Fintech Co taps into small-ticket loan segment

Senthil Natarajan, Co-Founder and CEO, OpenTap, said, “Financial institutions have been keen on diversification. Almost every bank, including PSBs, wants to partner with us. This year, we signed on major NBFCs and next year, even banks could forge tie-ups with us. Players like us offer banks a buffer of sorts, as associating with us implies piggy backing on a stronger foundation of digital models. Many legacy institutions are also looking for newer growth avenues.”

He added, “They want to use fintech companies as their last mile correspondent before disbursal of credit. If they end up setting up their digital infrastructure, then the cost goes up. Not only do we comply with regulations, we are able to offer relevant, future ready technology solutions compared to traditional systems the institutions are used to.”

Move from informal to formal economy

As of now, formal financial services still serve only 7 per cent of the country’s population. But the major chunk is part of the informal economy. “Our customers are engaged in formal employment, checking all the boxes, deriving periodic verified revenue, like any of us. Their salaries are credited into banks. Despite that, they are look at other options of financing as their loan requirements are minimal,” Natarajan noted.

“For us, offering unsecured personal loans of Rs 20,000 to Rs 35,000 gives the best traction. It is the best product that allows us to evaluate the customer. Indirectly we perform the function of a credit bureau besides introducing them to formal credit gradually. Small ticket loans (school fees, for example) are best for borrower and lender to cross evaluate each other,” he said.

After gold loans through a tie up, OpenTap is planning to enter affordable housing and two-wheeler loan segments. Aiming for a Rs 100 cr loan book size for the fiscal ending March 31, 2019, it will achieve only half the target, owing to two major issues. One, the eKYC and eSign norms, which have unique identification and traceability aspects covered. “None of us depend on Aadhaar as address proof anymore which is a big blow for the process. The Centre had accepted e-sign for verification of loans but it has been suspended now,” he said, hoping that the digital verification process, critical for its growth plans, gets resolved soon.

Secondly, the IL&FS credit squeeze, an unforeseen scenario, affected business for two months, but the slow recovery is welcome. However, OpenTap is confident of achieving the Rs 500 cr mark by FY19-20. The basis for this is a back of the envelope calculation, which considers its rapid customer acquisition strategy, where 200 customers with an average ticket size of Rs 1 crore, will make this target possible.