Fintech Asia features CASHe, a B2C lending startup in India. V. Raman Kumar, Chairman of Aeries Financial Technology Pvt. Ltd which operates the technology platform CASHe, shares in depth his thoughts on fintech, alternative lending and more…
This feature is part of the Fintech India series.
Raman Kumar is a successful tech entrepreneur and private equity investor. He is the founder & former Chairman/CEO of NASDAQ listed M*Modal Inc, a leading voice recognition, healthcare document technology company that he took from a start-up to until it was sold to One Equity Partners for over a billion dollars in 2012. Since then, he has actively invested in a number of ventures across India, Middle East and USA. He is also a limited partner in three large international private equity funds. He recently joined the board of THub- one of India’s most successful tech incubator and accelerator. Raman was Ernst and Young’s Entrepreneur of the Year 2007 award winner for Maryland, USA, and was also honoured with Maryland International Leadership Award by World Trade Centre Institute, Baltimore in the same year. Raman is currently the chairman and managing director of Aeries Technology Group and CASHe is his latest venture.
How did CASHe come about setting your focus on this category? Please tell us a little more about the company’s beginnings as well.
After selling my last venture MModal for $1.1 billion, I became a private equity investor plus serial entrepreneur. I first set up Aeries Technology Group and then in early 2016 started CASHe. The short-term lending market in India is underserved by big financial institutions and I saw a huge opportunity to reinvent the category. Past credit data to evaluate credit worthiness of young professionals used by the current banking and credit rating companies defies logic. CASHe uses modern technology combined with intelligent big data analytics, predictive algorithms to map young professionals across the country based on their mobile, digital footprint and their social behaviour patterns to rate their credit worthiness. CASHe is intensely focused on improving the financial worth of young urban professionals with its transparent and simple short-term financial products. CASHe products are 100% app-based, user friendly, instant & digital. The total loan process takes under 10 minutes for completion.
What challenges have you had to work around at an early stage? The lending segment of fintech has been growing significantly in India… what would you say sets you apart?
Technology moves at an incredible speed, and keeping up with the changes can be a challenge for startups. Secondly, finding and hiring the right talent for a new product/service category can be challenging. Building our industry-first proprietary technology algorithm platform, the Social Loan Quotient (SLQ) involved great amount of research, using big data and machine learning, and to eventually build an engine that trains, learns, adapts and predicts human behavior was a monumental task.. And finally, winning the customer’s trust. It is one of the most important challenges that businesses have in general – and startups specifically. Customers are the real force behind our success. We wanted to give a ‘wow’ experience to the first-time user with a product which fully met with their expectations. Their word-of-mouth power and their presence on social media gave us an edge against our competitors and all the traditional lending businesses.
What sets us apart:
All other similar platforms in the market rely on physical verification of the borrower’s documentation, with CASHe, we have made the process in-app and full automated. That’s the key differentiator. Plus, the speed of giving loan – within minutes. CASHe is:
- Hard to replicate Customer Experience: The CASHe experience is hundred percent app based, user friendly, flexible with multiple loan options, and totally digital. The 10-minute Turn-Around-Time for loan disbursal, without the user having to leave their home, is a unique feature of CASHe. The interest rates offered are on par or lower than those offered by credit card companies.
- Proprietary Credit Evaluation Framework – The Social Loan Quotient (SLQ): CASHe’s proprietary credit evaluation framework, the Social Loan Quotient (SLQ), uses a combination of Big Data Analytics and proprietary Artificial Intelligence based algorithms to evaluate tradition inputs and the user’s digital footprint to measure their credit worthiness. The SLQ determines both the loan amount and the interest rate charged.
CASHe’s proprietary SLQ is forward looking in nature as it measures a borrower’s propensity to repay based on currently available information, as opposed to traditional credit scoring systems which deliver a score based only on historical financial behavior. An individual with no history in the Indian financial system, but whom our SLQ engine determines has a reasonable propensity to repay, can get a loan from CASHe.
Thoughts on the present Indian fintech landscape? How does it compare to the rest of the fintech majors in the world like Hong Kong, Singapore, United Kingdom, Sweden, etc. according to you?
It’s a promising future for the Indian FinTech. India offers the largest unbanked or underbanked population, along with a strong technology and entrepreneurial ecosystem. The government is doing its bit to push for financial inclusion, digitization and startup activity has led to the introduction of policy initiatives which provide a strong foundation to the FinTech sector in India. The various initiatives it has launched recently including Jan Dhan Yojana, startup program and the Aadhar adoption for e-KYC checks has been instrumental in further augmenting the fintech landscape in India. Not to mention, promoting digitisation of financial systems and reducing cash transactions (UPI) in the economy have been quite effective in shifting consumer focus towards digital alternatives for financial transactions, with the payments sector having benefited the most.
According to a report from PwC, In 2016, 6 out of 10 of the leading FinTech geographic regions are from Asia (China, Hong Kong, Singapore, South Korea, Japan and Australia). Asia Pacific attracted the largest amount of investment with a total of US$14.8bn. However, China accounts for 88% of this, receiving US$13.05bn in funding. India has made great strides in this sector and over the past year, payments vertical has attracted the largest part of investments in India, this is explained by a combination of mature payment platforms expanding into new markets as well as the demonetisation of Indian currency. There has been a cumulative funding of USD 2.5 billion worth of investment in the mobile payment sector alone.
Which are the sectors in Indian fintech where you think there are untapped opportunities? How does it fit in with your product and growth plans for the immediate future?
In India, the financial services market is largely underserved with over 42% of the population is currently not connected to banks and moreover, over 85% of the payments are still made by cash. This untapped Indian Fintech market provides a robust opportunity to significantly increase demand in almost every category namely, alternate lending, Peer-to-Peer (P2P) Lending services, remittance services, retail investment services, equity funding services, blockchain and smart contracts. In each of these areas, new Fintech solutions can help the market to grow significantly.
We are currently working on a POC project to use block chain technology for our customer contracts, money transfer plus create a digital wallet on a high trust and secure infrastructure. We hope to be the first in India in the alternate lending space to implement Distributed Ledger Technology.
Please tell us a little about your funding journey – the requirements & objectives in mind when you decided to raise a round/s; the fit you found or were looking for with your investors; what would you be looking for in the future as the business grows?
I invested personally and through my group companies USD 5 million and then raised USD 3.8 million earlier this year with an investor group led by Mr. Mathew Cyriac (ex-Blackstone India Head). Besides this, we have raised debt from Kotak Bank and are actively engaged with other lender groups. Since this is a balance sheet based lending business we will be constantly looking out for other funding sources – both equity and debt players.
What advice would you give to other fintech entrepreneurs?
Fintech is as exciting as it is challenging. Entrepreneurs need to be constantly innovating and keeping a close watch on the quality of their lending book, if in the lending space, otherwise stay focused on innovation if they are a marketplace. Technological innovation, adequate funding, rapid growth and retention of talent are the keys to be successful in this sector.