In an interaction with Bfsinxt.com, Souparno Bagchi, Chief Operating Officer at True Balance shares his thoughts on bank-fintech partnerships, how they are approaching digital lending, RBI guidelines on digital lending, etc. Edited Excerpts:
Q. How have the lending partnerships evolved between banks and fintechs?
Banks and fintechs lending partnerships have come a long way. From a stage of mutually exclusive operating arena and approach to a stage where there is a material overall in terms of target segment and serviceability and operations. Therefore, the partnerships have evolved from no or low involvement collaboration to a stage where high involvement partnerships even to the extent of inorganic ventures which are now a common occurrence.
This also means that the premise of any partnership is now going through the rigour of a stringent value based approach. For example, it could be the hard aspects of Fintech’s’ making impact through deep tech, reachability, alternate business models vs. Banks’ strong experience and prudence of structuring financial products, knowhow of regulations and established risk and compliance processes. It could even be softer / organizational aspects of FinTech’s’ nimbleness, agility, risk appetite vs. Banks’ fabric of well deliberated due diligence.
In a nutshell, if it’s about complementary value, then Banks and Fintechs can do wonders by collaborating / partnering and if it’s just about efficiency / supplementary positioning then possibly they are better off competing.
Either way the Consumer is the winner !
The role plays have matured from Banks providing finances / debts and Fintechs offering superior technology i.e. supplier and digital distribution / channel partner to a stage where now it’s a two way street leading to cocreation of products and offerings both on supply side viz. lending partnerships, co-lending to demand side placements viz. marketplaces, platforms, FS super apps.
Q. How are you lending to the next billion users?
At Balancehero India, we have both- a PPI entity that is recognized by RBI, which is a True Balance app, and an RBI licensed NBFC, i.e., True Credits. These two accreditations give us a competitive edge to offer an end-to-end platform to users as a one stop solution for their payments and borrowing needs. We offer unsecured short-term loans through our platform which are custom fitted for our target users in the range of Rs. 1000- Rs. 50000/-.
So from the segment standpoint, we are possibly the only significant player where we have an uppercut of below 50,000. And that’s where we draw strength in terms of our deep customer understanding and underwriting abilities. We have primarily two flagship products, Cash Loan, and Level-Up Loan. Cash Loan is like the prime product in our segment, suitable for people who are salaried with regular income.
The level-up product is more like the entry-level product suitable for the thin-credit-file (TCF) and new-to-credit (NTC) users. This product helps to build their credit history, thereby, addressing the mandate of financial inclusivity by extending formal and organized credit horizon to the underbanked and unbanked people in India.
Q. How do you leverage technology and innovation for new credit use cases?
As mentioned above, our underwriting is optimised for this segment and is a key differentiator for our business. We use ACS (Alternative Credit System) which is a high tech proprietary system. Our first to the last mile is entirely digital. Therefore, even our customer acquisition process and digital marketing efforts are tuned with focus towards our segment of customers. Our ability to efficiently leverage the India stack in the financial services ecosystem space has been a great enabler as well. Given the nature of the business for us, digital runs the show.
Q. In what geographies and demographics are you lending?
Considering we are fully digital, for us, geography is all about pin codes. So, currently, our reach is 85% of the PIN codes in India including tier one, tier two, and tier-three cities, for each of which the persona is different. So, for example, let’s say tier two, tier three, have individuals who need personal loan for quick short term needs for supporting their businesses or, even personal exigencies. The Tier 1 population is primarily composed of gig workers, other blue-collar workers, and weekly or bi-weekly wage earners. The purpose for them could range from house repairs, paying their rent, etc. depending on their needs. Tier one and a bit of tier two also have in some parts personas like, students, but students who are earning. In the sense that they could be interns or they could be like part-time gig workers.
Q. What are your thoughts on the impending digital lending guidelines slated to be released soon?
The Budget 2022 spoke about the importance and growth of the fintech industry and how it will boost financial inclusion in India. The regulator is taking a deliberated view and stating all norms and regulations to ensure that the sanctity within the sector is maintained. We hope that the upcoming guidelines will be a mirror to the thoughts of the government to make sure that the sector is getting the necessary boost while maintaining high standards of responsibility and transparency. The guidelines should be a cornerstone to further enable India’s mandate of financial inclusivity.
Q. Any more thoughts on digital lending and the way it has evolved.
Technology and its adaptation have come a long way in the last few years. End consumers have evolved and so are the ways one borrows and manages their expenses. The overall ecosystem has evolved. The factors of demand and supply are to be noted here. See, smartphone penetration has increased massively in the last few years. It is pegged that by 2026, India will have 1 billion smartphone users* Consumers, too, now want and expect things and services which are just a click away. Fintech empowers consumers by providing them access to products and technology that helps in meeting their needs. Quick, fast, and seamless are the driving keywords. Hence, the fintech platform should be such that it is simple and self-explanatory, as a user proceeds it guides them throughout the journey.