In this article, Sameer Aggarwal introduces his digital lending platform, Revfin, which makes getting loans more accessible for start-ups.
- Q: What makes Revfin different? How are you solving consumer problems?
- Q: Are your targeted customers located in India?
- Q: How many people have benefited from the platform?
- Q: Could you just share a little bit more about the types of electric vehicles?
- Q: What kind of things or services are they delivering with these vehicles?
- Q: What does that mean for people who don’t necessarily know about the loan process?
- Q: What are the sort of payment terms? How do they pay it back, and how long does it take to get the loan repaid?
- Q: Is there any collateral for these three wheels vehicle loans?
- Q: So your credit losses, as your background is in credit risk, must be fairly low?
- Q: Can you share a little bit about these three different sorts of programs you have and how people find you?
- Q: So the referral is being made, or is it a new program right now?
- Q: In 2021, you raised 4m USD. What do you see going into 2022 and beyond?
- Q: How are you providing all these loans? Were you doing it with your own money, or do you have friends and family for business lending?
Q: What makes Revfin different? How are you solving consumer problems?
The basic purpose behind creating Revfin was to develop a digital lending platform that could underwrite or assess an individual for a loan irrespective of whether they have passed credit history or not, got banking transactions or not, their level of education, or their geography that they live in the right.
The thought was that basically, there are a lot of people across the globe, almost 2 billion people, that don’t have access to the formal and affordable lending platforms, and the idea was to create something for them.
A bit further say; it’s not just about the process itself, it’s also about the availability of information or data about users to make a decision, and most of the users that we work with have no data available about them.
So the process is difficult. It’s tough, but the data requirement is also very tough and is non-existent for many users across the globe.
Q: Are your targeted customers located in India?
Yeah, all of our customers are located in India, and most of our customers are in very small towns in India and classified as tier three or tier four towns. These are basically towns with less than 50,000 population, and then in the Indian context, 50,000 is a very small number.
Given that, some cities in India have 10 to 15 million people as well. We operate in very small towns, and our customers are generally in their mid-30s and have never taken out a loan in the past.
They have no or very few banking transactions or credit scores. They’re all smartphone users but not necessarily avid users of digital technology. So they have a smartphone, but they don’t use too many apps on their phone.
They are not educated beyond the age of ten, so the fifth standard in India. So that’s basically a typical customer for us, and most of these people have never either taken a loan or have never used peer lending service in the past. Therefore they also lack the sort of confidence to approach a loan lender for a loan.
Q: How many people have benefited from the platform?
So on the platform, we’ve got more than 100,000 users. We’ve not been able to extend loans to all of them, but about 10 to 12,000 people have been fully underwritten by us in the last three and a half years.
The loans that we give are primarily for productive purposes. So basically, a user takes a loan from us to start up a small business or a micro-enterprise. We focus a lot on commercial electric vehicles, so if somebody requires a personal loan to buy an electric vehicle for commercial deliveries or passenger-carrying, we will approve that lending.
So the loan ticket size also tends to be on the higher side. It’s about a hundred thousand rupees, roughly about 1500 US dollars in India, which is still a very large amount. Given that, these people probably went to three hundred dollars a month.
Q: Could you just share a little bit more about the types of electric vehicles?
E-bike: (2 and 3 wheelers) (2 Million vehicles on the road) which are used for delivering goods or transportation. Through it, a person can make $300 – $400 per month (they make less than $150 per month before this loan). It is very popular in the northern part of India.
Q: What kind of things or services are they delivering with these vehicles?
Work with e-commerce like delivery to your doorsteps or delivering furniture or other cargo services like delivering gas etc.
Q: What does that mean for people who don’t necessarily know about the loan process?
Traditionally —> to get a loan from the bank.
Do you have a job? Payslips? Bank account records? Etc.
There is no third party to evaluate them (score them) →predict past financial behavior with future financial behavior. So we introduced the concept of psychometrics.
If we do a psychometric assessment on users, it will help us understand their behaviors and their personality traits.
We worked on and did a joint research project with the university in India to create a product like that right. So we’ve now got a fully digitized psychometric assessment where users can answer a few questions in a few seconds.
We understand their personality traits, and we know how that translates into future financial performance and the intention of somebody.
Q: What are the sort of payment terms? How do they pay it back, and how long does it take to get the loan repaid?
Our lending structure is like that:
Pay the loan back in 18 months – pack the loan – installment over 18 months – About $100 per month.
Q: Is there any collateral for these three wheels vehicle loans?
Yes, the vehicles are collateral for the loan. They are hypothecated to us. These vehicles are also fully insured, and what we also do is all these vehicles have embedded telematics devices in them.
So there is a lot of security provided with the vehicle in terms of if it’s been stolen etc., it can be tracked down, or it can be immobilized.
Q: So your credit losses, as your background is in credit risk, must be fairly low?
Yeah, that’s correct. I mean, frankly, when we tell people what our losses are, they don’t believe us.
Q: Can you share a little bit about these three different sorts of programs you have and how people find you?
Revathon is basically our gamification platform. This is a platform where we try to influence customer behavior towards financial prudence. The idea is that if people pay on time, if people pay through digital channels to us, we will reward that behavior.
Because a lot of our customers operate in the cash economy and sort of default tendencies to pay their installments in cash and we want to discourage that behavior.
So we basically incentivize them to pay through their banks through direct debits etc., and then the reward given to the users is in the form of cash backs on EMIs or reduction in interest rates, access to more loan products, and so on and so on.
We have created a lot of partnerships with different people on the electric vehicle side. We have partnerships with manufacturers or OEMs and then with their dealers and distributors, so we become a point of sale finance at the dealerships or the showrooms.
We have partnerships with fleet operators, so if somebody’s fleet operator is basically operating with different e-commerce players so if any driver wants to go and work with a fleet operator or an e-commerce company, they could also get financed by us.
So our primary focus is on partnerships, and that’s sort of the way we source customers. Our intention is to basically create that ecosystem along with different partners for the users where they can find a complete package of products.
Q: So the referral is being made, or is it a new program right now?
That’s been on for a while, and in particular, if OEM or the dealer is very good, then you tend to refer a lot of your friends, and we see that happening. It’s not necessarily happening in a digital manner as much as we would like to see it, but that’s certainly happening. We see a lot of our customers bringing in their friends etc.
Q: In 2021, you raised 4m USD. What do you see going into 2022 and beyond?
First of all, I think the segment we are operating in is very dynamic. It’s very high growth. We have experienced a 5x growth and disbursements in the last five months.
So our growth rate is almost vertical at the moment, and we expect that the trend is going to continue for the next three to four years in this segment.
Our overall idea is to provide loans to about 300 000 individuals in the next three years, so that’s sort of the big game next year.
Q: How are you providing all these loans? Were you doing it with your own money, or do you have friends and family for business lending?
I have been very lucky to have friends and family sort of pitch in. Some people have gone really out of their way not only to invest in the company but also to get their friends and families to invest in the company.
So I would say I’ve had a few angels along the way, and they’ve really helped us scale to the level that we have so far.
Now it’s a different story. We’ve got a bigger quantum of money coming in and a more professional set of investors coming in, so I think there’s a lot of recognition for the work we’ve done in the last three years.