The consumer credit space has presented a lucrative opportunity for lenders over the past two years, thanks to the proliferation of fintech services that are widely accepted in cities large and small.
There has also been a drastic shift in the sensitivity of Indians to ‘stretch your legs according to the blanket’ when it comes to borrowing, and more and more Indians across the country, have access to small credit like never before.
Naturally, this led digital lenders in the B2B space to assess opportunities in consumer credit segment, and particularly in the low-cost economy where loans are taken out as needed.
Capital float, one of the largest lenders to SMEs in the country, has strongly embarked on consumer lending. In 2017, she announced her foray into personal finance, which peaked in August of the following year with the acquisition of Walnut, a personal financial management application.
With Walnut, Float Capital hoped to attract SME customers who were in direct contact with consumers. The move came after receiving comments from its SME borrowers that if Capital Float could lend to SME clients, the two could benefit each other.
With this, and after successful pilot projects, Capital Float began to invest heavily in personal finance – eventually launching a BNPL model, which today replaces its portfolio of SME loans.
BNPL stands for ‘buy now, pay later’. These are small loans from which customers can benefit on demand, without having to submit many documents or take out larger loans than necessary.
Although the commissions and loan amounts given to the small and medium-sized business sector are higher, there is an inherent problem with every digital lender when offering these loans: There are several other players in the market, and they all offer competitive interest rates, as well as other incentives like additional features like accounting, inventory management software, etc. at no additional cost.
Thus, while Capital Float had proven itself in the space of loans to SMEs, asserting itself as a key player, the customer acquisition costs have been pushed back.
User growth at Capital Float. (Source: Capital float)
The consumer credit space offered several advantages:
- The cost of acquiring new customers and retaining old customers was low.
- There were few players in the BNPL vertical, and those who were active had a pool large enough among them to mine, so that everyone could coexist.
- Even though there was no consistency in the frequency of borrowing or the amount borrowed, once consumers were hooked they were likely to come back for loans of different sizes, especially if the BNPL option offered competitive interest rates compared to IMEs, for example.
Also for consumers, the availability of The BNPL option was a convenient service, especially in the past year, as the pandemic has resulted in pay cuts, layoffs and a forced switch to e-commerce.
“Capital Float’s BNPL option is easy to access, even at the checkouts. Customers can quickly enter their basic information and pay quickly, without having to first create a separate account and then return to the payment page to enter those details, ”said Sashank Rishyasringa, co-founder of Capital Float. Your story.
BNPL Loans vs Term Loans by Capital Float. “Term loans” here refer to loans to employees and the self-employed. (Source: Capital float)
“Our goal has been to make the BNPL option via Capital Float as transparent like someone paying for an order using any other payment method,” he adds.
Since the acquisition of Walnut and the one million monthly active users that it brought with it, the startup made more BNPL loans than SME loans – and not because of a conscious shift in strategy, but because of simple consumer demand.
The company said it was uncomfortable releasing specific numbers, but mentioned that its BNPL or the portfolio of consumer loans was larger than its portfolio of loans to SMEs.
The startup says it has lent Rs 10,000 crore in digital credit, to date. Last month, the startup crossed 2,000 crore rupees in lifetime disbursements into BNPL, as well as two million lifetime credit customers.
Gaurav Hinduja and Sashank Rishyasringa, co-founders of Capital Float
It aims to cross four million customers by the end of the current fiscal year, he said. Your story.
During the quarter ended March 2021, the company said its BNPL’s disbursements had increased by 220% over the period last year and in March alone, Capital Float funded more than one million transactions.
The company has so far raised more than $ 150 million in funding from reputable investors such as Sequoia India, Lightrock, Ribbit Capital, Amazon, Elevation Capital and others, according to the aggregator’s website. Crunchbase data.
With Capital Float’s BNPL model finding takers even in lower tier cities and spanning over 10,000 PINs in India, the startup, founded in 2013, says it has a long way to go and much more customers to tap into.