Fintech is here to stay and loan apps are facilitating easy credit access. Sashank Rishyasringa, Co-founder, axio, speaks with ET Edge Insights on credit, lending, cross-product selling, and fintech collaborations.
Edited excerpts
1. Why should credit be used proactively? What does it mean to “make credit good?”
We believe in the power of credit. When used responsibly and proactively, credit can be an excellent tool that empowers individuals to fulfil their aspirations. It has the power to transform lives and accelerate the process of achieving dreams.
By ‘making credit good’, we are altering the traditional perception of credit as being a trap, a last resort. Through rigorous underwriting and controlling risk at scale, we are unlocking access to responsible credit for millions of customers. We do this by adopting a low-and-grow model, through which we help the customer grow sustainably in their credit journey. Customers are initially offered small amounts of credit, which is then scaled in accordance with their repayment behaviour.
2. Why is creating trust important when selling credit products, and how can technology bridge the gap? What measures does your company take to ensure data protection in this context?
Trust is core to the relationship between the lender and the borrower. Both parties must be confident of the other’s intent. The RBI plays a pivotal role in this relationship. The central bank serves to protect the end user while governing lending entities through well-defined regulations.
Technology has democratized financial services in India by leveraging smartphone penetration and the proliferation of mobile data. The experience of engaging with financial services has become quicker, smoother, and more convenient. Technology can play a crucial role in augmenting trust in digital credit products through government driven initiatives like Aadhar and UPI, verified apps of financial services providers, data protection, and regulatory measures, etc.
At axio, we take data protection very seriously. The collection, storage, and management of data within the organization relies on the core privacy principles of data minimization, purpose limitation, transparency, consent, and data localization. Any personally identifiable information is redacted and encrypted both at rest and in-flight within localized data centres hosted in the cloud. Any access to data within the organization or with authorized partners is via strict role-based access control over SSL.
3. How axio is resolving issues of its 100 million online customers?
India has 250-300 million online shoppers, but only 75 million active credit cards in the country. There is a large segment of customers who possess high aspirations but have traditionally been challenged by an affordability gap. Without easy access to unsecured credit, these customers are compelled to live within their means.
axio’s checkout finance product is designed to enable millions of online shoppers to finance their purchases easily. Customers can sign up for the credit product at checkout across 3000 merchants. axio underwrites and approves customers instantly, helping them convert their purchases into convenient, hassle-free EMIs.
We take under 3 seconds to approve a loan at checkout. In real-time, we collate data from multiple sources (credit bureau, RBI defaulters list, our partner, and our internal data sources) and determine approval. As an embedded finance offering, the product is available across leading brands in e-commerce, travel, electronics, home and kitchen, personal care, education, and health. Some of our marquee partners include Amazon, Xiaomi, Razorpay, Policybazaar, and Titan.
Through this product, we are democratizing credit in India. Nearly 20% of our customers are new to credit and 2 out of 3 customers have never availed of an unsecured credit product before. We are financing the needs and aspirations of millions of customers across India, with over 60% of our base located in non-metros. As we continue to scale this credit product, we are mindful of not overleveraging our customers, as evidenced by our industry-low NPAs of 1-2%.
We’ve witnessed a 2x increase in our customer base Y-O-Y over the last 3 years. As of today, we’re on the cusp of crossing 10 million customers and have our sights set on the next 100 million customers.
4. Could you share axio’s perspective on fintech-bank collaborations and how these collaborations benefit the financial industry?
We are one of the chief pioneers of co-lending in the country. The company regularly coordinates with leading banks and NBFCs in the country. The team offers a great deal of support to partner institutions, with respect to underwriting processes, and key norms like KYC fulfilments and collections.
We contribute up to 20% of the loan amount and manage the entire loan process, right from customer acquisition to servicing and collections. This results in low operating expenditures for partner institutions.
There are various other benefits to be gained for lending partners, such as:
● Lending partners can reduce their OPEX to build book value
● Lending partners can virtually increase their reach to remote locations and acquire new customers at a low cost
● Lending partners will be able to fulfill priority sector lending targets
Benefits for Fintechs include:
● Access to larger pools of funds at a low cost
● Improved risk management by sharing lending risks
● Ability to scale the product exponentially
5. What are your views on the future of the digital lending industry in India?
The future of the digital lending industry in India is undoubtedly promising, driven by several key factors that shape its trajectory:
a. Vast Addressable Market: India’s population and its increasing access to digital platforms create a vast and diverse market for digital lending. Unlike several other industries that are typically conditioned by select players, the digital lending space is unlikely to have a “winner takes all” scenario. The size of the opportunity at hand allows multiple players to thrive.
b. Robust Digital Infrastructure: The establishment of digital rails, such as Unified Payments Interface (UPI) and Aadhaar-based eKYC, has laid a robust foundation for further innovation in digital lending. These digital infrastructures facilitate seamless transactions, identity verification, and data access, making it easier for lenders to reach and serve customers across the country.
c. Collaboration and synergies: Financial entities are likely to combine their strengths to overcome new and existing challenges. We are likely to witness more collaborations between traditional banks and FinTech startups, creating synergies that enhance the reach, efficiency, and product offerings of the digital lending industry.
d. A culture of self-regulation: India’s regulatory environment for digital lending is well-defined and forward-looking. It promotes innovation while also protecting the interests of end customers. The Reserve Bank of India (RBI) has been proactive in setting guidelines and regulations that ensure fair lending practices, data privacy, and consumer protection. SROs will further add to the regulatory efforts of the RBI to create a financial environment fostering responsible lending practices and trust in the industry.
