How Consumer Lending Fintech ZestMoney Plans to grow its User Base from 5 Mn to 40 Mn by 2020

It’s interesting to note that in our country, out of a population of 1.2 billion people, only 50-60 million have a credit card. The remaining ‘credit-deprived’ consumers find it difficult to enter the elite ‘credit-worthy’ class because they first need a credit score. Unfortunately, they can’t get a credit score without getting a loan. Banks don’t entertain them because most of them can’t afford loans beyond 20 to 40K. The huge gap is where the opportunity lies, which is where ZestMoney comes in.

Ashish Anantharaman, CTO, ZestMoney

Founded in 2015, ZestMoney started with an aim to provide credit to even non-credit worthy customers. Ashish Anantharaman, CTO ZestMoney tells us how the company is uniquely positioned to grow its user base by more than 10x by next year.

The company was founded in 2015, and a short span of 4 years, they already have 5 million registered users. Seeing their success, the company now has ambitious plans to grow this base to 40 million+ by next year. That’s a tall order, but the company’s CTO, Ashish Anantharaman is confident of getting there with their unique business model and the use of the right technology.

We spoke with Ashish to understand how the company is unique and how they plan to use technology to achieve their growth objectives.

ZestMoney wants to help everyone live their dream today and then let them pay us back in affordable EMIs. They feel that credit should be available to everyone and not necessarily those who have a credit card or credit score. Therefore, they've augmented the best of mobile technology and digital banking to enable this.

But the big question is, how do you really identify creditworthy customers from the large universe of credit deprived ones? “We do a lot of due diligence on consumers by looking at additional data much beyond what banks look for”, said Ashish. This could be their social data, transactional data from merchants, and clickstream data, apart from the standard data from banks. “We then apply the power of AI on this data to identify creditworthy consumers”, he said. This is very different from what banks do, who go to bureaus, check their credit scores, see if they’ve ever defaulted, etc. and then decide whether they can be given a loan or credit card. IN such a case, those who need Rs. 15-20K loan doesn’t really qualify, which is where ZestMoney comes in. “Our average ticket size is 18-20K and the average tenure for payback is 16-18 months. There are also cases where people need Rs. 2L loan to say, an educational certification”, said Ananth.

Using Tech to Reduce Defaulters and Automate Processes

There’s a good reason why banks only go by the credit score to approve loans. As they’re large entities, it’s not feasible for them to hand out petty loans to those without a credit score and take the risk of having lots of defaulters. But for a fintech, which is smaller and therefore more agile, such experimentation is possible.

ZestMoney started by gathering as much data as possible about potential customers to experiment with them. Therefore, initially their NPA rates were therefore higher, but over time as more data was gathered, the company's tech became more predictable and NPAs came down significantly.

So much so that the company has automated their system to the tune of 95%. They continue to ask customers questions to gather data, which is then fed to a fraud and risk engine, which then is able to weed out fraudulent transactions and approve genuine ones. In fact, Ashish boasts that a high percentage of loan applications are approved in real-time.

Robust Partner Eco-system for Loans Disbursal

ZestMoney works on a B2B2C model where the company helps merchants sell more product by offering loans at the point of pay. Customers have a pre-approved credit limit with ZestMoney, which is then used to make the payment. The company has already onboarded around 1000+ merchants, and they expect to touch 10,000 by the end of this year. That’s a tall target but given the kind of technology and automation being used, they’re confident of getting there. Selection of merchants depends upon where there’s demand. Customers might want to purchase air tickets from an online travel portal. “Wedding is another high-demand market because millennials want to do different kinds of wedding, e.g. different locations, different ways, etc. This is where need financial support. Banks are not likely to help, so they could look at us”, said Ashish.

Continuous Growth in a Competitive ‘interest-free’ Lending Environment

The interesting thing about ZestMoney, according to Ashish is that the company continues to grow even though they don’t offer ‘interest-free’ EMIs on loan, unlike other fintech companies. “One proof of this is that when we started in 2015-16, we had 12 competitors. Today, none of them are left”, said Ashish. The company continues to evolve its model and train their team on collections.

“Another proof that people are noticing us is that there are more people searching for ZestMoney on google than those searching for the word EMI”, said Ashish. In just four years into existence, the company has more than 5 million happy customers. “Maybe by 2020, we’ll have 50 million customers, which should be doable”, added Ashish. On top of that, with an obsession for automation, the company tries to keep their head-count down, which further helps improve profitability and speed of operation.