Its credit assessment process, allows them to go beyond the traditional means of evaluating borrowers

Bangalore-based finzy is the premier peer-to-peer (P2P lending solution in India. It connects borrowers with investors and makes the entire process simple and easy. finzy makes the entire borrowing process simple and user friendly.  You can get your loan funded in as little as 48 hours.

Amit More, founder and CEO, finzy, tells us more. Excerpts:

BW CIO: Who are your borrowers, typically? Also, how do you determine profiles of lenders?

Amit More: Around 80 percent of our borrowers are salaried and 20 percent are self-employed. Contrary to the perception that the P2P industry is the lender of last resort and only cater to borrowers not served by banks and NBFCs, we, at finzy, offer loans, starting at a best-in-class rate of 10.99 percent per annum.

Our targeted average rate of return for lenders is 15.50 percent, so, we have been onboarding salaried employees from top-notch corporates having best CIBIL score and credit worthy self-employed cases.

Investors are onboarded on finzy through a simple and quick investor application. Lenders also go through a KYC verification process. Once, the investors are verified, they transfer the investment amount to a secure escrow account. finzy ensures that all the funds transfer management happens via escrow accounts that are managed by a SEBI-registered trusteeship company.

finzy’s value proposition to investors includes - focus on right borrowers, diversification of investments, regular monthly returns, rigorous loan documentation, follow up and recovery (in case of delays), tracking of investments via regular emails and on finzy’s investment dashboard, funds managed through escrow and many more.

BW CIO: It is also said that P2P is a get-rich-quick scheme for many. What's your take?

Amit More: Not at all, as lenders making this mistake will struggle to recover their principal investment. Lenders should not be swayed by the promise of high returns. Also, with high returns, one gets exposed to exponentially higher risks. These high interest rates come from loans of borrowers, who are subprime and have very limited access to credit.

At finzy, we have differentiated our positioning by only catering to served and underserved borrower segments, rather than unserved. This optimisation and sourcing strategy has resulted in finzy offering on an average 15.5 percent to 16.0 percent return to its lenders.

BW CIO: A market share of 40 percent seems ambitious. How do you intend to go about achieving this?

Amit More: Our confidence in this comes from the fact, that from going live 12 months back, we are already among the top three in the country, in terms of monthly disbursements. This growth has been a function of our focus on user experience, as well as our product positioning.

Though we offer loans in eight cities across the country, around 90 percent of the borrowers are primarily from Bangalore. We are soon replicating our sourcing efforts in other cities. This would provide sizeable impetus to our numbers.

Simultaneously, we will be triggering pan-India channel tie ups and increase our visibility with targeted digital and OOH marketing. Our credit algorithm and performance of the portfolio have resulted in a steady flow of lender registrations, which is only going to grow exponentially from here on.

The combination of giving consistent returns to lenders and sourcing the right borrowers will ensure that we should soon not only become number one in monthly disbursals but also have a more than 40 percent share of the market.

BW CIO: Elaborate on the proprietary credit assessment algorithm and granular diversification.

Amit More: Our credit assessment process, allows us to go beyond the traditional means of evaluating borrowers. Traditionally, banks and other financial institutions typically depend on a Credit Bureau score, income range and the category of company that the borrower works for.

We believe that a person applying for a loan is much more than their credit bureau score. Finzy’s proprietary credit algorithm goes beyond the traditional Credit Score (eg. CIBIL Score) by taking into account 130 parameters. Finzy’s unique algorithm assigns a finzy score and rating to the borrower. The rating corresponds to an interest rate that ranges between 10.99 percent to 27.99 percent per annum.

Our hypothesis and algorithm have been validated with multiple cases, where the customers had a low credit bureau score, but our assessment ranked the customers higher. Our assessment was vindicated when a lot of these borrowers prepaid their loans successfully.

On the other hand, we have also had cases that had a high credit bureau score, but on detailed assessment, we realized that they would not be the right borrowers to list on the platform, thereby allowing us to secure the right borrowers for the investors.

BW CIO: How long did it take to obtain the NBFC-P2P certification from RBI? What process did you go about?

Amit More: We were the first in the country to have applied for the license in October 2017 and received it on June 28th, 2018.

We were already 90 percent compliant with Master Directions on the day it was published. For instance, we already had escrow accounts set up for our transactions. This enabled us to quickly make changes to adhere to the remaining guidelines and be the first to apply for the license in India.

The application review process that the RBI adopts is extremely thorough. We had to submit information, spanning from the company’s detailed policies, info security policies, business plans to personal and professional details of each of the directors.

Our focus on customer experience, the proprietary credit assessment algorithm and a secure digital platform have allowed us to achieve ZERO defaults in EMI repayments in our first year of operations, thereby building trust with all our stakeholders. The Certificate of Registration, from the RBI, is a further vindication of our processes. We are happy to have received the Certificate of Registration within a year of commencing our operations.

BW CIO: Do you have a process to deal with loan defaulters, if any?

Amit More: Finzy has not had defaults for the first year of its operations from June 2017 to May 2018. Considering the fact that defaults is the major challenge faced by the sector in the industry, this is indeed an achievement for finzy and gives a positive outlook about the sector in the industry.

However, in case a default occurs, finzy represents all the lenders who have invested in that loan and facilitates recovery and regularisation of the loan. This ensures that the lenders do not have to follow up in their individual capacity.

Also, finzy has an in-house recovery process which encompasses reaching out to the customer via phone, email and field visits. There is a dedicated in-house team which attempts to collect the outstanding amount.

In the cases of continuing defaultees, we have tie-ups with bank-recognised collection agencies across the country, and partnerships with legal agencies to support the collection efforts.