Lending colour to young India's dreams

Gaurav Chopra was in London for seven years and had started working with Capital One bank. The bank had 4 million customers and all 4 million got their loans or credit cards instantly.

Gaurav felt that there was a huge opportunity in India, given the debt to GDP levels of India was the lowest compared to any other growing geography. The realisation made him move back to India and set up shop here.

He cofounded IndiaLends along with his colleague and friend, Mayank Kachhwaha. In an exclusive interview with, The Passage, Gaurav shared his insights and the big opportunity on the consumer lending space in India and how he established a brand with close to one million new users a month.

Excerpts

The Passage: What motivated you to start IndiaLends?

Gaurav Chopra: When I first moved back in 2012, I had joined a P2P lending company to learn more about India. All my professional experience was in the UK, US and Canadian markets.

I worked for one year with the P2P lending company, got them started, understood how regulation works, got in touch with banks and collection agencies, and then decided to set up my own business along with my cofounder, Mayank, who was also with Capital One.

The two of us started from my basement. Now, we’re a team of about 600 people. It's been about four and a half years now. We have a very good brand and close to 1 million new users come to us every month. We have partnerships with more than 50 different banks, fintechs, NBFCs AND all the leading credit bureaus in India. We help consumers get access to free credit reports every month and on that basis, we give them loans, we give them credit cards, we give them gold loans, two wheeler loans and all sorts of lending products.

The Passage: Why do big banks and NBFCs need you to work as a marketplace?

Gaurav Chopra: Three reasons. The first is not all banks and NBFCs offer the entire range of lending products. They all are focused in one or two sectors. For example, Bajaj Finserv only wants to look at the super prime customers and hence their ticket size and the loan tenure are very high. So, Bajaj would be giving out 1.5 million rupee loans for five years. At the same time, NBFCs like Fullerton offers loans for maybe 12 months or 18 months for 100,000 rupees at 30% interest rates. Now, given the fact that they have different segments and different products, the marketing for them becomes very difficult. If they are marketing for a consumer looking for a loan, they will obviously get all sorts of loan requirements and hence the marketing is not that efficient. By using a platform like IndiaLends we are able to find the right lender for the consumers.

The customer is happy because he finds the right product. At the same time, the lender is happy because his marketing efficiency comes in, and he's only paying for the segment that is applicable to him.

The second reason is, for most of the NBFCs and the fintechs, they don't have the entire range of services for a loan to go through. We have built that in our technology and we have partnerships on the ground level to make all these happen. For many of our lending partners, right from sourcing to underwriting to credit policy, to the technology, flow, onboarding, everything is done by the intelligence team and that is where they are finding the right value.

The third reason is we attract consumers by giving them their credit reports. These are credit reports that are coming from the four credit bureaus in India, TransUnion CIBIL, Equifax, Experian and CRIF Highmark. Now, once these consumers come to us, we have stickiness with these users, they come to us every month to get the new credit report, because we provide it for free. The credit report data is a goldmine. It tells us everything about the users’ credit history. And on that basis, we're able to run pre-qualified loan offers, we're able to give the users the right product for them without any uncertainty. And the banks like this, because then we can offer their products to these users without any friction from the user standpoint or the bank standpoint.

The Passage: What role does the technology play to ensure quick and secure loan distribution?

Gaurav Chopra: We have built all our processes ourselves over the last four and a half years. We have a very strong technology team. Our CTO used to work for one of India's first ecommerce portals called Sulekha. He has built processes that are scalable, fast and secure. We've built our engines on the whole Microsoft architecture.

On the security front, we have dedicated ISO teams. We have a dedicated security team: external partners who work with us on security and all the data protocols. We have an 80 members-strong in-house technology team. So the focus on technology helps us to provide these services in fast, secure and scalable manner.

The Passage: How many users do you have now? Could you give us the demographics breakup on users? Do you spend money on marketing?

Gaurav Chopra: We do spend on marketing. But whatever we spend on marketing we make in revenues in the same month. We have a range of partnerships that help us to optimise our cost to acquire customers. We have over 5 million users now. We’re acquiring close to a million users a month. 30% of our users are in the 22 to 30 age range. 30% are in the 30 to 40 age range and the rest are either above 40 or below 25. Geography-wise, we have 60% of our people coming from the top 20 cities and then we have a distribution that goes towards tier 3,tier 4 cities, smaller towns etc. We have about 60% of people who are salaried and working in companies and we have 40% people who are self-employed and professionals. And, 70% will be male 30% will be female.

The Passage: You have commented earlier that the new generation has a different spending ideology. Care to elaborate?

Gaurav Chopra: 10 years or 15 years back, if we had to, plan or travel to China or US, you would have to go to a travel agent and you would have to plan it months in advance, if you wanted to get education in a foreign institution, you would have to wait for weeks to hear back from them. Now with the internet, everything is so connected, that you are able to see how people live their lives in the US, UK, China etc.

A few years back, the mentality was let's save first and then spend. When a young person in India looks at his counterparts in the US, he feels that that is the life that I also want to live and credit is making that possible. So that change is happening and obviously this is all supported by high smartphone penetration and low data cost. The Indian consumer is now becoming more and more informed plus the Indian economy is an open economy. Indian consumers don't want to wait till they turn 40 or 50 to get the best experiences. They want to do it as and when they can afford it through lending.

The Passage: What’s most popular category on your platform?

Gaurav Chopra: About 30% of users come to borrow to repay other loans. For example, the loans to repay for credit card. In India, the credit card interest rates are very high. So every Credit card in India is at 3% monthly interest rate. Now, if somebody let's say goes on a shopping trip or goes on a holiday and overspend on his credit card, they will have to pay 3% monthly interest on it. So, these people come to us and they take loans instead - loans at 1% a month or 12% per annum or 15% annum which is much cheaper than a credit card right. We see a good 20-25% people come for travel loans.

The Passage: What’s the average ticket size of travel loans?

Gaurav Chopra: Within India, it is around 70,000 rupees to 100,000 rupees for a family of three to four. If it is in Europe, it can be anywhere from 400,000 to 600,000 rupees. And then we see a good 20% people who are coming for home renovations, buying, and the rest is for any kind of a personal need like medical emergency. Wedding is a good category. Especially our younger generation wants to have lavish weddings, and they don't want to burden their parents with the expense. So they're borrowing themselves for the wedding. We provide loan starting at six months to six years.

The Passage: What’s your revenue model?

Gaurav Chopra: Our revenue model is very simple. The lenders pay us a fee for every transaction we do. The quantum of the revenue depends on the product, the size of the loan, interest rate and tenure. If it's a credit card, it depends on which kind of card is it? Is it a high end card? Is it a low income card? We make all our revenues from our lenders, which also ensure our revenues come on time. There is no default because we're only working with institutions.

The Passage: How do you stand out from the competition?

Gaurav Chopra: Our focus remains on credit risk. Though we are a marketplace, our core job is to attract users. The fact that we attract users, and then we have their credit information, and have our models based on the data makes us different from others. We don't make money by generating and selling leads. We make money when loan goes through basis on our credit decisioning, analytics and technology.

The Passage: You're also the president of the DLAI. What’s your views on regulations in the consumer lending space in India?

Gaurav Chopra: Digital Lenders Association of India is the organisation that I founded along with eight, nine other founding members about three, three and a half years back. We have about 80 members who come from all aspects of digital lending in India. The idea is to bring together, be together as an industry force, keep our members up to speed on any regulation update, policy changes, technology developments and get them special deals at global trade fairs.

The RBI and SEBI, the two regulators in India, are very forthcoming. They are very progressive. If you look at the payments infrastructure in India, it's probably the best in the world. I can transfer money to you in a matter of seconds. It can happen 24x7, 365 days a year, all backed by good secure infrastructure.

When it comes to lending, NBFCs and banks have been there forever. Regulation is pretty strong over there, when it comes to who can lend who can't lend. The process of getting a license is very cumbersome, which means that the regulator is giving it enough attention to make sure that not everybody's able to lend and the ones who are able to lend have the capacity, knowledge, infrastructure and expertise to lend. Recent changes have come on the front of KYC. So the government is trying to balance technology along with risk; not only from a creditor standpoint, but fraud risk, money laundering risk etc.

While some things may have been negative in the past in terms of blocking the eKYC or OTP based lending. We are hopeful that soon digital lending will be possible, the government and RBI will come up with changes that allow lending to happen in a safe and secure manner.

The Passage: Do you have plans to raise funds?

Gaurav Chopra: We will raise funds next year. We are exploring conversations with all global funds. We plan to use the funds to acquire more consumers by offering them better products and technologies and growing our market share. We are talking to people from China, Europe, us, Korea, Middle East.