How True Balance is bridging the gap for a sustainable digital lending ecosystem in India
CXOToday has engaged in an exclusive interview with Mr. Souparno Bagchi, Chief Operating Officer, Balancehero India
- The Indian digital loan market and how it has grown the last two years?
Response: In India, digital lending has increased from $9 billion in 2012 to over $270 billion in 2022. Going forward, the industry is poised to grow by 4.75X to $1.3 trillion in 2030. Data indicates digital lending is set to account for 60% of the total finTech market in India by 2030.
The factors fuelling this growth are:
a) Innovation: – Fintechs have revolutionized the horizons of customer servicing through product customization, alternate underwriting processes, first degree risk based pricing and seamless user experience. Thanks to frontier technologies like AI/ML, Cloud and even in certain cases usage of distributed ledger technologies. Therefore, the market has progressed from a traditional binary orientation of defined cliffs of serviceability to a gradually expansive model driven by market forces of needs / acceptance and offerings.
b) Consumer Awareness: Due to the pandemic, consumers are embracing digital technology and incorporating it into their lives. Digital lenders and their offerings are also gaining dominance in consumer mindshare due to innovative products, speed, agility and seamless experience.
c) Collaboration: – The secret sauce of India’s digital lending market has been the power of collaboration. Regulator and industry bodies have been pivotal in creating constructive avenues of deliberated evolution of the industry. Across the country, digital lending is seeing growing consumer confidence reflected in the number of repeat customers & diverse customers, are endorsements of the growing consumer confidence in the digital lending space. Also, leverages of the India stack in terms of knowing your customer, validations, compliance and digital payments have been shining examples of the ecosystem play.
2. What are the large variety of loan products that True Balance offers, in different ticket sizes, and trends for each of these loan sizes PAN-India?
Response: Trends, USPs:
Assets / Leverages of Regulated Entities: Balancehero India, operates through the leading fintech app called TrueBalance. As a company we have both – RBI awarded perpetual PPI licence and an NBFC, i.e True Credits. These two accreditations position us uniquely to offer an end-to-end digital platform to users as a one stop solution for their payments and borrowing needs.
Product Market Fit: We offer short-term loans through our app which are custom-fitted for our target users / profiles. We are completely focussed on our target groups of the large segment of underserved and underbanked customers in India. Therefore, unlike many other players our customer acquisition strategy, marketing orientation and the underwriting engines are all optimized keeping in mind our USP of being the top segment player. This has helped us to crack the sweet spot of small ticket personal loans and we have been able effectively achieve the right product market fit with a dedicated strategy of ticket sizes of below 50K INR.
The Next Billion Users: As an end-to-end digital player we define our business reach in terms of pincodes. In a vast country like India, we take pride in our ability to effectively do business in over 85% pincodes pan India. If we further double click, the majority of our customers come from Tier 2+ areas of India with 80% customers between the age group of 25-40 years. All our customers are smartphone users who are proficient in carrying out digital financial transactions (viz. KYC, digital documentations, acknowledgements and payments; there is no cash transaction). The most prominent personas of our borrowers are salaried or self-employed individuals with a consideration of largely non-discretionary lending demands.
- Importance of need-based financial inclusion which has actually helped lakhs of Indian families survive the pandemic
Response: In last few years, most of our customers have taken credit to meet expenses related to health, home repairs, education and wedding expense. Additionally there have been a sizable chunk of customers from the millennial category availing loans from us to meet their aspirations related to travel, gadgets among others. The pandemic significantly changed businesses around the world and fintech is certainly no exception. Consumers have come to understand the advantage of fintech over local money lenders. The main reason being that though the pandemic was an accelerator, the benefits of digital lending are deeply fundamental and therefore, were not constrained by the tenure of the pandemic.
Overall, the use of digital technology and the pandemic have contributed to the transition and expansion of credit needs to digital. Additionally, it refined and validated the power of alternate underwriting and digital delivery by players and gave suppliers (such as banks and NBFCs) greater confidence to collaborate and participate in digital lending.
- What is the difference between bad credit and good credit?
Response: Good credit is the loan that a borrower repays in the definite amount of time with legitimate interest rate; whereas bad credit is the amount that the borrower is not able to repay due to reasons such as unwillingness to repay, unmanageable debt and other similar reasons.
To put in perspective, good credit is the loan which is extended to a customer by authorised lenders through appropriate product placements, disclosures and effective underwriting mechanisms which take into consideration like – creditworthiness of the borrower, financial behaviour history, disposable income, outstanding debt and various other similar parameters which have direct impact on the repayment ability and willingness of the borrower.
- How are digital lending platforms closing the credit gap?
Response: Indian fintech players have excelled bridging the digital gap.. With the emergence of digital financial services and the internet we have a chance to further close the credit gap. . A large population of India has been belonging to the underserved and unserved category and facing difficulty in availing credit from formal financial institutions. The rise of fintech in India have made it possible for the average person to acquire credit in a seamless manner, with customized products suited for diverse cohorts of the customers and at the convenience of his / her fingertips in a 24X7 manner. Today, the industry at the retail credit space has established its portfolio to 40%+ amongst Tier II+ locations in India. For us at True Balance, the ratio is actually favourably skewed with the majority borrowers coming from Tier II+ locations. A great testimony of how digital lending has been expanding the serviceable horizon of the market in terms of reachability, convenience, cost and consumer trust.
- How True Balance helps in building healthy credit habits in consumers?
Response: Healthy Credit Habits have two important pillars-
Firstly, the ability to identify good incumbent credit worthy customers or, who at least have good financial health indications. At True Balance, we operate as a 100% D2C (Direct to Customer) model. This gives us the ability to present our tailored user journey and understand the customer at first degree touch point basis. This uniquely positions us to present propositions which are customized at scale and to the order for first degree in terms of optimized credit approvals, pricing and similar key propositions.
Secondly, it is our ability to incentivize good credit behaviour and create a more effective and efficient credit profile of the customer with every timely repayment of loans and also ensure appropriate updates of his / her credit scores with the bureau. A reflection of this also happens through preferred and better loan propositions which happen for good repeat customers.
- What are True Balance’s future plans?
Response: We at True Balance have a competitive advantage because of our PPI and NBFC firms. We have established ourselves as a pan-India leading digital lender providing access to credit for underserved and unserved in the retail loans space. Therefore, through our regulated organization, we are in an strategic position to drive and build business and portfolios.
On any given day, we disburse around 10,000 loans. The business and transaction volumes are a testimony to our ability to operate at scale and supported through deep technological prowess. Therefore, coupled with the deep segment knowhow we are taking two pronged approaches; One being expanding the storefront of lending business products (viz. expanding product portfolios with different tenure, asset light propositions and objectives of loans). Secondly, introducing appropriate financial services products beyond lending but being true to the segment mostly, in a collaborative asset light model. Thereby, progressing in a well deliberated manner to establish True Balance as Neo Bank in India.
