Atul Saxena, a student in Bengaluru, would spend a large chunk of his monthly allowance on books, movies, gadgets, eating out, mobile recharges; in that order. Very often, he would run out of money before the end of the month and would have to borrow from friends. That was when he spied a message on the student notice board – a start-up named SlicePay actually offered credit to penniless college students like him. And it didn’t require his parents’ countersignatures! His Aadhaar card and college ID were enough.
When Sushant Singh, a trainee at his first job, got an interview call from a Mumbai-based firm, he rushed to get a Tatkal train ticket but to his dismay found that he did not have enough money. A friend then told him about ePayLater, a digital solution that allowed him to buy the ticket and offered a 14-day interest-free period to settle the payment. Soon, Singh had the ticket in his hand and was on his way to Mumbai.
More and more young people are getting access to credit despite not having a CIBIL score, a steady salary or a regular job, thanks to a set of fintech start-ups. These start-ups offer youngsters, especially students, a chance to make online purchases, buy bus, train and movie tickets, recharge mobile phones and buy data, make hotel bookings and even pay utility bills—all on credit. Says Rajan Bajaj, co-founder, SlicePay, “Our customer segment is primarily those young Indians who are new to credit and would not get served through traditional financing options. College students and young graduates are our target customer.” SlicePay was founded in Bengaluru in December 2015 by Bajaj and Deepak Malhotra.
While ePayLater offers a 14-day interest-free period to customers to settle their dues, another digital credit platform, LazyPay, an offshoot of digital payment firm PayU India, offers a 15-day grace period. App users can use this intervening period to make more transactions which they clear together at the end. Once the due amount has been paid, credit limit is restored, and they can continue making more transactions. Again, others such as KrazyBee and SlicePay allow customers to repay through low-interest EMIs. SlicePay has a virtual card through which customers can transact and choose their preferred monthly installment tenure.
“The USP of ePayLater’s platform is threefold. First, its “Buy Now, Pay Later” functionality; second, the enabling of a single-tap/one-click checkout process at purchase; and third, its ability to safeguard consumer information from unnecessary dissemination. By doing so, ePayLater comprehensively solves the digital payments problem for everyone,” says Aurko Bhattacharya, co-founder, ePayLater. The start-up was founded in 2015 by Akshat Saxena, Aurko Bhattacharya, and Uday Somayajula.
How do these fintech start-ups guage the creditworthiness of students or young professionals who have no chance of getting a credit card from a bank? Algorithms and risk assessment models do the trick. “We leverage sophisticated algorithms that have the capacity to cater to wide and differing audiences in an inclusive way,” explains Akshat Saxena, co-founder, ePayLater. “For instance, ePayLater works with different merchant partners that cater to very different target groups and markets. IRCTC sees traffic from the biggest metros and the smallest hamlets and gets customers of different ages that often lack credit histories. In spite of these challenges, ePayLater’s algorithms have been able to determine their creditworthiness, making it possible for ePayLater to solve real-life problems by dispersing credit through advanced data science.”
These platforms remove the requirement for third parties such as payment gateways and banks at the point of transaction. This ensures an unmatched transaction success rate and also increases transactional security for the customer. Typically, the Aadhaar number and college ID card is enough. For instance, KrazyBee requires on-campus verification check to be completed and a loan agreement to be signed by the customer for approval of the order. According to the KrazyBee website, Paytm customers who have had their e-KYC done can get KrazyBee money delivered into their Paytm Wallet.
Along with students and young professsionals, which ePayLater calls its B2C segment, the Mumbai-based digital credit platform’s B2B business is focusing on small businesses and SMEs. “Working capital assistance is provided to these businesses by leveraging data science. ePayLater uses data such as buying patterns with the merchants, digital footprint, social media information and device information to do real-time credit assessment,” says Uday Somayajula, the third co-founder of ePayLater. For business customers using ePayLater, the repayment term is either 14 or 30 days. This allows businesses to continue providing services to their customers and achieve higher sales through faster inventory churns. For its B2B customers, ePayLater has tied up with FidyPay to provide the latter’s merchants with a way to recharge their wallets without needing to make an upfront payment. They now have an interest-free repayment period of 28 days on this credit; once the amount is repaid, the credit limit is restored.
These digital credit platforms are seeing success. ePayLater has 2 million-plus users from tier 1, 2 and 3 cities on board. SlicePay has disbursed more than Rs 100 crore with 0.5 million loans. On every card loan, it charges an interest ranging between 0-30% APR (annual percentage rate), and average tenure is nine months. SlicePay did about Rs 3.4 crore in revenue in FY18, Rs 35 lakh in FY17 and Rs 3.2 lakh in FY16.
SlicePay has recently tied up with Singapore’s MatchMove, a digital payment firm to provide a virtual credit card. “The MatchMove partnership allows us to provide our virtual mastercard card product to our customers. This has opened the number of merchants where customers can avail the credit from SlicePay by more than 100x,” says Bajaj. “We are also in touch with multiple e-commerce and travel merchants to come up with low cost EMI plans for our customers, and will be rolling out some of these products soon. We have also partnered with many colleges in Karnataka region currently for our education loan product that gives parents a low-cost alternative to finance their children’s education fee—expanding further on these partnerships with more colleges.”
“Our platform gives B2B clients the ability to insert instant payments and an instant card within their app and digitise cash transactions. Using our platform, our clients could issue their customers a card on demand straight into their phones. A virtual card first followed by a physical card. Top-up can be done cash-over-the-counter, via debit or credit card, e-banking, local wallets, etc., enabling inclusion for the un-carded and unbanked. For the existing banked and carded, it offers a safer alternative to debit / credit cards for users cautious about domestic merchants,” says Kumar Srinivasan, CEO (India), MatchMove.
That perhaps explains what makes digital credit platforms the go-to place for young millennials. And also why digital payment apps such as PayU are entering this segment. For anyone regularly using mobile wallets, the next natural step would be to look for digital credit. Don’t be surprised if these new-age fintech start-ups soon offer credit to the self-employed and blue-collar workers —a segment that lies beyond the formal banking sector’s horizon.