MARKET.

3FEATURED INSIGHTS | UNDERSTANDING THE INDIAN SHOPPER-LOANS Copyright © 2014 The Nielsen Company

Source: Nielsen

34

16

28

43

MALE

SPOUSESELF

FEMALE

DECISION MAKING

Few consumers make loan decisions all by themselves, but there are

those that do (25%). The impending decision of availing a loan is taken

primarily in consultation with spouse (36% cases).

Our study found that promotions play a key role in attracting customers

to loan products. In fact, 31 percent of consumers avail of loans earlier

than they planned because of promotional offerings. Comparatively,

more than two out of five (44%) consumers wait for better deals before

availing a loan.

4 FEATURED INSIGHTS | UNDERSTANDING THE INDIAN SHOPPER-LOANS

Nielsen attributes last minute changes to availability of better loan

features, promotional offers and additional information shared by the

salesperson.

REASONS/PARAMETERSCHOICE- BANK/

DEALER/NBFCLOAN AMOUNT INTEREST RATE LOAN TENURE

Availability of better loan features 94% 77% 54% 54%

Info shared by salesperson 51% 71% 51% 54%

Variation in sanction amount 29% 44% 42% 21%

Promotions 9% 27% 45% 34%

Source: Nielsen

Source: Nielsen

All figs. in %

CRITERIA CHANGE

CHOICE- BANK/DEALER/NBFC

LOANAMOUNT

INTERESTRATE

LOANTENURE

4555

38

62

29

71

26

74

UNCERTAINTY FACTOR

While most of the details pertaining to loans are closed beforehand,

some aspects, however, are often left undecided in consumers’ minds.

This is exactly where the influencer steps in and can make final

alterations and recommendations, and this is where the loan can get a

little more customised to meet one or more product parameters.

We found that 45 percent of respondents changed the bank or NBFC

that they had originally planned to take a loan from. Similarly, nearly two

out of five (38%) changed the loan amount they had initially intended.

CHANGE IN PRE-LOAN CRITERIA NO CHANGE IN PRE-LOAN CRITERIA

5FEATURED INSIGHTS | UNDERSTANDING THE INDIAN SHOPPER-LOANS Copyright © 2014 The Nielsen Company

PROCESS CYCLE

The study found that consumers favour a quick turnaround time for

loan processing - from applying for the loan to the final step of getting

the cheque. This is a critical factor, because as many as 75 percent of

consumers say they approach three different banks or NBFCs when

seeking their loans. They also say they visit the branch, on an average,

about three times in order to complete the loan process. Banks can

play a key role by providing all of the information regarding their loan

products at one time to reduce the number of times a consumer must

visit the branch.

Moreover, on an average, loan disbursal takes about one month.

Financial institutions stand to gain more customers if they are able to

cut down the process cycle.

Banks continue to be the largest channel when it comes to handling

consumer loans. It’s also interesting to note that the internet plays a

significant role when it comes to vehicle loans.

Out of the total loan applications cleared through the bank channel,

62 percent took the loan from their existing bank, which reiterates the

need to retain and develop the relationship with existing clientele. In

fact, most of the consumers who avail of loans for the first time, take

it from their existing bank. With banks holding the major share of loan

disbursals, there is also a greater need to enhance customer experience

and add to customer delight during their visit to the branch.

KEY CHANNELS (%)

62

2111

6

BANK NBFCINTERNETAUTO LOAN

MONEY LENDER

6 FEATURED INSIGHTS | UNDERSTANDING THE INDIAN SHOPPER-LOANS Copyright © 2014 The Nielsen Company

FAMILIARITY IS THE KEY DRIVER OF THE PERSONAL LOAN CATEGORY – CROSS-SELLING PERSONAL LOANS AT THE BANK WOULD CONTINUE TO BE A MAJOR SOURCE OF BUSINESS AS BANKS ARE THE LARGEST SOURCE OF INFORMATION FOR CUSTOMERS ACROSS REGIONS.

Source: Nielsen

FIRST TIMERS AVAILING LOAN FROM EXISTING BANK

HOME LOAN AUTO LOAN PERSONAL LOAN

95% 93% 84%

7FEATURED INSIGHTS | UNDERSTANDING THE INDIAN SHOPPER-LOANS Copyright © 2014 The Nielsen Company

SUBHASH CHANDRA,

EXECUTIVE DIRECTOR

NIELSEN INDIA

ABOUT THE AUTHOR

Sachin Punni from the Nielsen Finance team contributed to

this issue of Featured Insights.

ABOUT NIELSEN Nielsen Holdings N.V. (NYSE: NLSN) is a global information and

measurement company with leading market positions in marketing

and consumer information, television and other media measurement,

online intelligence, mobile measurement, trade shows and related

properties. Nielsen has a presence in approximately 100 countries,

with headquarters in New York, USA and Diemen, the Netherlands.

For more information, visit www.nielsen.com.

Copyright © 2014 The Nielsen Company. All rights reserved. Nielsen

and the Nielsen logo are trademarks or registered trademarks of

CZT/ACN Trademarks, L.L.C. Other product and service names are

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8 FEATURED INSIGHTS | UNDERSTANDING THE INDIAN SHOPPER-LOANS