Ten years ago when somebody wanted a loan, they used to go straight to a bank or any money lender. But things today are totally different thanks to the digital revolution. Instant personal loan platforms like KreditBee cater to young professionals, where they can avail loans upto Rs 2 lakh as per their requirement. With a strong focus on online tech-based and data-centric KYC, such platforms want to bridge the financial inclusion gap in the varied demographic segments of the country. In this week’s Finapolis Conversation, Kumar Shankar Roy talks to Madhusudan Ekambaram, CEO, KreditBee, on why the platform targets this customer segment, what makes its credit decisioning systems different, how the two 3-month EMI moratoriums reflect different behaviours of customers and much more. KreditBee is a brand of Finnovation Tech Solutions Pvt Ltd, funded by some key VC firms and investment entities like ICICI Bank, Alpine Ventures and Arkam Ventures, among others. Currently, it has five million loan customers, out of which over two million are active loan customers. To know more, keep reading.
Why does your Instant Personal Loan platform focus on self-employed and salaried professionals? What types of loans do you give and what is the interest rate charged?
The platform focuses on self-employed and salaried professionals because this forms the largest chunk of the young user base in India, and that is the demographic our platform primarily wants to serve. Also, most of these users are in immediate need of credit on one side, but don’t have any credit history, which makes it difficult for them to avail financial services from traditional financial institutions (banks & NBFCs). This is where a digital lending platform like KreditBee comes to the fore, wherein we help these customers get access to credit via their smartphones, and render them live on the credit bureaus. We disburse flexi-personal loans to salaried and self-employed segment, personal loans for salaried, and e-voucher loans backed by different partner platforms like Amazon, Flipkart, Myntra and MakeMyTrip. The interest rate usually starts at 18 per cent, though for certain e-voucher loan products, we start disbursements with zero cost EMIs as well.
You have previously said KreditBee aims to become the first choice when it comes to quick and convenient personal loans. What will it take from your end to become the first choice?
KreditBee is a preferred loan platform for most of our customers, when it comes to quick and convenient personal loans. The primary reason for that is the reliability that the customers are able to place on the platform with respect to the fulfillment of the proposition that we promise, be it in terms of timeliness of disbursement, loan upgrades, or the overall consumer service. With more product innovation and a larger portfolio of loan products, we should be able to move much closer to a first-choice loan entity for all our end consumers.
There are so many online loan platforms. What is your USP?
Our faster decision making and instant disbursement makes it pretty convenient for users who are in search of credit. Our other differentiating factors are simple and hassle-free user interface, no hidden charges, lower processing fees and higher customer satisfaction among loan platforms. We have been rated well on Google play store and other surveys on customer satisfaction. We have also partnered with larger NBFCs to boost fund supply and meet the credit demand from the user base.
Tell us about the algorithm behind the loan decision making. How is it different from others?
There are multiple components at play here. First one being the novelty of the data sources that are being tapped in creating the variables or signals. We have more than 120 data sources that are referred to, to provide different perspectives on the customer behavior. These data sources help arrive at a number of variables or signals, which is the second component. We look at more than 6,500 variables either in a standalone capacity or as a part of different scorecards to underwrite. The third part is that we have more than 10 scorecards that are used over the course of the entire user journey - right from customer onboarding to credit line assessments to collections prioritization. These are based not only on vanilla regression models, but also on machine learning neural net models. Referring to these scorecards, different strategies are calibrated using decision trees.
The next component to follow is strategy validation. Generally in the industry, there are champion challenger models to validate the calibrated strategy. However, we have enhanced the strategy validation framework to ensure that more than two strategies can be validated at a time to iterate on the strategy with the lowest risk, and requires minimum possible time to deploy. Currently, we have seven strategies, which are live for different loan products. Lastly, we have a unique portfolio management framework where, adding on to the conventional B score, we use additional data on the customer to enhance their credit limit. This ensures that the best customer is discovered fast and is provided with the most optimal credit limit.
How’s the KreditBee’s journey so far in terms of a company, business and growth. Where do you see yourself in next 10 years?
KreditBee was launched two years back in order to help the young professionals have 24x7 access to instant personal loans on their mobile phones at the click of a button. In the past two years, the company has scaled newer heights to become the top rated finance app on Google Play. It received more than 25 million loan applicants and has become the largest lender in India in the digital-only space. Within a year of its operations, it has become one of the rare Indian start-ups to become profitable on all accounts. In next 10 years, we plan to be a part of 500 million Indian lives and be the first choice lender for them.
What are the major challenges in your industry? And how are you planning to overcome them?
The major challenges in the industry are raising debt for disbursal, identifying the right set of customers to lend, building collections capabilities and scaling it up faster with lower costs. In order to tackle the issue of raising funds, we have already tied up with numerous NBFCs, private banks and public sector banks and with time we will increase the number of such associations. KreditBee has a robust underwriting system, which comprises different aspects of the customers, including, but not limited to their personal profiles, social media thumbprints and their spending habits. This helps in eliminating the potential bad business with fraud customers in the very beginning.
With enhanced usage of artificial intelligence and machine learning coupled with inculcation of more data sources, the system will become more capable of segregating the good customers from bad. Collection practices in KreditBee boasts usage of robotics, automation and many other techniques that vastly improve the reach towards the customers and provide effective measures to use for collections.
Do you have any overlap with banks and other established formal financial institutions in terms of customer targeting? If yes, how do you beat banks at their game?
Banks generally cater to customers of high ticket sizes and tenures that extend to years. Also, customer application has to undergo a lot of scrutiny along with physical presence being required in most of the cases. Many times, customers want to borrow for a shorter tenure, say, for a few months to meet their immediate cash needs and hence, wish the approval process to be least cumbersome. KreditBee banks upon such requirements of customers by providing immediate access to loans and a completely online process. Also, a major segment of the customers do not have any credit history, and even though they have exposure to banks, they won’t be provided any loan by banks. The evaluation system of KreditBee makes it possible to identify the right customers and assign a limit to them even though they are completely new to credit. These factors help maintain an edge over banks and co-exist in the lending space, while catering to the needs of the customers.
RBI has now given two 3-month moratoriums to EMIs. What is the status of KreditBee loans Vis-a-Vis paused EMIs? What is the impact on companies and borrowers?
The customers have shown different types of behavior with respect to moratorium. Mostly, the segment comprising salaried individuals has refrained from availing the moratorium as they find it less beneficial to postpone the loan and pay more interest on that. In fact, the payment coming in from this segment has been healthy and is in-line with the behavior shown before the moratorium was announced.
While the prepayment has been on expected lines, KreditBee has rolled out different customer friendly offers for the after due collections for paying up, and have been educating customers heavily on how to opt for moratorium in case they do not wish to pay. In case of lending, the company is currently lending only to the repeat customers on a selective basis. The strategy during this whole time has been to provide customers with multiple options for payment and moratorium, and let them choose as per their convenience.