India’s is moving towards entrepreneurship at a rapid pace & scale: Bala Parthasarathy
Coming amid challenging times, ‘Vocal for Local’ is seen as giving a major impetus to homegrown businesses and brands as well as local Apps. We at Adgully support this movement wholeheartedly, and with Startup Stars, we are featuring all local/ homegrown businesses, brands and Apps.
In conversation with Adgully, Bala Parathasarathy, CEO and Co-Founder, MoneyTap, speaks about what motivated him to start his venture, challenges faced by him during his journey, his mantra for success and much more.
Please take us through your journey as an entrepreneur. What motivated you to establish your start-up? What were you doing prior to turning an entrepreneur?
India had already started making major inroads into digitalisation before MoneyTap. Back then, the market was brimming with players that offered app-based solutions across categories like food delivery, ride-hailing, etc. MoneyTap’s founders and our initial team noticed that there was a huge gap and need for flexible credit. There might not have been enough focus on the Lending and Personal finance space and we saw the huge potential to transform the customer’s entire lending journey.
For instance, a large part of India found it difficult to get credit, say, from existing, traditional lending providers, when they lacked a good credit score. Besides this, people had options such as credit cards and loans, which weren’t as flexible as one could hope for. Especially with the norm which was long wait times after applying, and a customer experience that was lesser than average.
After conducting several surveys, we found that the demand for flexible credit solutions, which were seamless, digital, and hassle-free was very high, especially among the middle-class who were earning and had the ease of a smartphone. As a result, we decided to address this need by simplifying the entire process by giving customers an easy-to-use app, where they add their details, submit mandatory KYC, get their credit approved, use the amount multiple times as per their need. They could also choose flexible ways of repayment and tenure, paying interest only on the money that they use.
Before MoneyTap, I was a venture capitalist with what is now called Prime Ventures. Prime is one of India’s largest seed stage funds with assets under management of over $140 million. I also had started a number of start-ups and one of the largest was Snapfish, which I started and built to about $400 million business within the course of a decade then bought by Hewlett Packard in 2005. I also worked for two years with the Government of India with the UIDAI, in defining the application strategy and developer ecosystem on what is today India’s largest biometric ID – Aadhaar.
What need gap did you want to fulfil with your start-up? What is the core business proposition?
A majority of India’s population couldn’t access credit a few years ago, especially when it came to meeting their day-to-day expenses. Hence, as a last resort they have had to approach informal lenders, who charge high-interest rates. This often leads people to land in huge debt traps. People can further go down the debt rabbit hole by getting new credit, to pay back older credit bills, because of desperation.
On top of this, India always lacked genuine credit solutions that were easily accessible and came equipped with flexible repayment options. This is the gap that we strive to bridge at MoneyTap. Since our inception five years ago, we have successfully served millions of consumers by disbursing over Rs 4,000 crore in credit with our established banking partners through our pioneering product, the Credit Line, which is enabled on an end-to-end ZeroTouch process (a 100% digital process for KYC, documentation, photo upload, etc.) along with Biometric eKYC and KYC via Aadhaar enablement.
Now that we know that our consumers are inclined towards quick credit solutions more than ever before, owing to their increasing borrowing needs in the wake of COVID-19, we are working on various projects to meet these emerging lending requirements while keeping innovation at the forefront of our operations. We are also growing in a way where we will continue to introduce new products into the financial marketplace. And start to fill gaps in places where we see the fit. Though the credit line was our primary product, we have been expanding to offer other lending products for a while now, including Credit Cards, EMI financing options, UCL Lending, BNPL, etc.
How did you identify your TG? Did you carry out any feasibility study prior to starting your business?
Before launching MoneyTap as a full-fledged digital consumer lending company, we did enough thorough research on the lending space and identified a lot of untapped areas that needed attention. We found that most people in our country, mainly the middle-class, were already looking for flexible credit options that they can easily access. This was primarily because of the reluctant nature of financial institutions towards some parts of the community due to multiple reasons such as bad credit score, new to credit customers, and low levels of income, etc. MoneyTap became an excellent platform for people to address their frequent lending needs, especially for smaller to medium amounts that a person might access immediately without having to wait for longer approval processes through a seamless digital hassle free application.
What we have seen is that there is a lot of need in the market for people needing amounts ranging from Rs 5,000 to Rs 2 lakh, which are small ticket amounts mainly used for paying bills, school fees, house furniture, medical expenses, renovations, weddings, etc. Research also says half of such loans taken by consumers were as low as Rs 5,000 and even below. In fact, the small-ticket personal loan segment is driven by young, low-income and digital-savvy customers, whose significant contributions have made this an Rs 12,000 crore market in 2020. The growth of such loans can also be attributed to the on-going pandemic, which has pushed businesses to go digital in every possible manner.
What were the challenges that you faced in your start-up journey and how did you overcome them?
Challenges are inevitable for any start-up. We were no different. At MoneyTap, we did face a lot of challenges from a regulatory front. For instance, whenever the Supreme Court came up with a change in law or introduced a new reform, we had to ensure compliance with it quickly, and incorporate the changes in our existing operations. Besides this, players must also understand that credit is cyclical in nature, which leads to one facing unexpected challenges that mostly come uninvited too. For example, the IL&FS incident entirely disrupted the lending ecosystem and engendered a liquidity crisis across India. The best way to tackle unexpected odds is to stay agile and be equipped with the right tools that can overcome any roadblocks, and help you continue operating seamlessly.
What were the clearances that you required for your venture from various authorities?
The RBI mandate for Finance Companies or Micro-Finance Institutions (MFI) was the first set of clearances we followed before starting our lending journey in India. Besides this, we made sure that we only worked with reputed, registered banks and NBFCs, who followed the RBI guidelines, and not with any fly-by-night operators. A reputed lender will also disburse credit only after completing all the necessary checks. A well-known step is a lender will check the credit history of the individual before giving them a loan.
Additionally, we have made sure that we have equipped all our lending processes with robust, and industry-leading banking encryptions to ensure complete safety to our customers at every point of operation. Since our servers are present in India, all our consumer data naturally stay here, unlike many other random lending apps that don't even provide transparency to their processes.
On top of that, we do not collect users’ personal data without their consent. And when we need data for legal requirements, we make sure that it is encrypted before being stored or transported. As an additional safety measure, we also allow users to anonymise their data on request if they wish to leave the platform. Besides this, we have partnered with relevant authorities who regularly audit our systems for compliance and security, followed by our association with ethical hackers to address vulnerabilities in our in-house mechanisms.
Funds/ finance is the prime issue of almost all start-ups. What can the industry and the Government do to address this issue and ease the capital requirements of start-ups?
Looking at the current business landscape, the Government can look at easing up on certain laws, for instance, the tax on angel investing. They can make sure that players don’t have to face any kind of retrospective taxing during their business journey.
There is already plenty of capital available, with more expected to come in. What’s required is a fair and equal distribution of these funds among players. Doing so will create a level-playing field for everyone and promote healthy competition and transparency.
Prime Minister Modi has just announced a Startup India Seed Fund. How do you see start-ups benefiting from it?
All these initiatives, including the Startup Indian Seed Fund, indicate that India’s climate is moving towards entrepreneurship at a rapid pace and scale. Start-ups have been a significant catalyst to the country’s constant growth trajectory and will continue to play a pivotal role in steering the country towards betterment and self-reliance. India houses numerous promising start-ups with huge potential to bring change. But somehow, due to lack of funds, they fail to achieve their respective goals. However, with moves like the Startup Indian Seed Fund, these players can innovate further, and eventually achieve what they are aiming at.
How is digital helping you further your business?
Since our inception, we have kept digital at the forefront of all our operations. It has helped us gain traction, and add value to the lives of consumers, without having an offline retail presence. We can’t deny that going digital dramatically lowers the operational costs, including rent, power bills, and other miscellaneous overheads. The lending sector has witnessed massive growth amidst the pandemic. So, it really helped that when we could operate our office digitally, and have all our employees work remotely from their homes.
People are borrowing even for buying essentials. Besides this, we have also observed a surge in educational and healthcare loans owing to the pandemic. To address these increasing lending needs of consumers, we aim to extend our services to more tier 2 and 3 cities. Presently, we have launched MoneyTap services in 80 cities in India with the goals to grow up to 200 cities in the near future.
What were your key learnings from 2020? How do you see the start-up ecosystem progressing in 2021?
2020 was a year of disruptions for individuals and businesses the world over due to new needs that arose because of COVID-19. However, at the same time, the pandemic also pushed companies to bank on new opportunities by innovating further. At MoneyTap, too, the pandemic made us realize the growing importance of going digital, being agile and adopting new business models, if needed. The same goes for all start-ups that are trying their best to retain and attract existing and potential customers, respectively. Many players in the start-up ecosystem have come out with more innovative solutions in their domains. It seems that the pandemic has acted as an opportunity to grow and expand further, to meet the evolving needs of consumers and keep them satisfied at every point possible.
What would be your message for the budding entrepreneurs?
I believe there is only one mantra to success. And that is to be tenacious and follow your passion. Remember, it’s a long game, and no such thing like overnight success exists. Challenges will always come your way, but you have to deal with them with utmost patience, an upbeat attitude, and keep going without giving up.