How Fintech is changing banking for SMBs

Time to analyse the health of LendingKart, Razorpay, EbixCash, Capital Float, Indifi and NeoGrowth to understand how they would benefit SMBs 

Financial technologies are helping SMBs getting established, scale and thrive. Fintech gives small and mid-sized businesses more options around funding, payment, processing, money transfer and more. Precisely these are the areas where a variety of fintech solutions have proved to be a panacea for the SMBs in India.

Indifi Technologies: Verticalization is the USP

Indifi Technologies is a debt-financing platform that facilitates SMB lending with a focus on customer-product fit. Indifi claims to bring to the market specially designed credit products suited to the needs of SMBs. Its approach towards SMB lending since the beginning has been to work with ecosystem partners like large aggregators. This helped Indifi penetrate through segments better.

A robust technology and data platform enable scalable segmented execution. Deep understanding of segment and customer enabled the platform to provide tailored product offering to its customer segment in terms of cash flow cycles, need for funds, margins etc. This industry verticalization brings unique benefits to the customer as product design fits into the business cash flows of the MSMEs. For instance, Indifi worked extensively with brands like Zomato to gain access to restaurants and collect relevant data in order to understand the target segment better and offer solutions accordingly.

Indifi claims to have contributed to bridging the gap in SMB financing with an amalgamation of technology and access to data, enabling seamless access to funding with flexible repayment options for startups and small businesses. Backed by investors such as Accel Partners, Elevar Equity and Omidyar Network, this fintech platform has emerged as an enabler for start-ups and SMBs that seek seamless access to funding without having to dilute their equity.

Indifi solutions are distributed through supply chain partners like ticketing consolidators, online travel agencies, and online food ordering companies among others. This reduces the cost of distribution and makes the process for MSMEs more convenient. The platform also has multiple aggregator partnerships, which help in sourcing customers as well as data for underwriting.

Indifi typically considers three key aspects to analyse the creditworthiness of SMBs. These include the ability to pay, the intent to pay and volatility of the business. Both internal and external factors are mapped by studying business stability through the operation age and business cash flow using traditional as well as alternate data. The intent to pay is historically analysed through credit history made available by credit bureau agencies.

The leveraging of alternate data and using it to build a proprietary algorithm to make customer-centric credit decisions is one key focus area for Indifi. The unique methods the platform is leveraging today enable it to add layers on top of credit bureau scoring. With 30%, first-time unsecured borrowers on the platform, Indifi is fuelling the growth of country’s lending ecosystem by catering to startups & SMEs with little or no credit history at all.

Capital Float: Leveraging AI and ML for Lending

Capital Float is an online platform that provides working capital financing to SMBs.  The company offers short term loans that can be used to purchase inventory, service new orders or optimize cash cycles. Capital Float has issued loans to SMBs from their loan book and also through its lending partners.

The company has devised one of the largest co-lending models in the country, that currently contributes to nearly 40% of Capital Float’s overall lending. It has partnered with over eight large banks and NBFCs to co-lend with us on the platform. In this model, Capital Float participates in a proportion of 10%-30% of every loan and manages end-to-end loan management for the co-lender. This includes functions spanning from sourcing the lead to collections and recovery.

Capital Float acquired Walnut in 2018 as a strategic move to strengthen its consumer lending business. Walnut is the largest personal finance management app (PFM) in the country with over 7mn downloads. Besides, Capital Float’s consumer finance product line comprises online checkout financing in partnership with Amazon and personal credit line via Walnut mobile app. No wonder, Capital Float has grown exponentially over the last six years. It has served over 500,000 customers in 300+ cities with a lifetime disbursal of over $1 billion. The company has a loan book of over Rs 1,300 crores and a monthly run rate of over Rs 100 crores.

Capital Float extensively deploys AI and ML models to determine credit risk across all products. Its small-ticket loans are fully automated and are built using AI. In its Walnut Personal Finance Management (PFM), functions are algorithmically designed to generate financial insights of users, which helps the platform to offer customised credit facility to customers proactively. Capital Float also uses ML in sophisticated Collections stack to optimise cost by developing an in-house, industry-first early warning signal system. Besides, the ML models assist Capital Float’s digital marketing in streamlining the operations by offering customised credit proposals for customers.

Though the plans by South African Internet giant Naspers to acquire Capital Float fell through, the company’s unique underwriting and efficient collections as well as innovation in fund sourcing makes it one of the top fintech solution providers today. Capital Float is committed to accelerating Walnut App’s evolution into becoming a financial partner for the unbanked and millennials by continuing to design a highly sophisticated credit evaluation engine.

EbixCash: Growing Through M&As

EbixCash is emerging as one of the leading financial exchanges in India. With a physical strategy (physical experience with digital backend) that combines more than 260,000 physical distribution outlets to an Omni-channel online digital platform, EbixCash has established an enterprise financial exchange portfolio that encompasses leadership in digital payments solutions, money transfer services (domestic & international), travel, insurance and corporate and incentive solutions.

Recent strategic arrangements with MoneyGram and Amadeus would likely to further bolster the position of EbixCash in India. With Ebix Cash becoming MoneyGram’s exclusive partner in India, MoneyGram isnow be able to reach additional consumers through Ebix’s 320,000 distribution outlets spread across 768 districts, 4,000 cities, and more than 75,000 villages, significantly increasing coverage in rural areas

EbixCash customers in these locations can now access the MoneyGram platform to affordably and quickly send or receive money to family and friends across over 200 countries and territories. The strategic partnership aims to service inward remittance volumes of $3 Billion annually by targeting remitters in key sending markets outside India.

EbixCash also inked a strategic travel technology partnership with Amadeus to grow its footprint across not only India but APAC as a whole. With 210K travel agents to service and 4.5 million users of its travel app, EbixCash needs access to an extensive range of content and the best, scalable technology to deliver what its agents, corporations and travelers need. The partnership will provide EbixCash’s online websites, travel agents and corporations with greater access to the breadth of content offered by the Amadeus Travel. Built on fully open systems, the Amadeus Travel Platform harnesses artificial intelligence to bring a greater level of personalized content into one integrated platform.

Prior to these strategic partnerships, EbixCash has been on an acquisition spree in India. It invested nearly $500mn in 11 acquisitions within a 14 month timeframe. These included Money Transfer Service Scheme (MTSS) business of Transcorp International,  elearning company Smartclass, money exchange platform Centrum Direct, financial software provider Indus Software and travel services ventures Mercury Travels and Leisure Corp. Ebix acquired an 80% stake in ItzCash in May 2017.

NeoGrowth: Mastering Analytical Underwriting

NeoGrowth is a tech-enabled lending business that provides unsecured loans to small retailers in major cities. SMBs have the option to repay by future card receivables, e-commerce sales and other non-cash payments. The solution combines new payment datasets, traditional scoring, dynamic repayment and automated collections to identify and serve creditworthy businesses. Merchants are not required to pay fixed monthly instalments, but instead make automatic repayments as a portion of their sales made with electronic card payments at PoS.

The proprietary technology platform of NeoGrowth helps in analytical underwriting around the digital spends data and other alternate data. It looks at the performance of the business rather than the credit score of individual. With its tech enabled underwriting, NeoGrowth is able to provide tailor made loans to various merchants as per their industry segments ranging from food& beverage, apparel, salon, petrol pumps, automobile dealers among others.
NeoGrowth’ s card statement based scoring algorithms provide a better assessment of credit – worthiness of small businesses as compared to traditional balance sheet based lending.

Creating a positive social impact has been at the heart of the NeoGrowth’s business strategy, which is geared towards improving the financial lives of SMBs across India, more than 50% of whom are creditworthy but until now have been excluded from accessing loans based on traditional underwriting methods. NeoGrowth caters to this under-served market by adopting an innovative approach and validating the creditworthiness of the business. This is done by looking at current business performance and stability. Till date over 15,000 business merchants have been helped by NeoGrowth to grow their businesses.

The unique tech & touch model of NeoGrowth, augmented by the in-house technology platform and smart analytics of the digital spends data ensure that NeoGrowth offers the best products and services in the market. The company also offers NeoCash Online, which is designed exclusively for online sellers on e-commerce marketplaces and retailers selling online through independent portals.

NeoGrowth has offices in top 21 cities of the country, where it envisions the best growth for acceptance of digital payments. The company continues to expand into these markets and keep improvising and come up with better solutions to help the SMBs. NeoGrowth focuses heavily on customer delight initiatives believing them to be true brand ambassadors. As a result, the company has a healthy renewal rate of around 70% and its default rates are around 3%.

Razorpay: Complete Payment Solution with Razorpay 2.0

Razorpay is a payments solution in India that allows SMBs to accept, process, and disburse payments with its product suite. It gives customers access to all payment modes, including credit card, debit card, net banking, UPI, and popular wallets including JioMoney, Mobikwik, Airtel Money, FreeCharge, Ola Money, and PayZapp.

Razorpay Capital is ther lending arm and RazorpayX is the neo-banking platform. Currently, powering payments for over 800,000 businesses, the company has been witnessing a healthy growth rate of 35% month-on-month. It also expects Razorpay Capital and RazorpayX, along with the non-payment gateway suite to contribute to 40% of its revenue by next year.

As part of its 2.0 expansion strategy, Razorpay, funded by the likes of MasterCard, Tiger Global and Matrix Partners India, launched the vendor payments service that allow its 100,000 clients to manage account payables, critical for SMBs to manage their liabilities. Razorpay 2.0 was launched as part of the company’s bid to evolve into a converged payment solutions company, allowing its clients to handle all aspects related to the flow of money, right from the moment a payment is initiated, to the point that it is fully reconciled and disbursed.

Razorpay has followed an acquisition strategy to gain further foothold into its businesses in India. The acquisition of Thirdwatch, an AI driven company for real-time fraud prevention, has improved the response and redressal mechanisms of partner businesses in combating fraud. It is also aligned with Razorpay’s long term strategy of building core-competencies in big data and artificial intelligence (AI) by bringing in disruptive minds that can solve unique business problems in the industry.

The acquisition of Payroll and HR Management Software provider Opfin was to solve for seamless automation of a business’s entire payroll process. Payroll is a fragmented market with no clear solution. With Opfin, Razorpay hopes to make this effort a lot easier with robust technology and an enhanced experience. The Opfin acquisition is a significant part of RazorpayX’s business banking strategy and will also fast track a few years in how the payroll industry has functioned and ensure that businesses follow all compliances.

LendingKart: Geographically Largest Indian NBFC

LendingKart is a lending startup that provides SMBs and entrepreneurs access to working capital loans. It evaluates the creditworthiness of a business by leveraging on Big Data and analytics. It has another NBFC arm called LendingKart Finance which raises money from financial institutions and banks and lends it to customers.

LendingKart has disbursed 76,000+ loans to more than 640,000 MSMEs in more than 13,000 cities across 29 states and UTs. This makes LendingKart the NBFC with the largest geographical footprint in the country. Aimed at addressing the growing working capital needs of SMBs, LendingKart recently inked a strategic partnership with Northern Arc Capital allowing the two to disburse more than Rs 150 crore in working capital.

Unlike banks and other NBFCs, Lendingkart does not focus on vendor’s old records (past financial statements and income tax returns) to evaluate the credit risk profile of a potential client. The NBFC focuses on the client’s current year’s cash flows and business growth. The objective is to make capital funds available at finger tips so that entrepreneurs can focus on business instead of worrying about gaps in their cash-flows.

Some crucial data points lead to an accurate prediction of a potential customer conversion. As SMBs submit their self-declared business vintage, LendingKart captures the call centre data. This gets built into a model that it calls survival function. Essentially it tries to predict the likelihood that the customer is going to convert within the next call. For this, LendingKart uses surrogate data that reveals how many calls have been attempted, answered, and the talk time on the last call variables.

Lendingkart also analyzes variables like the time spent on the lead page and the optimal time needed to fill the form. These indicators are used to optimize the work board as well as the product for increasing the output from marketing to data collection. For each part there is a probability score that the customer is likely to go into default at some point of time. With the credit default model, the input is bank statement and civil data with some inputs from the marketing channel as well.

An important technology initiative was the data warehouse creation. This warehouse creation was most important because it stitches the customer journey right from marketing acquisition to the disbursal to loan performance. Consequently, conversion rates have improved by a couple of percentage points.


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