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Building The Amazon For Lending | Gaurav Chopra @ IndiaLends
343 Plays2 years ago
IndiaLends brings efficiencies in the lending process by aggregating multiple lenders on one platform so that every customer can find a lender that meets their needs. Gaurav is a lending industry veteran, having worked with global lending companies. He talks about the 7 year-long journey of building IndiaLends, surviving the pandemic, and the Saas opportunities they are chasing in the lending space.
Know about:-
- Business model
- Building a plug-and-play technology for lenders
- Fundraising journey
- Future roadmap
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Transcript
Introduction to Gaurav Chopra and IndiaLens
00:00:00
Speaker
Hello, everyone. I'm Gaurav Chopra. I'm the founder and CEO of IndiaLens.com, and it's a pleasure to be on the show today.
00:00:19
Speaker
way to understand credit is to look at it not as a source of money or capital, but rather as a time travel machine. Credit makes it possible to access your future earnings today by paying a small fee.
Credit Penetration: US vs. India
00:00:31
Speaker
In a developed economy, credit is a lubricant that greases the growth engine of the economy, empowering businesses and consumers to time travel their income. In fact, in the US, the value of total credit is more than double the GDP.
00:00:46
Speaker
In India, this is only half of the GDP. This shows the massive opportunity to build credit businesses in India.
Podcast Episode Overview
00:00:53
Speaker
In this episode of the Founder Thesis Podcast, your host Akshay Dutt is talking with Gaurav Chopra, the founder of the fintech startup India Lens. India Lens brings in the efficiencies in the lending process by aggregating multiple lenders on one platform so that each customer can find a lender that meets their needs.
00:01:11
Speaker
And they have raised more than $30 million so far to help them in their mission. Gaurav is a lending industry veteran, having worked with global lending companies. And in this conversation, he talks about the seven-year-long journey of building India Lens, surviving the COVID pandemic, and the SaaS opportunities they are chasing in the lending space. Listen on, and if you like such insightful conversations with disruptive startup founders, then do subscribe to the Founder Thesis podcast on any audio streaming app.
Gaurav's Early Life and Education
00:01:48
Speaker
Actually, I grew up in Delhi. I belong to a middle class family where my father was a chariot accountant. My mother runs a small boutique for women. So they were in a way, they were both like entrepreneurs. Correct. In my schooling and college in Delhi, school was at Springbales, Dholakkwa, and that was that I went to St. Stephens College.
00:02:08
Speaker
I did an undergraduate in mathematics. So that was essentially the stepping stone into a career in finance. I started off my career with the usual internships that people do. The first internship was working with Tata AIG. They had just started operations in India in that for two, three months. Essentially, it was a good understanding of the insurance product. As an 18-year-old, I didn't really understand what these products were. So I ended up learning that.
00:02:37
Speaker
To mention the sales part, it was a good way to also nurture your selling skills. It's not easy to go and sell a product. That was good. Especially insurance. Yes. The second year I did an internship with ABN Amro. That was in the investment bank. So they had a nice little outfit based out of the North Place. And that time I was essentially helping the investment banking merges and acquisitions team. They were looking at a transaction that involved quick service restaurants merging together.
00:03:04
Speaker
There was a lot of family pressure to study more. And hence I decided to move to London.
Career Beginnings and Move to London
00:03:10
Speaker
I did my master's degree from the London School of Economics. And this first straight after college, six months, April, I think we graduated and September I was in London. And the next nine years I was in London, actually. So between 2004 and 2013, I was in London. First one year was my master's degree.
00:03:31
Speaker
And then I ended up joining a bank, Capital One Bank in Analytics. So this was campus recruitment, my first proper job. And literally I know that I spent seven years working for the same company. And that was essentially the start of my career in consumer finance. Ended up doing almost everything that has to do with understanding and building consumer finance products, credit cards, personal loans, savings.
00:03:55
Speaker
What question? Capital One is like an NBFC, right? Or is it like a traditional bank which takes deposits also? So in the Indian context, Capital One, when I joined, was an NBFC. So this was again started in the late 80s, early 90s by two gentlemen in the US. And when I joined, it was not doing deposits. But within, I think, two, three years of me being there, I'm not taking the credit for it. But within the first decade of 2000, Capital One
00:04:23
Speaker
went on a huge acquisition spree. And today, it is in the top five bands in the US. In fact, if you go to New York, the way you see HDFC branches in Delhi, you will see Capital One branches over there. And that time, it was a good global expansion spree as well. Capital One was in the US, then Canada, Spain, Italy, France, the UK. We were also looking at expansion into India.
00:04:46
Speaker
And that was the first time I actually understood the Indian consumer finance data, how big the eligible population is, how under penetrated consumer finance is, how the credit bureaus are not really present compared to what I was used to looking at in the West.
00:05:01
Speaker
That was the first eye-opener that India is the next big opportunity. And so this was the time I started thinking about moving back to India. And again, when I spoke to my family about it, they were like, you know, you are still not properly educated. So I said, what are you talking about? I've done my undergrad. I've done my master's from LSE, one of the top 10 institutes in the world.
00:05:22
Speaker
Yeah. So then they're like, no, you must do an MBA as well. So then I thought, you know, maybe this is a good opportunity. You never know, you need to get it again or not. I ended up doing an MBA from the London business school and that worked out very well. It was in London. It was literally a 15 minute walk from my house and the capital one was very supportive. In fact, they sponsored the MBA for me.
00:05:42
Speaker
This would have been like an executive program that you could work and study together. Correct. So this was an executive program, which was essentially classes used to be on a Friday and Saturday. And then every few months, there would be a full block week. And that was, I would say, the best experience I've had. Nowadays, a lot of people talk about doing MBAs remotely, or they have books which talk about a 90 minute MBA or a three month MBA. There is no experience like an MBA, especially after your work for so many years. And from a good college.
00:06:11
Speaker
Yeah, and the networks you have, I tell my friends and family that I will do another MBA maybe 10 years from now. It is just the networks you build, the learnings that you have, the kind of people that came and spoke at that time, the guest lecturers, you can't replicate that in the online world. So that, again, was a great experience. I ended up choosing the international module, which meant that besides London, there were forces. I took up in Columbia, in New York, in HKU, in Hong Kong, in Dubai,
00:06:41
Speaker
Argentina. It also gave a good global perspective, both from a developing world standpoint, or going into the, for example, Argentina, and as well as meeting other people and understanding more businesses, you know, in the US, Middle East, and Asia. And that also was a good, I would say, confidence booster, which meant that you could now leave a well-paying job, or I would say a well settled life as well, and moving back and bring the courage to take that risk of, you know, coming back into the unorganized world.
Return to India and Entrepreneurial Insights
00:07:09
Speaker
I then moved back to India.
00:07:10
Speaker
You moved back to India, were you clear that you weren't going to do business or was it India that attracted you and then you thought I will figure out, I will search for a job or I will explore business?
00:07:25
Speaker
I always wanted triple business and at LBS that became very obvious for me. The courses I was taking were on entrepreneurship. There was a new product development course I did. There was a course in venture capital private equity. So I chose my elective modules in a manner that would also prepare me to take the plunge and be aware of what things to look at.
00:07:45
Speaker
And to be honest, at Capital One as well, I was responsible for launching a few new products. So that entailed right from hiring people to doing the legal contracts, getting the product in the right place, having the marketing collateral. So those were things that were exciting. The only unknown was India. And that was both from our personal as well as from a professional standpoint.
00:08:04
Speaker
most of my adulthood was spent in London and then moving back into India. You change jobs, you move countries, you start something new. So all those things were unknown. So I gave myself a three year window. I said that in three years time, if
00:08:20
Speaker
my venture does not succeed, I will move back either into the corporate sector in India or move back to London. So I had kept close to option and luckily when working in finance, working with Capital One, having the right credentials from an educational standpoint, that confidence was there that you will find a job. Don't worry about that part.
00:08:40
Speaker
And luckily at that point, there were no liabilities in terms of mortgages or a family to support kids. It was relatively, I wouldn't say easy, but an easier decision to take. So I moved back to India. This was after quitting Capital One. I actually spent six months traveling.
00:08:56
Speaker
I thought that this is one opportunity that I shouldn't let go. So spent six months traveling and then came back to India. That is where I think the roller coaster started. I ended up doing a few things, which were essentially, I would say the flavors of the season. So my first venture was actually developing mobile apps, brick and mortar stores.
00:09:16
Speaker
So we are talking about 2013. There weren't really topifies of the world. People were still talking about moving to mobile phones. Data was cheap, but not as cheap as it is today. Went on and developing a product that saw good traction to begin with. I remember there were customers who were willing to pay two, two and a half lakh rupees a month for an app. And this was built as a SaaS product. As a new business, you always quickly do the math that if I get my first thousand customers,
00:09:41
Speaker
And this is going to be hugely profitable. But like most things, I realized that two things were missing. One was the passion for the product. That is where, you know, I realized that in the time you're not passionate about what you do. And in my case, that was finance. You will never be able to wake up at six in the morning or work seven days continuously. And the second part was that there has to be a differentiator. In this particular case, there were cheaper clones that came in that were offering same services for one fifth the price.
00:10:08
Speaker
cost was probably $110. I realized that was a good start to actually understand what I want and what I don't want to do. And so the next step should be that let's come back and do what I am passionate about, which is finance.
Discovering a Market Gap in Lending
00:10:20
Speaker
And the way I took was actually joining a startup. I thought that I understand consumer finance very well, but that has more to do with how it works in the West. India is a very different ballgame. At that point, you could ask me anything about the US market, UK market. They won my fingertips.
00:10:37
Speaker
In India, trying to figure out how is your 1.2 billion population split? How many are urban? How many are rural? What are the income split? Once you're in the job, these are things that you can relate to. It's not that you can just read about it and start a business on that. When I joined the startup, it was a P2P lending startup in India's first one called iLing. It was there for nine months. So it was a two-member 14, which were coming from a tech and ops background. I was the only one away from a credit background.
00:11:03
Speaker
So it was a good match, ended up launching their first product building there. So you were doing the credit underwriting for the startup, like responsible for that.
00:11:13
Speaker
I was looking at all the lending operations, so credit underwriting, selecting the customers, how to reject them, what kind of product features to have, what address rates to have, how to set up collections. So that was an amazing learning ground for me. I ended up understanding the credit bureaus, the collection agencies, the collection practices, what services or banks are providing, what they're not providing.
00:11:36
Speaker
It was a great way to learn the industry. And that is when I had to make a call that do I continue doing this? So that's where I said that, okay, there is a huge gap that I can understand, which is that most borrowers who need loans are not getting it.
00:11:52
Speaker
And the ones that don't require are the ones that are being bombarded by the lenders to take notice. And we have solved this problem beautifully in the West by setting up marketplaces similar to your Amazon of the world, but in this case for lending, where a consumer would come in, he'll tell us a bit about himself and basis that we'll be able to figure out which is the best lending product for them.
00:12:13
Speaker
And this lending product, unfortunately, most of us, if you ask, can you name 10 financial institutions? So the first three or four, we'll be able to name because we bank with them. But then even going to the fifth or sixth would be difficult. And understanding that India has over a few thousand NBFCs, which are balance sheets of more than 500 crores, 100-odd banks. It's something that people don't know, right? So there could be a lender who's literally
00:12:40
Speaker
10 minutes away from you, willing to give you a loan, but because you haven't heard of him or you can't reach out to him, you're not able to access him. So that is where we came in. Essentially, you're saying the problem you identified was information asymmetry, which could be solved through an aggregation platform, like aggregating borrowers on one side and aggregating lenders on one side and connecting them and earning some commission on every transaction. That was what you thought as the business model. So there were three things that came to mind.
00:13:10
Speaker
One was from a lender standpoint because end of the day that is how we make money just to summarize in the end of the platform where we are trying borrowers and we have the country's best lenders and we make them meet and the meeting is not just passing on a lender or a borrower.
00:13:26
Speaker
It is doing a lot in between, whether it be KYC, whether it be underwriting support, whether it be figuring out what's the best product for them, providing them a good user experience, providing them the borrowers more information about their finances. So those are the value adds. But from a revenue standpoint, our revenue comes from our lenders.
00:13:44
Speaker
We held distribution for our lenders. That's the primary goal. And that was a huge challenge in the lending market. It still remains. And the reason for that is that most lenders have any segment or product focus. So you'll have a big bank who would say that I want the cream of the cream. I want salaried people who are working for the top 100 companies who are earning at least.
00:14:06
Speaker
60,000 rupees a month, and I will provide them with the lowest address rate. Similarly, you will have a smaller MBFC, who would say that I am happy to lend to people who are earning 15,000 a month, but I will only give them 20,000 rupees, and I will charge them 25%. Now, both these extremes require customers to come to them. And unfortunately, when they both try to market, they get segments which may not actually overlap with their own customers.
00:14:33
Speaker
The envy I've seen this case will go and market for the customer. They might get somebody working for a Google who's never going to take a loan, but they spend marketing. Similarly, the bank would attract all sorts of people who may not be eligible. So we felt that if we have all these lenders on our platform, we can market jointly on behalf of them.
00:14:53
Speaker
And the Google profile can go to a bank who's just started their career, is not earning enough, does not have a credit history, could go to an NVFC or a challenger bank, right? So that was, that was the problem from a distribution standpoint we were solving. Got it. So essentially like you're pulling in the marketing budgets of all of these and making it more efficient because now, irrespective of who comes in, there will be some product for it. Whereas if a
00:15:20
Speaker
lender was doing individual marketing, then half of those leads would be irrelevant, but those irrelevant leads are relevant for somebody else. So that way it's more efficient.
00:15:28
Speaker
Exactly. So we actually nailed it. It is combining the marketing budgets, but actually not having those budgets. And that is where I think the world venture capital comes into play that you need to prove that. So now we have lenders who are willing to give us those budgets. But when we began, it was that we had to spend from our own pocket to prove this out, which luckily... Essentially, when you began, it would have been performance-based payout. If you are giving them a
00:15:55
Speaker
like a qualified lead, then you would get paid else you would not like something like that. So that was one distribution problem. Then the second one was from a customer standpoint, which is a borrower essentially requires three things. He wants the lowest interest rate.
00:16:11
Speaker
He wants the best or optimal ticket size, the loan amount. And the third is he wants a process which is optimal in terms of not giving too much information or getting the loan as quickly as possible. So the whole process part of it. And that is where I claim was that we will provide you the best possible loan.
00:16:30
Speaker
This is your profile. So at Indian Airlines, we've given loans as low as 10,000 rupees. We've given unsecured personal loans as high as 45 lakh rupees. They start at as low as 9.9%. They can go for fees or in case of a credit card in the 40s as
Data-Driven Lending and Customer Experience
00:16:44
Speaker
well. So from that standpoint, if the borrower is looking for choice, we were also pleasantly surprised that when we started, we thought we'd only attract higher risk profile, but we were getting a decent and we continue to get a decent amount of people who any bank would be willing to lend.
00:16:58
Speaker
But they're coming to us for two reasons. One is, again, choice. How do you know that your bank is offering you the best product? And the second, which wasn't that obvious, was that it was actually one secrecy when it comes to taking loan products. They will not call up their personal manager or relationship manager and tell them to give me a five lakh rupee loan. They'll call up and say, open this new account for me or help me with my trading services. But there's still a sense of pride on the opposite.
00:17:25
Speaker
That's taboo, right? Taking a personal note. So that was one thing we realized that besides choice, customers also want to tell the whole world that they're looking for a loan. And the third thing was, and this was from the Western experience, that we felt that data was not properly used for underwriting. I could ask you,
00:17:45
Speaker
for your bank statements, but if I don't need your bank statement, why should I take it? And if I'm taking your bank statements, the idea should be to give you a lower interest rate or a higher ticket size. So the term for that is risk-based pricing, which is you understand the customer's risk and then, based on that, you provide him a loan offer, which is customized, right? And what we felt was, and which is today also the case, if you look at a credit card, for example,
00:18:08
Speaker
Now, whether it's an American Express credit card or it's a new bank's credit card, all of them have the same interest rate of 3.5% a month or 42% a month. Now, that should not be the case. Somebody who has a good credit history, who's getting a good salary in place, should have a lower interest rate. Somebody who's, let's say, missed some payment before, should have a higher interest rate, so on and so forth.
00:18:31
Speaker
And so this is where we felt that by having a platform in place where we get access to a lot of consumers, as well as look at the lending practices of all our lenders, we could improve some of these things. And that is where some of the services we provide to our lenders, whether it be analytics or it'd be recommending what kind of risk segments to go after or what kind of products to convey is something that they find valuable. So those were the three things that we were after, and we continue to do that right now.
00:18:59
Speaker
So essentially like to recap like choice, data privacy, confidentiality, personalization. These were like the broad benefits for the borrowers that you were offering. And for lenders, ROI driven marketing, basically, you would not take anything upfront. They would pay for performance. So it was a better way to do marketing than just blindly spending and getting a lot of irrelevant leads.
00:19:24
Speaker
Yes, but over the last three, four years, what has happened is that we also build a plug-in plate technology module for lenders, where they can come and they don't have to build things for themselves, right? So let's say, bank cross-statement stripping, or C modules, or analytics on the data side. So one of these big banks in NVFCs have all of this in-house, but let's say you're a new NVFC starting out. You don't want to spend time, energy, money on reinventing the wheel when a platform like ours can offer you a plug-in plate solution.
00:19:54
Speaker
Within the spirit of the regulation, whatever we can provide to our lenders, we do that for a fee or for a business commitment. So that's the value they see. And lastly, it is giving insights and analytics to our lender so that they can optimize the products further, either from a risk policy standpoint, or from the segments that they're operating in, or from what new additions to make to products.
00:20:15
Speaker
So that those are the ones that come into play.
Tech Development and Market Strategy
00:20:18
Speaker
Tell me your go-to-market journey. You must have got a tech team together to build an app because you wanted this digital first, right? That was the only way it would make sense. Tell me that go-to-market from that zero to one. So tech was the backbone and I was, I always used to tell people that in safe and tech, finance is the core and tech is the enabler.
00:20:37
Speaker
as opposed to the other way and what i mean by that is that technology is super important but more important is the financial element of it the risk the how you get your customers how you make sure that the right matching is happening risk is this policies are very defined it's all with that in mind we had a poor finance team in place and that is something which you know being coming from that field it's easier to attract that talent
00:21:02
Speaker
And I was looking for a CTO co-founder to join us. And I spent, I would say four to six months trying to get the right person. And when we were not able to, we said that, okay, let's go with the same mantra that he and Tech will follow. We hired a company to build our first tech module for us.
00:21:19
Speaker
And then very soon actually actually hires that company itself. Right. Where we said that was a six, it was a six member team that had just started their tech development. We were among the first few clients and they enjoyed working with us. There was not any more clients at that time. So we said, listen, the code synergy, why don't you come in full time, work with us. So that worked out well. And it's been seven years now and our CTO was the same guy we hired from there.
00:21:44
Speaker
And then it was bootstrapped for the first three, four months. Put in Savitlin, got the first few hundred customers, started out with three lenders that we put on. We got one lender, which was offering loans to Super Prime customers, you know, Bajaj. We got one lender who was looking at Prime segment, which was Fullerton. And then we got our Prime, Subprime lender, Capital First, which is now IDFC First.
00:22:08
Speaker
And that's how we started the journey. So I'm going to three lenders on the website in place and started marketing for customers. So I still remember it was the first day and I was not sure what will happen. And I think within the first one hour of launching a website in a small Google campaign, we did a first loan of five black rupees. That was essentially a validation we were looking for that somebody would come in and they would want and the loan went through.
00:22:34
Speaker
And I would say the rest of history, right? We started scaling up or directed some capital and just started building the product from there onwards. What was the risk management process here? Did you give like a first loss default guarantee or did you do the underwriting or did you pass on the information to the bank and then they did the underwriting and decided to approve or reject?
00:22:55
Speaker
Yeah, so to begin, so we have not actually done first-law default guarantees, right? And the reason for that is very clear that we are not going after segments that nobody's willing to underwrite, right? Our approach is very simple that you come and look at the segments that we have. A big bank is happy to come and pick up certain segments, a smaller NBFC is happy to come and pick up some segments and that has worked well.
00:23:17
Speaker
Right. And so like you're saying this first was default guarantee or FLTG as the insiders call it. This is, it's a tool for FinTechs who are tapping a new segment. Like that's when they use it. Yes. It's to tackle segments.
00:23:32
Speaker
that why would a bank want to part with its revenues by asking for an FLDG if they are sure about a segment? A bank would say that, listen, I know the segment very well or the NVFC would say, I know the segment very well, we'll help you to get the loan. Their apprehension comes because it's an unknown segment and that the bank says, okay, fine, as long as you are protecting the downside on this, I'm willing to share some upside with you there by reducing my margins, but it means my downside is protected. So that's how the whole FLDG concept came into play.
00:24:00
Speaker
And this is actually to an extent similar to the whole BLPL suspension model, right? Where Apple or the Samsung would say that, please, today a customer comes in, he can't afford my product. But if you provide him a loan, I will pass on some marketing costs to you, which you can then disguise as a 0% product or a low-interest rate product, right? And you add an FFTG on top of it, so it's, you know, cherry on the cake.
00:24:21
Speaker
So what was your process? So our process was simple, right? We stuck to our code that people are looking for choice. So our first one year was let's understand where the banks are lending and where they're not lending, right? So simply get consumers to come to us, enable them to share their information in a safe, secure, digital manner with the lenders.
00:24:43
Speaker
and then figure out where the lenders are working with are not working. So this was our first goal where it worked well. Here we are making very low commissions because it was actually just a lead gen model as opposed to any value act for the lenders. And then after a year when we understood what segments people are lending at, what are the policies that nettles are looking at, we felt that the only way for us to grow this would be if
00:25:08
Speaker
we are able to have the same information that the bank has access to, which is essentially the credit report of the customer and the bank statement of the customer. And if you're able to get this, not only will we be able to provide the best experience from a borrower, he does not need to go before three letters on our platform, he can get the best one, but at the same time, we'll be able to operate the best product as well, which is his risk profile and can negotiate on behalf of the borrower as well.
00:25:34
Speaker
So right now what was in the first year of happening was that the entire negotiation was happening between the lender and the borrower. Now what happens is that we know exactly what the profile is. We will tell our nectar that listen for this segment, please offer the best possible address rate, lower the processing fee.
00:25:50
Speaker
because this is what the risk of the customer tell us, right? So this was the second, I would say, condition where we started getting access to all this information. We were the first company to go to a credit bureau and tell them that, why don't you start your consumer credit report product and give it to us at a lower price than what you're offering to the customers and we will make it free for the customers.
00:26:12
Speaker
So we offered the whole three credit report, which has now become a commodity. We started this as ODS 2016. And this was the first in India where borrowers were happy because they were able to see the credit files. The credit bureaus were happy because they were able to get scale. And we were happy because we were able to understand the consumer and the borrower better.
00:26:31
Speaker
And our lenders became happy as well because now what they were getting was essentially something where they only have to take a decision that should be proceed or should we change the product of freight as opposed to rejecting a lot of them because we earlier did not have this information. So that is where the whole trend and report journey started. And then we added on more ideas on top of that.
00:26:51
Speaker
So this credit report would help in two ways. One, it was a marketing spend to get more people to sign up on the website, like free credit report would be a pull. And then second, you would make probably a relationship with a bank where they could give you a blanket approval for a certain cohort, like people with this much salary, this credit report are approved.
00:27:14
Speaker
by default, because of which you needed the credit report to get that blanket approval from the bank for that cohort. That's where it helped. Absolutely. Absolutely. Got it. Got it. Okay. And so for the various lenders, you would have mapped cohorts with each lender. For this lender, this cohort will get this interest rate. For this lender, this cohort will get this interest rate. And therefore, when someone of that cohort came in, you were able to match him to the best, like the lender giving the lowest interest rate for him.
00:27:43
Speaker
Yes. And when you have to be at the advantage of starting in 2015 and having a lot of consumers who took loans from us and who got rejected as well. And now when we had this shared report information plus banking information, we were able to go to a bank and challenge some of the decisions on rejecting customers, as well as telling them that listen, if you are offering 40% and there is another player who's offering 12%, you are the one who's losing out.
00:28:11
Speaker
Right? So how can we optimize this better? We can make it more digital, so that cost also comes down, so on and so forth. Right? So it meant more business for lenders. It meant a better product for consumers. And in between, we put down our business model, which becomes the indispensable then from either sides.
00:28:29
Speaker
I guess for a consumer, the other advantage is that his credit report, I believe if you go to many different lenders, each lender asking for the credit report from the Bureau, then that will reflect negatively. Like it will impact your score negatively. Now that would not happen because only you are
00:28:45
Speaker
getting the report on behalf of all lenders. This is a very critical and important part that borrowers and consumers have to understand. See, the logic is that when a lender pulls out your credit report, he's pulling it out because you've applied for a loan and he's evaluating you for a loan. Now, if after doing so, he gives you a loan, great. But if it does not give you the loan, the credit bureau thinks that the bank has rejected the loan and there is something wrong with this profile.
00:29:12
Speaker
And then hence the credit score falls. And then if this happens and if a borrower applies to let's say 10 places and let's say all 10 places offered him a loan, but he only takes from one. The credit bureau of the other lenders think that he needs applied in 10 places. Line have rejected him. It's called a credit inquiry. And then more number of inquiry, the computer thinks that the borrower is desperate. He's applying to so many places and hence there is something wrong. Yeah. There's a negative impact on your scores. They're going to make it an impact.
00:29:40
Speaker
Now, what we did was, we did not only did we say that we'll pull out your credit report once, we went a step further and said that actually the credit report which we are providing you is the one that you have requested not from the lender but from the credit bureau. It is like any other borrower going to the credit bureau and saying that I want my credit report, I want to see it. You can do this every single day. For the rest of your life, your credit report score is not going to change because there is no inquiry order.
00:30:10
Speaker
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00:30:31
Speaker
So this is the product that we came out and said that you can actually see a credit report on a monthly basis throughout the life. And it is not going to impact your score. On the contrary, if you do this, it will tell you what your score is. It will tell you if there have been any formula transactions. If somebody's inquiring on your behalf, if you've made your credit card payment and it does not reflect, you will be the first one to know about it. So that was the value act for the customer, which is not only be aware of your score, but keep a tap on your identity.
00:30:58
Speaker
Keep a time on any fraudulent transactions, any missed payments. We'll give you EMI alerts on top of that. When is your payment due?
00:31:05
Speaker
And then the information in the two reports that the bank pulls at the one, the customer support is the same. So basis that we can now say that we don't need to go to 10 different banks and those 10 different banks will pull your credit report. Just go to one and your credit report will still be pulled by that bank. But it's only one as a postal multiple. So when somebody is taking or applying for a loan through India lens, does the lender still do a credit inquiry or they just go by the report that you give them?
00:31:32
Speaker
No, they do a credit inquiry and we also encourage that just to be on the safer side, right? Because let's say customers come to us today and he's applied to four or five places tomorrow, the lender should know before doing that kind of check. So it's always encouraged. But sometimes the lender is like, okay, if this report is fair, why should we get an extra cost? Most lenders pull out another report, the cost is compared to the risk they're taking as it's ridiculous. But instead of
00:32:00
Speaker
10 inquiries, there'll be only one inquiry because you will be able to match him and avoid that frustration of applying somewhere and getting rejected. We started off as a comparison website, which many of our competitors are, and it gradually won't become a recommendation.
00:32:16
Speaker
So now there is no point in showing a standard chartered personal loan of 20 lakh rupees at 10% to somebody who is never going to get approved for it. So the user journey, now somebody comes in, we take his permission, show him his credit report, not just fool it ourselves, show it to him. And this is your credit report. The basis is this, here is the best offer for you. And there's probably no better offer than this.
00:32:40
Speaker
and then give him a choice between those two or three lenders that here is one lender, here is the address or the such, the processing fee is so much, prepayment or pre-closure penalties are here and you choose and here is our recommendation.
00:32:53
Speaker
Got it, got it, got it. So you were talking of that those value add services like EMI alerts and telling you about your credit. So is that like a paid product for consumers? We debated about making it pay. Then we thought it is probably best not to do that. Let's keep it free for till date. We've kept all our consumer services free of cost and you try to optimize how we make money from our lending partners.
00:33:17
Speaker
And tell me the journey in terms of numbers. So you started with three lenders in the first year. How much, how many loans did you disburse? What was it like in the second year? So I talk of my mind one to year seven will be very difficult to come to the exact numbers.
Growth and Overcoming Challenges
00:33:31
Speaker
But I would say that from three lenders, we now have, I think 65 or 67 lenders.
00:33:38
Speaker
Right. And so this is mainly both adding lenders as well as saying no to a few lenders, so on and so forth. Right. Now, luckily we have reached a place where any new lender or anybody who's getting into digital lending traditional at BFC is traditional banks will automatically reach out to us. At times we have to say no to them if we believe that
00:33:58
Speaker
Either their processes are too manual or they won't be able to scale up the way we want them to. Right? Even, and then again, from a loan volume perspective, overall, I think we've done around 2,500 crores of personal loans. We've done maybe 800, 900,000 credit cards. And year one, this number was probably not three crores of loan and no credit cards in year one.
00:34:21
Speaker
So it's been growing. It was very challenging during COVID. COVID was probably one of those years where first four or five months were those times where, you know, there was actually no business activity. Lenders had stopped lending. But overall, now things are much, but not much better. They are actually better than pre-COVID, higher revenues, lower costs, higher profits, all those are things that have come to play.
00:34:43
Speaker
Okay. Okay. Okay. Do you also do collections? You would not need to do collections, right? Because you are just like a loan origination platform. You're not taking on, you're not doing any underwriting. So you are right. But then we also thought that this is a value art that some of the newer NBFCs are looking for.
00:35:00
Speaker
that go one of A to Z solution. That you come, you originate, you also help in connection support. So we've recently, I would say six months back experimented with it, order collections, even plays that we are doing some pilots on. And we'll see how we get along with that. But the idea is to essentially provide value adds to our lending partners, where we continue to be not just a source of distribution, but throughout the lifecycle of the customer, we are there to help them.
00:35:28
Speaker
And this is how we feel that we'll also be able to differentiate and maintain our importance, especially when a lot of other companies, e-commerce companies, etc, are having access to probably the same consumers that are there. Your food delivery companies are having same consumers, your travel aggregators have the same consumers. So it was a huge question mark on, does customer acquisition
00:35:50
Speaker
even make sense for somebody like us. But then our answer to that, which is being proven is that somebody who's coming onto a full delivery company is not really looking for a loan from there. And even if they are, if we are able to provide 10 other value ads, then end of the day, the lender is going to get more comfortable with what we provide as opposed to being there.
00:36:09
Speaker
So that's where we built that out. And we are partnering with other consumer companies as well, who want to monetize, let's say, their user bases, right? So with one of India's biggest consumer mobile companies, we ended up building our entire or replicating a platform on their app. So a customer could come and take a loan from there and the entire backend was ours. So they benefited from, and we did revenue share with them, right? So they benefited from monetizing the user base.
00:36:33
Speaker
without actually getting into the integrity and the complexities of managing multiple vendors kycs product changes, regulatory challenges, ISO issues and all of that. Got it. A plug and play, how someone could integrate a payment gateway, they could integrate like a lending product, a white label lending product, I'm guessing. Exactly. Got it. Amazing.
00:36:54
Speaker
And how do you get bank statements? You were talking about bank statements, how does that work? The company that provided the one that is in the news recently is Perfios. So whatever Perfios does is that it allows the customer to think of it as a net banking transaction where instead of making a payment, the command is that we download my bank statement. So you are logging into your bank, you are downloading the bank statement and the bank statement is
00:37:18
Speaker
becoming available in the digital format. And the benefit is that there is zero fraud over there. And the processing time is immediate as opposed to an underrated looking at your bank statements. So this is, I think, where technology is changing by the day. This one particular one has been there for quite some time now. It's a good way to de-risk yourself for some fraud as well as getting efficiency from a digital process.
00:37:39
Speaker
So banks don't have an API call supported where you can just have an API call with some authorization to get the data, the statement that doesn't happen. See what these other companies are doing is they are aggregators of the same now. So instead of me going and integrating with 100 different banks, they have already done the hard work and hence they are valued at that level. So banks have two APIs. Some have APIs, some are doing it different ways.
00:38:04
Speaker
And what has been your revenue journey? What are you estimating this year to end at in terms of your 2 to 6% earning?
00:38:14
Speaker
See, what we have done this year, right, which is a big surprise that came to all of us was that we actually delivered profits this year as well, which is the year is still 15 days to go. But we have become profitable from this quarter onwards. So next year we'll deliver a full profit. And this is at the back of having a pretty bad 2020 where it was mainly cost and no revenues. It was a loss making entity now getting profits. From our revenue standpoint, the idea is that
Profitability and Future Goals
00:38:42
Speaker
Hopefully, we'll cross the 100 crore mark next year. And that is what we are running for. Amazing. And this year, what are you expecting to cross? This year would probably be around one third of that. Okay. Amazing. 3x growth you're planning next year. How will that happen? Have you seen 3x growth in the past also? Or do you have a strategy? We've seen it. See, the mantra is not about growth. It is about sustainable growth.
00:39:07
Speaker
right we are in our industry where i give you an example of one one particular month and before covid when we were able to attract 8 lakh new users who are looking for lending products so demand is not an issue at the same time supply with the 65 67 lenders we have
00:39:26
Speaker
include the country's biggest banks, NBFCs, fintechs, Q2P lenders. Anybody who is relevant in the network ecosystem today is a partner. From that standpoint, the supply is also huge. The problem is that, like I said, we have to invest in getting the demand
00:39:44
Speaker
in setting up the processes. And unfortunately, what has happened in the last four or five years is starting from demonetization to ILFS crisis to your COVID-related stress cycle fears. We are dependent on our lenders because that's how we make money.
00:40:00
Speaker
So we don't want to go and land for NX growth in good months, it will sustain. But if the lending activity becomes reduced, that's where the losses start coming in. And losses are not because of credit losses, but because the costs are not even sustained.
00:40:15
Speaker
So we are still at low margin and high volume business. And for that to sustainably grow, I mean, there is no reason why we can't do 6x, but 3x, we get a comfort that at least we'll be in the green when we do it. So what is your cost breakup? How much is spent on which head? In our business, it is good. I would say at a very high level, a 20-20-20 split or a 25-25-25 split between technology, marketing and other human resources.
00:40:44
Speaker
And the last 25 is like your overhead, your margin rather profit before tax. Yeah, your overhead, your any kind of one-off activities, your data security efforts, all of those things come into play. Is this market of lending aggregation, is this like a winner-take-all market?
00:41:04
Speaker
And based on your experience globally, do you find this to be that kind of a market? You would typically have two large players like food delivery or e-commerce. So why is lending not the same, purely from aggregation space? See, aggregation space, to be honest, therefore, we just two players or three players. I don't think it's going to be one player leading it. The second now
00:41:27
Speaker
Even from a Ford delivery or a taxi service standpoint, you are right that two players are more than enough. But at the same time, the government comes tomorrow and says that from a competition standpoint, we need three players or four players to automatically happen. What they did for UPI, that regulation for UPI, that no players can have more than, I think, 25% market share, something like that here.
00:41:48
Speaker
Correct. From that standpoint, I think, see, from a consumer standpoint, he will obviously look at, I have a choice between the two taxi companies and the two e-commerce companies. But at the same time, being a deal seeker, when it comes to e-commerce, at least I'll stick to a quick check on the other one.
00:42:04
Speaker
That whole choice is then not just a choice on an aggregator, it is a choice between aggregators also. How many times have we gone on to a make my trip and then gone directly to the website of the airline and then to a clear trip and then said, okay, one is offering more discounts and this is offering the last seat was not available on this one, it's available on the other. So that from a consumer standpoint, that makes sense. Who are the other dominant players in this aggregation space?
00:42:28
Speaker
people who are like directly doing what you are doing. So we are Pesa Bazaar. There would be number one ahead of us. Again, good business backed by the whole policy Bazaar. Drove, been in business for a longer time, had more access to capital, done a good job. So yeah, they're also basically gone. We have good relationships with them. Back Bazaar, Lending Card. Are these also in the same space? Lending Card is an NVFC. Their focus is on self-employed. So Lending Card is a fun one.
00:42:54
Speaker
Bank Bazaar is in a similar space. Their business model is more towards credit cards than personal loans. Our business model is more skewed towards personal loans and credit cards. Tell me about some of the customer acquisition strategies that you adopt.
00:43:11
Speaker
Supply of lenders is not a constraint for you. It is the borrower side, which is the constraint. So what are some of those innovative things you have done to grow that? One of us, we discussed about the... Actually constraint, it started going a lot. Yeah. It's not even the borrower side, right? There is an often more demand for our products. It is what I meant was that it has to be sustainable. We need to have the right match, right? I can't have
00:43:39
Speaker
So many borrowers are not having lending activity, which is not in the lender's hand also, right? If there is a great crunch tomorrow, if there's a lockdown tomorrow, lenders will not pay. We have lose power, right? But if we are exact question, how do we attract borrowers? So there are a range of techniques, right?
00:43:55
Speaker
directly for the product. Anybody who's looking for a loan will be present, whether they're looking for it, whether it be social media or it'd be so. Similarly, Credit Report is a good acquisition channel to provide them a free credit report, credit analysis, a bank statement analysis. Similarly, there are ways to reach out to them, to other methods, and then this whole partnership, which I think is embedded finance, where you embed your systems into people who have huge user bases.
00:44:22
Speaker
And then you have to give that option to a consumer that if he's looking for a loan, he could just get it from that very platform. So it's a combination of these things. What we've not done so far is on the ATL or above the line marketing road, big brand campaigns, getting in like a competition for all film stars and cricketers coming and selling their products. We still believe that direct ROI on each marketing dollar is the right way.
00:44:45
Speaker
and we stuck to that till now. That is one opportunity that we really want to scale up to go that role. We'll do it when the economics makes sense. Okay. And how much have you done so far? Initially you told me you bootstrapped in 2015 when you launched the MVP product and the three lenders. Tell me about the funding journey from there.
00:45:06
Speaker
I think overall we've done more than 25 million dollars in fundraise and this was stuck. Typically each round is similar or higher than the previous one started off with a very small infusion of 2 crore rupees, 1 million round, 5 million round or 10 million round.
00:45:21
Speaker
The first round was in 2015. This was three months after we started. This was where we got a DSG consumer partner, which is one of the biggest consumer funds in India, along with some very well-reputed angel investors, Parik being one of them, Mr. Kaurtham Dada Krishna being one of them.
00:45:39
Speaker
That was our first hundred. This was after seven, eight months, we raised a million dollars from the same group. And then we got American Express to come and invest in us in 2016. And then we got alongside them came some, another Indian fund advantage partners. And that in 2000, that was a $5 million dollar.
00:46:01
Speaker
And then we got a $10 million round where European fund ACP came in 2018. And then we did another round of $8.5 million during the COVID period from our same investors. Now we are self-sufficient. There is money in the bank. We are generating profits. So we'll see when we need the next engine.
00:46:22
Speaker
I think the next infusion would be when you want to spend on that brand investing in ATL and that's where you would look to raise next. Like when you're confident that it makes sense to do that. Correct. Either that or if we are expanding into more products. So our focus is 100% on unsecured consumer loans. If we decide to go on to the secured side or if we decide to go to the business side, that's where it will come in.
00:46:50
Speaker
Okay. So what's on your roadmap? Do you have prioritization list that these products we would look at first? See, we are, we are very confident that the segment that we've chosen, which is unsecured consumer loans, which is both credit card as well as personal loans are the ones where there is biggest demand supply gap. There are enough margins and because of these two reasons, right? We believe that there is no point in going up or anything else.
00:47:16
Speaker
And these are growing segments. For demand supply gap means that you always have demand. Good margins would mean, along with the demand supply gap, that there will be enough suppliers when or more and more people wanting to enter into the space. So here, the product roadmap is more focused on, again, more engagement from a borrower standpoint, putting in more tools that make their journey simpler, at the same time adding value at one end. What is your advice to aspiring founders around fundraise?
00:47:45
Speaker
As somebody from outside, it seems to be that big hurdle to cross to grow a business. And like we spoke about islands and how that fundraise was probably a reason for them to not sustain. Do you have any learnings you'd like to share? Yeah. So I think in my view, it is very simple that firstly, think why you need the funds.
00:48:05
Speaker
Right? Is this business something which will attract VC funding, which is can it generate 20 to 30 times more in the next five years for them? If so, get more than you need. If you need, if you think you need X over the next two years, probably get 1.5X. And then at the most important part is to get the right set of
00:48:24
Speaker
We see our investors. You want people who will back you when things are not great. Everybody is available to back you when things are going fine. Get people who understand your business, who understand you. There is a good, who get good vibes from the guys you meet because things will go back. I don't think there's any business.
00:48:39
Speaker
who's normally seen one fly. And for that reason, you need people who can support you. And lastly, a fund rail is like a loan. It's not something to be celebrated or celebrate because you've achieved it. But I somehow just find it very crazy when people associate founder's wealth by the amount of funds his company has raised. If I take a loan of five crores today, I can't say that my network is five crores. And what is your team size today? So we are about 375 people.
00:49:07
Speaker
Well, what is the split like? How many in your tech team, how many in operations? Yeah. So on the tech side, we have around 45 people. Product would be another 10. There's a risk and analytics team of about 11, 12. There's a marketing team of five, six maybe. There's a HR team of five. Then we have our sales and operations teams, which are the majority. And we are the people who are the spokespeople in between the borrower and the lender assisting borrowers with their stuff or looking at making sure that the whole process goes through.
00:49:37
Speaker
And then other business functions finance and business development compliance legal secretary do you have advice on scaling up your team like you told me the first scale up was through that actually higher of six seven people the software vendor from there today you're three hundred yeah i think there is no right or wrong answer here it is that your core team that you have the ones that are managing other people the ones that are
00:50:00
Speaker
in the managerial position or senior management, you need to make sure you get them right. And it's not a number singer. I need to hire 10 people in 10 days. It's about, I need to hire the right people. And that means that please go all out in getting references, in actually spending to get the right people, right? A lot of people sitting there who I won't spend.
00:50:18
Speaker
Money in trying to hire people I won't spend, I will not pay 5% extra to a headhunter. In the grand scheme of things, paying 5%, 7%, 10% extra is not going to hurt if you're able to find the right person.
00:50:32
Speaker
So my last question, so looking at five years in the future, what would be the best case scenario for India lens and what would be the worst case scenario for India lens? And I know no one likes to think of the worst case scenario, but as an entrepreneur, surely you would have some of those fears in your mind that what if this happens? So can you talk about both, like best case and worst case, five years down the line?
00:50:58
Speaker
The best case scenario is that anybody who is thinking of getting a loan or a card picks up us. Let me first check on India Line. Even if I'm sitting in my bank and my bank is offering me the best possible loan I can pick up, the thought should come that let me check on India Line. Is this the best one?
00:51:18
Speaker
Is there something better? And what would be your worst case scenario? The worst case is you don't exist, right? You are irrelevant for either your lenders as well as for your borrowers. And see, I have the view that I'm very patient when it comes to letting a business show its true worth. But at the same time, if your business is not growing, it is telling you something.
00:51:43
Speaker
Right? You can spend 1, 2, 3, 4, 5 years and try to make it fine. But I've seen enough and more entrepreneurs spending on 20 years, 30 years, when actually the businesses, telling them the business, either they are not the right people for that business or the business is not the right one to be in. And that brings us to the end of this amazing conversation.
00:52:03
Speaker
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