'Buy-now-pay-later' may soon swell to 10% of entire e-commerce deals

In the Covid era, the digital ecosystem exponentially took over India and many element of the traditional working model simply went away. In the positive aftermath of Covid-led technological advancements, people and businesses have started to realize numerous benefits of digital lending over the traditional lending process. Buy Now Pay Later (BNPL) enables heightened accessibility, convenience, and transparency while still meeting essential needs. "It will eventually account for a sizable share of e-commerce transactions - 10 per cent in the coming years," says Krishnan Vishwanathan, Founder and CEO, Kissht, in an exclusive interview with Bizz Buzz

We have managed to leverage data in order to develop a transparent lending infrastructure that allows us to extend loans to new-to-credit, salaried, and small business owners in a dignified as well as time-efficient manner. We have been successful in doing so and have disbursed over 2 million loans since our inception

How do you see the future of digital lending in India?

In the Covid era the digital ecosystem exponentially took over India and many element of the traditional working model simply went away. In the positive aftermath of Covid-led technological advancements people and businesses have started to realize numerous benefits of digital lending over the traditional lending process. Hence, an increasing number of institutions that offered loans using legacy systems are switching to digital lending. Moreover, the huge funding received by fintechs as a sector over the recent years indicates its immense potential in making a difference in the country's recovering economy.

Do you think the BNPL services will take over the credit card model in the near future and what are the significant reasons behind its outperforming?

The payment industry has evolved over the years and it has accelerated as a result of the pandemic. Credit cards have become the most plausible solution, but the credit card industry has three fundamental drawbacks i.e. accessibility, operations heavy, and lack of transparency. Thus, there is a loss of trust in the customers' minds. This is where BNPL services come in as a mainstream option. It enables heightened accessibility, convenience, and transparency while still meeting their essential needs. It will eventually account for a sizable share of e-commerce transactions - 10 per cent in the coming years. Our ongoing efforts to financially empower our customers have allowed us to establish a presence in a variety of business segments such as instant cash, personal loans, consumer durable loans, and online shopping through over 300 affiliated partners such as Amazon, Flipkart, Caratlane, Make My Trip, Uber, and many more.

Big tech companies are foraying into financial services, especially sachet-sized loans, BNPL, and payments. Additionally, how do you look at the Account Aggregator (AA) Framework and the UPI auto-pay feature?

It comes with no surprise to me, that there is still a huge undiscovered market for digital lending in India and global tech companies have sensed this opportunity. The move will help in achieving India's financial inclusion plans. In fact, if challenges of cybersecurity, data privacy and monopolistic practices are tackled in the right way the future looks quite promising. The AA framework and UPI auto-pay are steps taken in the right direction. The implication of the AA framework will compile all the digital footprints of the customer in one place and make borrower evaluation easier and loan processes faster keeping security at the forefront. Additionally, UPI auto-pay feature will enable customers and small businesses to make recurring transactions, further enhancing the ease of business.

Tell us about your startup, what does it do and the problem it resolves?

Kissht is a 100 per cent digitally enabled lending platform founded in 2015 with the intention of providing instant loans to India's credit-deprived segment, i.e. lower-income/self-employed groups. Traditional players are unable to address the needs of this segment due to rigid underwriting processes, lack of or low credit scores, etc. However, we have managed to leverage data in order to develop a transparent lending infrastructure that allows us to extend loans to new-to-credit, salaried, and small business owners in a dignified as well as time-efficient manner. We have been successful in doing so and have disbursed over 2 million loans since our inception.

What is your biggest USP?

Kissht has developed an entire in-house technological stack and leveraged it to ensure a splendid customer experience while staying compliant with all regulatory standards. We have put to use the power of every digital innovation in the form of India stack, mandates, eSign, UPI, and so on resulting in faster and efficient customer underwriting backed by our robust fraud detection engines. Our biggest USP is the way we have combined third-party data sources with a great analytics process to build and fine-tune our credit and fraud engines. We also have our unique Kissht score that has led us to tap a relatively new market of customers that do not have a CIBIL score.

What were the challenges of setting up and scaling the business? How did you overcome them?

The fact that a large portion of our customers are self-employed, have irregular income patterns and are often part-cash salaried, understanding their genuine income, spending patterns, and other factors using alternative data sets was critical. Furthermore, designing and deploying a risk model that self-learns and improves over time was the most difficult task. Additionally, creating a fully digital architecture that is future-proof with the ability to scale to 100 times of the current levels with a 100 per cent cloud-based solution while ensuring minimum company expenditure and maximum customer delight also posed a challenge. With that said, we have managed to overcome all these challenges by showing the right amount of agility and patience to develop the right organizational culture that is built around customer-centricity.

What are the future plans of Kissht - In terms of expansions, fundraising & innovation?

Our goal is to double our monthly disbursals to Rs700 crore by FY22 as well as our registered users and unique borrowers to 20 million and 5 million respectively. Furthermore, we are planning to go multi-product to an extent that is relevant to the segment we serve. Ultimately launching products like: Medical and general insurance, as well as small ticket life insurance which is the need of this segment. Other products such as two-wheeler loans, loyalty cards for our premier customers and more remain a key focus for the platform. To reach our ambitions we are also in initial discussions with equity investors to raise capital.

Brief us about your product road map (how has it evolved/recent product innovation), how do they work?

We specialize in three primary products – short-term personal loans, Checkout financing/ BNPL, and line of credit. Traditional short-term personal loans formed almost 80 per cent of our disbursals. With this product, we offer customers small ticket-size loans of from Rs 5000 to Rs 20,000 for a duration of not more than 12 months, through direct cash deposits to their bank account. We were among the first to champion the concept of Buy Now Pay later in 2015 when customers began exploring alternate payment options. Through checkout finance/BNPL we fund end purchases through merchant partners (physical and e-commerce).

Line of credit was an innovation we launched last year in the midst of Covid-19 after doing a survey on customer behaviour and keeping in mind their changing financial needs. Under this offering, we assign a lump sum amount to the customer and they can draw down on the limit whenever required; being almost akin to a credit card.

Two of our recent product innovations include bullet repayment wherein a borrower chooses a fixed day to repay the amount all at once rather than a repayment plan and the snooze feature, in which customers can use the snooze button 48 hours before their repayment deadline to prolong it by 30 days without penalty. Our goal is to complete the product portfolio within the lending segment, moving on to develop products like medical and life insurance as cross-selling products for the same underserved segment, interchange link credit card - which can be used against merchants we have on board, Two-wheeler loans, etc.

Explain a customer's journey on your platform and how does your company leverage advanced analytics, big data, at each stage?

The user journey has been kept simple, with a strong emphasis on requiring little inputs and providing maximum gratification. The origination of the journey could be either at our partner merchant or by downloading our app. The user is required to enter some basic information such as name, age, employment status, declared income, and complete the real-time e-KYC process. It takes anywhere between 2-3 minutes to complete the process and at the end, we assign a limit to the customer based on our UW logic and Kissht digi-score (credit limit and available offers).

As a next step, the borrower can choose Kissht as a payment option at a checkpoint at any of our partner websites or via our app in just a few simple clicks. The entire process is monitored and the loan is disbursed instantly and completely paperless.

Big data, analytics, and machine learning have been used in the Kissht ecosystem for a growing number of tasks, ranging from customizing communication channels to determining the ideal frequency for each customer. ML-based statistical models are in place which helps to fully understand a customer's ability to repay and to detect fraud. Using data-led architecture to study customers' behaviour, their online purchases, utility bill payment history, travel ticketing history, social media handles, etc, we develop a proxy metric to devise alternative creditworthiness evaluations.