The fintech sector has immensely benefited from the successful adoption of Aadhaar-based KYC, UPI and other digital KYC options, as it has opened up the possibility to verify and onboard customers faster and remotely. These changes have made room for a multitude of financial services startups over the past few years. According to Inc42 The State of Startup Ecosystem Report, there were 2.7K fintech startups active in India till March 2018, with several of them in the lending space.
In fact, digital lending is one of the fastest growing segments in India’s fintech space. A BCG report has predicted the digital lending industry will touch $1 Tn mark in the next five years. As per DataLabs estimates, the credit demand in India is projected to be worth $1.41 Tn by 2022. The estimated growth rate in credit demand is 3.73% between FY17 and FY22.
This rocket growth for digital lending is indicative of the failure of India’s extensive banking infrastructure in meeting Indian customer’s expectations. According to CEO of Chqbook, Vipul Sharma, “Indian banking system is pretty broken. Every banker and the bank wants to provide great customer experience but because of the legacy systems, teams, and the old way of doing things — they have not been very successful in being able to provide it.”
Solving the customer experience bit of banking services are the finance marketplace startups such as Chqbook, Rubique, Paisabazaar, and Bankbazaar. Finance marketplaces operate as an aggregator of banking services coupled with technology interventions which enables a better customer experience for the users.
Lending Blended With Ecommerce Discounts
In the tight fintech marketplace market, Gurgaon-based Chqbook differentiates itself by driving customer acquisition through partner discounts and using AI to offer personalised financial services. It offers discounts and offers on products ranging from movie tickets to streaming subscription, based on which it then upsells fintech products from banking and NBFC partners to the very same customers. This reduces the cost of acquiring customers as compared to a typical fintech lending model, which has to spend a lot to attract users. Instead, Chqbook lures in users with discounts on ecommerce and online shopping platforms, while using the engagement therein to further recommend fintech products tailored for the user.
Customers can explore personalised loans and credit card products, and check their eligibility on the go, while Chqbook uses machine learning algorithms to match customers to the right lending provider.
Besides listing fintech products such as loans and cards, Chqbook’s USP is that it manages the entire onboarding of customers for fintech products as well as the KYC aspects, thus acting as a middleman for lending partners, and a quick service agent for customers, who otherwise would have to jump through many hoops to avail these financial products such as credit cards, home loans or personal loans.
With partners such as event and movie ticket booking platform Bookmyshow, music streaming platform Gaana, global ecommerce company Amazon, travel startup Ixigo, epharmacy startup Netmeds, and lifestyle brand The Man Company. The company lets customers get discounts while using any of these platforms, among others.
In addition to partner discounts, Chqbook also provides AI-based personalised financial recommendations that are tailored to the customer’s credit score, behavioural trends, financial and social profile, and demographics.
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Founded by Sharma and Rajat Kumar in 2017, Chqbook currently claims to have over 50 credit cards, 21 home loan providers and 17 personal loan and business loan providers listed on its platform. Till date, Chqbook has raised seed funding from a clutch of investors such as Startup Buddy, Harsha Bhogle, Apurva Chamaria, Sachin Arora, Bharat Gupta, and Amit Manocha.
Can Discounts-Based Lending Bridge The Fintech Gap?
As shown by the data on the fintech from DataLabs by Inc42, India’s metros and Tier 1 cities are way ahead of Tier 2 and 3 cities as well as the rural sector when it comes to financial inclusion. However, ecommerce and online shopping penetration in these areas is far higher. Chqbook is banking on the fact that online shoppers will engage with its platform while looking for discounts and end up getting familiar with financial products and choose to avail digital loans or credit cards.
Unfortunately for Chqbook, its approach has not entirely managed to close the gap in financial inclusion between rural and urban India.
A majority of its customers hail from the top 25 Indian cities, and its customer base is equally split between salaried and self-employed users. “Over 70% of our customers have good credit scores of around 700, and that’s the reason why brands partner with us because they want to access this customer base,” said Sharma.
The company claims to have sold more than 100 movie discounts, and thousands of music and shopping benefits over the past year, besides the financial products. Users can avail these discounts by redeeming their Chqbook points. Also, Chqbook matches its joining fee on all products through rewards from its partners.
“Customers benefit from partner discounts because they get free stuff and, we benefit because we get the customer to be able to engage with our platform. So it is a win-win for everybody,” he added.
Offering Personalised Customer Service
Customer engagement in availing discounts and cashbacks from various partners helps Chqbook understand the buying patterns and capabilities of the customer. Chqbook uses artificial intelligence to offer personalised financial services to users.
Its in-house TARA AI takes into account multiple factors such as the user’s credit score, profile and demographic, and then shows them a list of financial products, which they are more likely to get approval for, instead of showing a laundry list of all available credit card options, which often does not include products that the customer is eligible for
Each application is tracked over 100 parameters and Chqbook monitors the entire approval process, making the experience seamless for both customers and banking partners.
“We also track what kind of brands customers like and claim on our platform. And that goes into building a better understanding of what the customer would like to purchase. Say, if a user has been using our discounts to buy frequent tickets to Mexico. TARA will know that if somebody is booking frequent flight tickets, they are probably more interested in travel credit cards or travel loans.” he added.
Currently, the company does not track user SMS history for its recommendation engine like many other fintech marketplaces, which is something it has not ruled out completely.
Further, Chqbook’s technology stack has a fulfilment technology which allows end-to-end tracking of the product delivery cycle including details such as who is picking up customer’s financial documents, and the documents submitted for the KYC process
Sharma said, “It is strange that I know who’s coming to deliver my food but I don’t know who’s coming to collect my bank statement, which is very appalling, actually. This is something we’re changing today.”
Room For Multiple Fintech Models
Obviously, getting customers in a cost-effective manner is vital for any rewards programme or fintech marketplace. This helps pass on bigger benefits to the customer, instead of keeping the cost of acquiring service high.
According to Sharma, Chqbook does not spend a single rupee on social media, Google or Facebook ads, to acquire customers. Instead, it uses discounts to naturally attract online shoppers. And therefore, it can pass on the saved costs back to the customers.
In a bid to reach more users, the company recently partnered with Metro Cash and Carry to expand the reach of its financial products to its 3Mn customer base spread across 25 stores in the country.
While Sharma didn’t reveal any revenue figures for the company, he claimed that Chqbook expects revenue growth of over 1000% this year. That’s a big claim and the company hopes to get there by adding more financial products for customers that are still not covered by its AI-powered recommendation engine. Chqbook is focused on deepening the marketplace to have more products for its customers. “We still have customers who are not eligible for any of the products on our platform,” said Sharma, explaining how the company hopes to sell these products.
Driving Fintech Adoption In Tier 2 And 3
Chqbook is also looking at bringing more NBFCs and banks that are willing to lend to these underserved customers and expand further into Tier 2 and Tier 3 cities with these new partners, which solves problems for both parties.
According to Sharma, although financial technology has caught a lot of attention lately when compared to kind of adoption banks have, fintech has captured less than 3% of overall financial services in India. This is borne out by data from DataLabs by Inc42, which shows the opportunity in personal loans and service sector loans is much higher than in credit supply to the food sector, which makes up the bulk of the lending. Personal finance products such as loans and credit cards contribute more than 50% share in the total non-food credit supply.
“Financial services, are a large piece in any economy, and therefore, as we go along we will have multiple models in fintech similar to numerous ecommerce models such as B2B, hybrid etc — there won’t be a one size fits all model,” Sharma added.