After payments, lending is the fastest growing space for fintech start-ups in India. While more than a dozen start-ups are engaged fulfilling the working capital needs of micro, small and medium-sized enterprises (MSME), a large portion of the market remains undeserved. Indifi Technologies entered the market in May 2015 to fill the same gaps in the lending space. Alok Mittal, co-founder and CEO attributes its segmented approach to lending as a distinguishing factor. “We follow a segment-oriented approach. We realised that a lot of transactional data cannot be interpreted in the same way across different kinds of businesses such as e-commerce, hotels, travel,” he says. “We use data sets such as bank statements which can be used for all kinds of businesses but we interpret them at a segment level,” he adds.
Another challenge for SMEs is the lack of credit history which makes it difficult for them to meet the underwriting requirement of the traditional banking system. The scale of their business keep them from maintaining their financial on a formal accounting system and they may or may not be filing tax returns accurately, according to Mittal. He accepts that there are lending organisations which have gone out and developed their own lending proprietary models for SMEs but that business is hard to scale.
Other companies in the lending space include Lendingkart, Capital Float, Rubique, Cash Suvidha, and Credit Mantri. Furthermore, e-commerce companies Snapdeal and ShopClues have also launched their merchant lending programmes. “We participate in merchant lending programmes of Paytm and ShopClues and they are our partners. They share the data they have regarding the SMEs in terms of the transactions and returns with lenders,” Mittal says.
“Some lenders are able to interpret the data but some lenders question how this data is going to be plugged into the lending system. Here we act as a bridge and build data models that allows the lenders to interpret the transactional data in context of credit,” he explains.
In the second leg of the lending process, application for the loan has to be matched to the right lender. “This is the matchmaking between the SME and the lender. There is a work-flow that follows when the application is sent—it has to be approved by the lender, the customer has to accept it, and necessary documentation must be in place before the disbursal,” says Mittal.
Indifi Technologies provides three different lending products—line of credit (working capital loan), term loan (fixed duration loan for specific projects), and merchant cash advance (loan against credit card receivables for merchants). It does not operate on the conventional commission-based model. “We manage the full life cycle of the loan and we monitor all the data. So, for all these services we charge a fee to the lender based on the product availed by the client,” Mittal says. The company also charges a processing fee of 1-2% of the loan amount to the borrower. Indifi Technologies clocks revenue growth of 20-30% month-on-month. Cost is low for the company as it operates as a marketplace for other lenders. But Indifi pays a commission to their partners who help them originate the business such as ShopClues and Paytm.
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Banking and NBFC partners of Indifi Technologies include India Infoline, Edelweiss, Capital First, Lendingkart, Aditya Birla Finance, and IDFC Bank, among others. Mittal says, “Till date we have disbursed loans to more than 2000 SMEs with average size of each loans in the range of R4.5-5 lakh.”
In December, Indifi mopped $10 million in Series B funding from Omidyar Network. “A lot of investment in our company would go on the product development side. We will also be deploying it on research and pilot that are involved in the new products we are building as we need to check what data construct fits for the product,” he informs. Over the next couple of months, the company plans to focus on key segments—travel, retail and e-commerce. “We will continue to expand in the existing segments as the credit performance has been good but restaurants is one segment that we are closely looking at,” Mittal adds. Indifi also seeks to add more categories under lending and build its own payment mechanism for loan repayment.