We will double our loan disbursal rate once every six months: PaySense's Karanjkar

When PaySense raised $18 million in a Series B funding round last month, it joined a growing list of online lending startups that have increasingly become an investor favourite in recent times.

Run by Paysense Services India Pvt. Ltd, the digital lending platform was founded in 2015 by Prashanth Ranganathan and Sayali Karanjkar. South African conglomerate Naspers, homegrown venture capital firm Nexus Venture Partners and Singapore-based Jungle Ventures are among its investors.

The Mumbai-based company operates a mobile app, through which users can get personal lines of credit to finance online and offline purchases through equated monthly instalments. After filling out an online application form, users can select the required EMI plan and upload know-your-customer documents. They can apply for personal loans of up to Rs 2 lakh and repay it in three to 24 months.

The company, which is currently operational in over 50 cities, has tied up with Mumbai-based India Infoline—its sole lending partner—and has disbursed 60,000 loans in the last 12 months.

In an interaction with TechCircle, Karanjkar, co-founder and chief operating officer of the venture, talks about the digital lending space in India, how it will use the capital it just raised and expansion plans. Edited excerpts:

How will you deploy the $18 million Series B capital and how much operational runway will this round give you?

We have made a lot of investments in tech and data and this will only continue going forward. The second part is we will continue to expand our geographical reach. Thirdly, we will continue to experiment with newer consumer products aimed at the broader sections of the underserved population that are new to the credit economy and non-salaried people. Currently, our loan ticket sizes range from Rs 5,000 to Rs 5 lakh.

We are currently in the midst of accelerating our growth and will work on that while generating revenues at the same time.

What is the total amount of loans you have disbursed since inception and currently? Will you expand your lending partner base and open up to peer-to-peer lenders?

In the last year alone, we facilitated the disbursal of more than 60,000 loan applications, worth Rs 200 crore. This year, we have already hit Rs 50 crore a month, which will soon touch Rs 100 crore a month. At the current pace, we expect to double our growth once every six months until next year.

We have a good partnership with IIFL and will continue to develop it. This year, we aim to expand our lending network base beyond IIFL. We will look to add more bankers or registered non-banking finance companies to our network this year. We are not really exploring P2P lending on our platform at the moment.

Currently, you offer products in the personal loan segment. Any plans to diversify into other categories?

While we only offer personal loans now, it is made available to individuals in both the salaried and unsalaried class. However, we believe that credit should be flexible and we will continue to innovate our products in terms of ticket size, tenure, interest rates and repayment options.

A consumer can get a loan disbursed in less than five minutes on our platform. It is very customised in terms of risk and pricing, unlike the traditional industry.

Most digital lending apps still do physical verification, so it would be difficult to disburse loans in a single day. How do you work around that?

We do not do physical verification at PaySense. It is all truly digital. On our platform, the entire process from application to disbursal can take place on the same day, in a few minutes.

There are quite a number of online lending players present in the space. How do you differentiate yourself from them?

We have been able to build a very nuanced data model that allows us to cater to the underserved population. Lack of a prior credit history or a bad credit/trade line from a credit bureau or lack of some documents is really not a deterrent when it comes to applying for loans on our platform.

Alongside the application process, we also educate customers and assist them in the decision-making process. This has largely helped us achieve significant organic growth. Most of our consumers today come through positive word of mouth from our existing customers.

Do you plan to take your services to more cities this year?

We are currently operational in over 50 cities and will continue to expand into more Tier 2 and 3 centres. We should be present in close to 100 cities by the end of this year.

It’s been three years since you set up operations. Can you elaborate on unit economics, operational break even and profitability?

I think it's still early days for both PaySense as well as the larger India fin-tech space. But I think we have grown in a disciplined and organic manner so far with a significant degree of control over cash burn. In the next two years, our business will have some strong fundamentals.

I will not be able to comment on a timeline at this point. It all depends on the market factors. We might continue to grow at a pace where it becomes imperative to invest in advance but the results will come over the years.

Which age group of customers do you serve and what is the default rate on your platform?

Our consumers largely fall within the 22-35 years age group. We found that this demographic is more mobile, tech-savvy and, more importantly, largely underserved as well. We believe we are on a journey with them and will continue to cater to their needs, say a home renovation, medical or family emergency when they turn 35 and beyond. More than 40% of our consumer base comes back to our platform after their first transaction.

The rate of default number differs from sector to sector. Personal loans are usually within the 2-3% range. Our performance is in line with the large traditional lenders in this segment and we do it with much more leaner, efficient processes. Otherwise, we would not have been able to scale up our loan disbursal rates to the current level.

Your thoughts on the investor and deal activity in the Indian fin-tech space, more particularly with reference to digital lending platforms like yours.

India is a nascent digital economy and the vast young populace is just coming into the market and is figuring out ways to spend its money (read disposable income) digitally. So, growth in digital commerce goes hand-in-hand with the rise of digital fin-tech services, credit and payments. More importantly, the traditional banking sector does not serve a large part of the population who are new in the market, more specifically the millennials, in a cost-efficient manner.

Fin-tech investors will continue to support change-makers that strive to build technology-enabled, cost-effective products for the underserved people while helping them manage their financial health.