How Digital Lending Startups are Changing the Fintech game?

25 March 2020 | 1339 Views | By Abhinav Mishra

At the start of our professional career, we all face one common problem once in a while – Our money is all gone a week before the start of the new month. Does the situation sound familiar? Even college going students go through this situation where they end up spending all their pocket money before receiving new funds from parents.
This is a problem for every other person and this led to the formation of a lot of startups who are now providing a solution to this problem in their own ways. Now when you run out of money before month end or you have some unexpected need of money, there is no need to panic, there are top fintech companies ready to help you and lend you funds in just a few hours. Fintech innovation has made us have several interesting digital startups, that are oriented towards quick problem solving.

What are digital startups?

As the name suggests, digital startups are those whose entire business presence and working is over the internet. These can vary from lending to consultancy, delivery to movie streaming.

How digital lending Startups changing the game?

Digital lending has seen massive growth in India led by technology advancements, higher smartphone usage, and proliferation of financial and transactional data which has allowed fintech companies to create unique lending models. The lending market in India is estimated to touch $1 Trillion mark in the next five years.

More than a dozen financial technology fintech companies have come up in the past few years offering small ticket loans. They all have their own USPs and are on the path of growth. In this article, we are going to study four such startups –

Slice

Slice is a fintech startup that targets Indian young generation – students, freelancers, and young or inexperienced professionals. Their aim is to build a simple, smart and transparent financial platform to provide a different financial experience to millennials. The young people today will make the difference tomorrow and hence they want to build long lasting relations with young people. Initially, started only for students, they have extended their service to young working professionals who are unable to get the traditional credit card.

The process starts when the users sign up on the platform. Users then have to upload required documents for verification purpose and select a preferred repayment plan. Based on the application form details, the company’s underwriting algorithms analyze a number of parameters such as applicant’s Facebook or Linkedin account, bank SMS history, accommodation (staying with parents, rented, PG or hostel), and monthly house rent, among other data points. After completing these steps the user receives a credit limit using which they can shop the products of their choice.

Slice cards work just like a credit card with some additional benefits like no cost EMIs and emergency loans. This makes it extremely convenient for customers to use the card for different purposes like flight booking. They can pay their bill on installments with our no cost EMIs ranging from one to six months.

Initially known as SlicePay, Slice’s fintech services offers a minimum credit limit of INR 4000 which can be Rs 60000 at max for students. For working professionals and freelancers, the limit can be up to 1 lakh. They recently raised a funding of $2.8 million from Japan based Gunosy capital. Today, the company is serving 200K active customers and an average of 8-10 slice card transactions in a month.

KrazyBee

KrazyBee is India’s first online installment store only for students, and arguably one of the best fintech technology startup. It is a marketplace that connects borrowers (students or their parents) to the lender. It was formed in 2016 by are a bunch of IIM & NIT alums. Their USP is they target students only who have no credit history and credit cards. KrazyBee offers them flexible installment based purchase options.

They not only provide loans but also sell products to college students. Some of the items available with them are electronics items such as cameras, mobile accessories, smartphones, as well as apparel such as branded clothes, shoes and watches on flexible equated monthly installment (EMI) plans. Nominal interest is charged per transaction to the student.

How do they work?

Signup and complete your profile
Upload documents
Place order
Get your one-time on-campus verification check completed and Loan agreement signed
Order gets approved and pay down payment
Enjoy your dream product delivered at your doorstep.

Students have to pay 25% of the amount as down payment and select EMI tenure from 3 months to 12 months.

Their services are mainly divided into 3 classes –

Student Paycard
Two-wheeler loan
Semester loan

They have disbursed over a hundred thousand loans as of now and have a total NPA (loan defaults) of 0.8 percent. KrazyBee is operational in four cities – Bengaluru, Pune, Mysore and Vellore and plans to expand in a dozen more in next year or so.

mPokket

mPokket is a prominent digital lending platform that offers short term personal loans to college students in a hassle free and seamless manner. As a student, you don’t need to have any credit history to borrow money. They eliminate the time consuming and paper heavy loan process. They have a reach in more than 5000 colleges and 200 cities across the country. The process is very simple, the applicant has to fill in relevant personal information and submit the document online. Once the verification process is over, the user is assigned a credit limit.

mPokket uses proprietary credit models that take into account multiple unrelated alternate data points to assess the creditworthiness of a college student. The credit limit is determined on the basis of factors like demographic, financial, social, behavioral, and transactional factors.

The credit limit varies from Rs 500 to Rs 20000 and depends on the purpose for which the loan is taken and also on the details of the students. The loan has to be repaid in a period of 3 months. If the user is not paying the loan in the repayment period, a penalty gets added. It continues to add for as long user default.

mPokket currently reaches only about 1 percent of the total college student population in India. Their goal over the next two years is to increase awareness of the product and expand their reach to 10-20 per cent of college students in India.

EarlySalary

EarlySalary is a fintech startup and India’s earliest consumer lending platform launched in 2015-16. At that time, instant loan was only a concept to most of the Indians. Today, it has over 10 million app downloads and over four hundred thousand active approved customers. They have come a long way from disbursing 30,000 loans a month two years ago to processing hundred thousand loans a month now.

The company sees a maximum demand from individuals employed in IT, banking, telecom, and manufacturing sectors. As per the data shared by the company, the average monthly income of its borrower is Rs 40,000 and the average loan size is Rs 1 lakh. The highest demand comes from Bengaluru (27%), followed by Delhi-NCR (21%), and Hyderabad (13%).

In 2018, they acquired Cashcare which allows them to face competitors who are offering customers ‘Buy now, Pay later’ service for online and offline retail purchases.

The company aims to reach seven fifty corporate clients by the end of 2020, and with that, they will be able to fulfill a target of two million loan disbursals.

The startup raised $4 million in a Series A round from IDG Ventures India and Dewan Housing Finance in 2017 and in 2018, it raised another Rs 100 crore in a Series B funding from Eight Roads Ventures India.

The loan is available immediately to anyone and everyone today but as a user, you should not forget to exercise due diligence before applying for a loan. As a rule of thumb, instant loans should be opted for only in case of an emergency. Do share your experiences of taking an instant loan and what are your thoughts on the process overall?