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Interview: “Scope of lending business in India is huge,” says KreditBee Founder & CEO Madhusudan Ekambaram

Today, we speak to Madhusudan Ekambaram, Founder & CEO of KreditBee, to understand the journey of KreditBee and how it is shaping the digital lending space through its services.

TechGraph (TG): Can you let our audience know more about your role in KreditBee?

Madhusudan Ekambaram: I am the Founder & CEO of KreditBee. I am fortunate enough to lead this organization from a stage when Digital Lending itself was nascent and unheard of in the Indian Ecosystem. Today, I feel proud to say that KreditBee is one of the largest digital lenders in the country disbursing INR ~900 cr of loans on a monthly basis. 

Being the CEO, I try to be pretty hands-on for the overall set of functions and initiatives within the entity. However, my main focus area is “Products and Technology”, something I have done in the past and love doing even now. Other than that, I also spend a good amount of time with the investors and internal & external stakeholders of the company. 

We have a very closely-knit team where I just focus on overall business metrics.

TG: What is KreditBee, and why it is different from other service providers who are already in this sector?

Madhusudan Ekambaram: KreditBee is a full-stack Digital Lending Platform, with the entire life cycle of the loan, starting origination of an application to disbursement & repayment being completely online. We have followed the Digital-first strategy in our entire product journey, and it has been received very well by our customers. 

We have even automated our collection processes in a capacity that we don’t rely on any physical touchpoint with the user for the same. With quick decision making based on alternative data points, KreditBee helps consumers avail of a loan within 10 minutes on their smartphone at any given point of time in the day with no paperwork or bank visits. 

Also, the inclusive nature of the platform allows self-employed users as well as new-to-credit (people who haven’t taken a loan earlier) to avail loans from us, along with the salaried workforce. Along with the convenience of applying for a loan, we also make sure that customers build a strong credit history in this journey and at a certain stage become eligible to take larger and longer duration loans from the bank. 

Just, to give you an idea of the bigger picture, in the last 1 year we have upgraded over 1 million customers who came to us as NTC to people with decent bureau scores to take loans from banks. We have over 30 Million App Downloads within 2 years of operation, and more than 5 Million Loan customers, out of which roughly 2 Million is an active set. The DAU on our app is over 1 Million, and the MAU is over 15 Million.

TG: What was the idea behind the launch of KreditBee and how it all got started?

Madhusudan Ekambaram: I have personally been in the personal finance space for close to 5 years before starting up, and have followed this industry very closely over the last couple of decades. The consumers practically have to face a lot of hassles in applying for personal loans, where a lot of time, effort, and paperwork is involved, with delayed decisions and no guarantee of approval or disbursement. 

Also, there is no provision whatsoever for urgent loan requirements in places where our banking system hasn’t penetrated enough, and beyond the working hours of the bank

The biggest challenge to break-through this need gap was to identify a tech platform that could digitally under-write customers based on data points that can be derived from the users via their smartphones. 

KreditBee has a robust underwriting system that comprises different aspects of the customer, including but not limited to their personal profiles, social media thumbprints, spending habits, etc. This helps in eliminating the potential fraud of customers at the beginning of it. 

The scorecards we use for decision making are based not only on vanilla regression models but also on ML neural net models. We also use decision trees to calibrate the strategies. 

With more usage of AI and ML and inculcation of more data sources, the system will become better in segregating the good customers from the bad. Even the collections practices in KreditBee boast of using robotics, automation, and many other techniques besides calling agents that vastly improves the reach of the customers and provides various majors to use for collections.

TG: As the entire country is in lockdown, many are struggling to manage their money. What impact do you expect this crisis to have on the lending sector?

Madhusudan Ekambaram: I believe the NBFC sector was anyway going through some pain for the last one year, which was further aggravated by the lockdown & moratorium. I believe demand has never been a challenge in this sector. However, the two phases of the moratorium mean that the lenders have become even more skeptical to lend to the end consumers as some amount of the loan book is already in a moratorium. 

The biggest challenge right now is not just to reassess the credit scoring mechanism of folks with respect to the changing times, but also to identify the intent of the users considering the changing dynamics. Also, the demand will move from being luxury-oriented to necessity-oriented. In other words, the loans will be driven by the needs rather than the wants.

While we are largely doing well during COVID times, I don’t think we can have a ‘one size fits all’ strategy. Every entity needs to formulate its own strategy depending on their current situation. 

On the positive side, I believe few players will emerge as the winners’ post COVID where they will have more customers to serve and also enough liquidity to meet the demand. For example, we have not taken a single moratorium from any of our 40-plus debt partners. As a result, we are already seeing good support from our debt partners as an investment when we require liquidity.

TG: Where does KreditBee stand on the profitability metric?

Madhusudan Ekambaram: As an entity, we have already achieved breakeven, and are always conservative for our cost & strategic initiatives. We re-invest most of our earnings in product innovation within the entity since the idea is to disrupt the financial space in ways more than one. 

We were always conservative about our cost & spending as an entity right from the very beginning. As a result, we have achieved breakeven within 2 years of our operations. We have been profitable for the last 2 years. 

However, with long term investors on board, we re-invest most of our earnings in product innovation and to increase our equity base, which further helps us to leverage our balance sheet for onward lending. Our organizational objective is to bring 100 million users to a formal credit system.

TG: Where does KreditBee stand in terms of capital under management?

Madhusudan Ekambaram: In the last financial year, we disbursed loans upward of INR 7000 Crores with outstanding AUM of Rs. 1,500 Crore. This kind of growth was achieved because of continuous equity raising and adding new debt partners to our NBFC. 

However, with the advent of COVID over the past few months, we have slowed down on our monthly disbursement and the focus is to collect money wherever possible to give moratorium to the needy customers or restructure the loans in a way that customer is comfortable to pay. 

Though we have not taken any moratorium from our lenders, we have given moratorium to ~6.5 Lakh customers. We look forward to having a loan book of Rs. 5,000 Crores in the next 3 years.

TG: Since its inception, KreditBee has launched multiple services, which among these generate significant revenue for KreditBee?

Madhusudan Ekambaram: We have a very balanced portfolio in terms of our monthly disbursement. The Flexi-Personal Loan (A Short-Term Personal Loan product with tenure ranging from 2 months to 6 months, and ticket size ranging from Rs. 2,000 to Rs. 30,000) is the most popular loan product in our overall portfolio. 

We also have significant disbursements for Personal Loans for “Salaried Personal Loan” products with tenure ranging from 3 months to 15 months, and ticket size ranging from Rs. 10,000 to Rs. 2,00,000) and e-Voucher Loans (A Loan product with disbursement in the form of e-Vouchers across various partner platforms like Amazon, Flipkart, Myntra, and MakeMyTrip, among others).

Let me answer it differently. Instead of revenue, we see how a particular product or service can fit into our customer base or how can a new product help us to retain customers.

We try to manage a very balanced portfolio across our products keeping in mind the customers’ profile and risk associated with them. For example, Flexi-Personal Loan (A Short-Term Personal Loan product with tenure ranging from 2 months to 6 months, and ticket size ranging from Rs. 2,000 to Rs. 30,000) is the most popular loan product in our overall portfolio. This is major because we acquire a good number of NTC or self-employed customers at this level and then migrate them to our higher loan product. 

We also have significant disbursements for Personal Loans for salaried personals with tenure ranging from 3 months to 15 months, and ticket size ranging from Rs. 10,000 to Rs. 2,00,000) where people who tick all the right boxes can avail higher tickets and higher tenure loans. 

Further, we also migrate a good number of our customers from ‘Flexi Personal Loan’ products to this segment once they show good repayment behavior. Another key product which we have in our portfolio is the E-Voucher Loan Product (A Loan product with disbursement in the form of e-Vouchers across various partner platforms like Amazon, Flipkart, Myntra, and MakeMyTrip, among others) where we give the customer the flexibility to purchase goods & services from various E-commerce platforms on EMI, just with a click of a button. 

In short, our main focus across the services is to make sure how we can offer hassle-free loans to customers keeping risk in mind.

TG: Leading the sector from the front, what according to you is one of the biggest pain points of the lending sector that need to be addressed?

Madhusudan Ekambaram: The biggest pain point in the lending sector is to raise debt at competitive rates, especially at the initial stages. Most of the debt platforms try to gauge the lending acumen of the platform by looking at their lending history rather than the potential, which is very difficult to showcase for any entity that is just starting up. 

Luckily for us, we were able to manage a strong influx of debt & equity capital right from the beginning, via which we were able to build a strong lending rapport to onboard debt & platform partners’ right through-out. Currently, we have more than 5 platform partners for KreditBee and over 40 debt partners for Krazybee Service Private Limited NBFC.

Another big pain point for the lenders is their inability to assess and underwrite the NTC (new-to-credit) base because of a lack of relevant credit history of the user. This makes it difficult for the users to get the right lender, and at the same time the lenders end up treating a lot of prime users as sub-prime because of the imperfection of market (information lack); which in turn leads to a clear gap in the market. 

The new-age fintech lending platforms that are using alternative data points have been able to bridge this gap via their modern-day rule engines to a large extent. 

A centralized financial information pool of users would make it easier for lenders to access data from a single FIP, which would make it easier for them to assess customer information within regulatory norms. The licensing of NBFC Account Aggregators is a move in the right direction by the RBI.

TG: Is there any plan to enter new verticals too?

Madhusudan Ekambaram: The scope of lending in India is huge. Currently, our focus is to expand our presence in the lending space itself by launching innovative loan products that serve various consumer segments.

TG: What is the roadmap for KreditBee going forward?

Madhusudan Ekambaram: We want to become a single-stop digital solution for the financial needs of a consumer, primarily focused on lending. The idea is to help digitally savvy end-consumers with tech-enabled solutions that would be able to replicate the brick-and-mortar experience at the ease of a smartphone handset.

TG: Lastly, as a time of crisis there have also been opportunities for change. Are you optimistic about the post-COVID-19 world?

Madhusudan Ekambaram: Definitely, the world is looking at digital initiatives like never before. Any proposition which is pure-play digital will have a clear headway over non-digital solutions in the post-Coronavirus world. The masses have become more skeptical of doing things offline, which they would do otherwise 6 months back. 

Be it digital lending or contactless payments, I see a lot of regulatory purviews easing out for these digital propositions, opening up new avenues for Fintech firms. I won’t be surprised to see higher investments from banks & traditional NBFCs in their digital initiatives to keep up with this trend.

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