Fintech lenders use omni-channel for healthy loan book
NEW STRATEGY: Startups are putting in place a mix of physical and online processes at a time of asset-quality challenges and rising borrowing costs.
Multiple fintech startups, which had started with a purely online model, have found new lines of businesses through corporate tie-ups, kiosks, physical branches and cluster models. While these are still at an experimental level, early signs have been encouraging, say industry executives.
“We are getting around one-third of our new customers from our offline channels,” said Akshay Mehrotra, chief executive officer, EarlySalary.
EarlySalary offers quick loans to salaried employees which they have to return once they get their pay the following month. It has set up on-premise kiosks at 383 large corporate partners through which it caters to walk-in customers. “We also have a “shop now, pay-later” product running on-premise at Big Bazaar,” he said.
Industry experts have pointed out that disbursing loans online is a customer acquisition game, and the difficult part is in getting the money back, which is where many new age fintech lenders seem to be faltering.
“While the core fintech lending models rely on a data driven auto credit decision-making with no offline presence, there are models where a hybrid distribution model can make sense, particularly small and medium enterprise financing,” said Ashish Sharma, chief executive officer, Innoven Capital India.
Offline presence in key industrial clusters can enhance underwriting, provide branding and cater to segments where some touch and feel is required, he said. “These startups should leverage their digital distribution capabilities, but create offline servicing systems for their customers, this will also help in educating the customer, which in India, is the biggest challenge,” said Madhur Singhal, managing director, Praxis Global Alliance.
For example, Rupeek, which is a gold loan player, works with multiple lending partners that have branches and provides doorstep delivery to its customers.
The move towards offline is driven by an aspiration to replicate the success of traditional NBFCs, who created strong loan books through a branch-led model, although fintechs need to create a blend of both worlds. Creating offline channels for assisted delivery is a positive model going forward, said Satyam Kumar, cofounder of lending startup Loantap, but sourcing loans offline is not the right way ahead.
If startups start exploring offline channels for small-ticket retail loans, the cost of operations will shoot up and their competitive advantage against banks will be lost, he said. “There is a need to keep operations costs low, underwrite customers better and then create physical collection infrastructure,” he said.
While fintech companies have disrupted the way people get loans, they have much to learn from traditional players regarding collections, a top executive at a traditional NBFC said.