The current fintech market stands at $1.2 Bn, according to KPMG’s June 2016 report. Demonetisation, adoption of the India Stack (UPI, Aadhaar, Digital Lockers and more) has paved the way for a cashless economy, sooner rather than later. SME lending, a previously disorganised sector, has also been given a big boost via the mushrooming of fintech startups catering to that vertical.
But this wasn’t the case even three years ago. Back then, only 4% of the 57.7 Mn SMEs had access to formal finance from the banking sector, according to a 2013 report by National Sample Survey Office.
Manavjeet Singh, with more than two decades of experience in Indian banking, had the opportunity to discover the pain points of customer-lender interactions closely. “When we started Rubique in 2014, I noticed that whether it was retail lending, MSME finance, or commercial vehicle finance, there existed a huge gap between banks’ requirements and customer needs along with the challenges faced by banks and the pain that customers go through.”
To bring this idea to reality, Manavjeet co-founded Rubique with Sandeep Nambiar, a family friend and the technical lead of the startup – which was initially called Bestdealfinance. The startup acts as an online financial marketplace and offers an end-to-end solution for a user’s capital needs, including SMBs and individuals. Rubique deploys its proprietary algorithm and integrates it with the bank’s lending system, processing in real-time.
Till date, Rubique has raised about $3 Mn in funding from Kalaari Capital, YourNest Angel Fund, Globvestor & Dexter Angel Circle, and Globevestor. It has tied up with over 65 financial institutions including banks and NBFCs such as Lendingkart, CapitalFloat, ICICI Bank, HDFC Bank among others. The platform showcases more than 165 products in various categories such as SMB loans, retail loans, and personal loans as well.
Playing Financial Matchmakers
Banking is a simple business – you’re getting money from somewhere and you’re sanctioning loans to others, using a risk calculating mechanism and charging an interest for the same. But an average Indian customer does not understand all that.
As Manavjeet adds here, “When we began our journey as Bestdealfinance with our earlier model, we thought, we’ll change the world. But it didn’t work. But when we remodelled it around our customers, that’s when we hit the right spot. The new model steered closer to the digital savvy customers, stayed relevant to our core proposition of technology and aimed at winning the new age marketplace.”
Rubique is an attempt to bridge the gap between lenders and borrowers through a wide range of capital financing options.
The platform has two verticals. First, it provides the users a well-aggregated, curated and digitised collection of products with partner financial institutions. For instance, if a user needs to buy a credit card, he can compare complete details such as transaction fees, approval time, eligibility, offers and more, of over 20 cards offered by different banks, all at one place.
Second, after comparing and selecting the required product the user can instantly apply online. The founders have also developed their own credit score – Rubique’s Magic Score – a proprietary matchmaking algorithm that uses AI and machine learning and is integrated with the bank’s lending system.
“On the basis of details filled, the platform’s proprietary algorithm matches the applicant with the right financial institution, eliminating the ones where an applicant can get rejected because the credit criteria does not match. It only shows those institutions where chances of getting loans are the highest.”
Rubique executives help the user with end-to-end fulfillment process, including document pick up, and submission to the respective financial institutions. A user can also track the entire application progress online. At present, the company offers a gamut of services – ranging from personal loans and credit cards to SME and retail loans, with a focus on actual disbursement. The products include credit cards, consumer loans, personal loans, loan against property, and newly launched insurance services as well.
The company processes loans of various durations, that varies from product to product. For instance, unsecured loans (such as personal loans) are generally sanctioned for two-three years, and secured products like loan against property are processed for 10-15 years.
Data Points: The Alternative Credit Score
Rubique, as a company, provides white label solutions. For those banks who do not have a technological solution already in place, the startup makes it for them.
“While lending, a financial institution keeps in mind two things: firstly, the capacity to pay, and secondly, intention to pay. Your capacity to pay can be judged by where you work, what kind of company, who all work under you. The second part becomes tricky, because there is no way one can judge the intention of the applicant. This is where Rubique aims to differ from everyone.”
It uses various data points such as telephone bills, travel modes, social media, avg account balance, restaurants one is visiting, and so on to assess a prospective borrower’s probability of paying back the loan. With this data, even if a user has a low credit score, he could still avail a loan. Hence, the borrower’s requirements are matched with the lending criteria. So there is a predictability in the entire process where the applicant would know that if he applies here, chances are he might get this loan.
Loans disbursed for individuals and SMBs without any previous credit history are processed at a comparatively higher interest rate, for financial institutions to have a safety margin to recover the money. As per Manavjeet, institutions usually take these calls because predictability is much higher in these cases and Rubique provides them with this information.
The startup has also launched a new feature called ‘Rubique Advantage’ that enables users to get their loan applications processed faster through e-KYC with enhanced logic in the proprietary matchmaking algorithm. Potential customers can also receive online in-principle approval on a few products and keep track of their status through their Rubique account.
Rubique attempts to offer the best of both worlds – a fair and open marketplace for the customers to choose eligible lenders and an end-to-end fulfilment solution just like any lender. Based out of Mumbai, Rubique has now expanded to cities to Delhi, Kolkata, Bengaluru, Hyderabad, and Pune.
Fulfilling The Promise Of End-To-End Disbursement
Since the RBI mandates physical signing and documentation, Rubique attempts to go all the way to provide an end-to-end fulfillment solution to its customers. For this, the company has put in place business associates across the country – financial advisors, chartered accountants, officials etc. The company provides them with an app which keeps them updated with the financial proceedings the and required documentation. Their job is to go to the client’s doorstep and fill out the required document, and update the app in real time. From a consumer’s point of view, it’s a convenient process.
In addition to that, a lot of SMBs in India are not tech savvy. For these companies and individuals, Rubique provides an assisted online model via tab solutions. The company’s associates physically go and sit across with the SMEs and complete the details. The data is electronically transferred to the transit station, and is matched with the financial institution, a soft approval is given to the applicant and the proceedings begin.
On the back end, Rubique follows a two-point checklist for adding a financial institution to its platform. Explaining the same, Manavjeet says, “13 financial institutions have been removed from the platform for two major reasons. Firstly, the financial institution has to leverage technology, because if they are not leveraging technology, we believe they will not be able to help the customer. They have to be tech-friendly. They can leverage our technology, but they cannot go the conventional way (physical documentation.) Secondly, a set policy from the financial institution is mandatory.”
When questioned about Rubique’s liabilities while processing a loan, Manavjeet says, “We are providing loans as per the financial institutions’ criteria, according to the risk profile they were looking for. Now we are also trying to build data points so as to understand how is the customer behaving, so we can refine it further.”
Making Money The Marketplace Way
The startup monetises by charging a fee from partnering financial institutions depending on the type and category of the loan. Rubique charges a certain percentage of the amount of the loan facilitated, sometimes they also charge a predesignated amount that varies as per the financial institution. On the other hand, its services are free for customers.
So far, the platform has claimed to disburse more than $151 Mn (INR 1,000 Cr) worth of loans and has issued more than 28,000 credit cards through 65 financial institutions. It has, till date, generated a revenue of $2.6 Mn (INR 17.5 Cr). Additionally, it has issued more than 28,000 credit cards, along 4000 + distribution points and has processed more than 100,000 applications.
The Indian fintech startup space has seen the emergence and growth of startups that have disrupted the traditional ways of how businesses have been conducted. Lending and payments industry has been revolutionised, but at the same time, the space has become saturated now.
The online lending marketplace is populated with players like RupeePower, BankBazaar, Finrek, Monexo, among others. There are players who are catering to a very niche market space such as PolicyBazaar, Turtlemint etc., Where on one hand BankBazaar is backed by the ecommerce giant Amazon, RupeePower counts Snapdeal as a minority stakeholder.
Recently CrediMantri secured $7.5 Mn in its Series B round of funding led by Quona Capital. In February, Capital Float raised about $2.5 Mn (INR 17 Cr) from IFMR Capital Finance and its alternative investment fund.
“Though we are compared with web aggregators, we are more than just an online aggregator website generating leads. Our core focus is disbursements. We are unique in our platform where lenders and borrowers can discover each other in a transparent process through our matchmaking algorithm and fulfillment engine, which offers real-time assessment. And India is such a huge market that each one of us has enough addressable market to reach out to,” Says Manavjeet.
A very large chunk of the Indian SME market is still offline and that is the biggest challenge for the startup, i.e. to bring SME customers online. As per the founder(s), the success rate for loan processing for SMBs is 60% and for retail loans, it’s as high as 100%.
Owing to demonetisation, there was a rise in the number of banks that wanted to join Rubique’s platform, in their own quest towards digitisation. It recently also got approval from IDA (Insurance Design Administrators) and is soon going to offer insurance products on their platform. As claimed by the founder, the plan is to break even by March 2018. The team has also crossed 1 Lakh applications last week, with 65% applications coming in from SMB customers. Rubique’s associates are also in touch with different financial institutions serving SMEs and NGOs to promote their assisted model.
The startup further plans to expand the assisted model to six more Indian cities and firmly push for organic growth.
The online financial marketplace industry has witnessed entrance of several players given the huge potential in the ecosystem. The sector is expected to become a $2.3 Bn market by 2020, up about 15 times from $164 Mn in 2014, led by a surge in usage of mobile wallets and insurance services, among others, according to a report from investment bank MAPE Advisory Group and consulting firm MXV.
In this highly saturated market, where CapitalFloat offers tailored products, Lendingkart offers instant loans, BankBazaar offers instant paperless solutions, Rubique focusses on disbursements, with a neutral business model and aims to become the go-to solution for loan, insurance and other financial products.
But the real game changer would be customer procurement, end-to-end satisfaction and technology, and this is exactly what Rubique aims to bank upon. With the startup looking to tap into the largely unstructured market of alternative financing, there is tremendous opportunity for it to scale. How far will it be able to carve a niche for itself amidst the competition remains to be seen.