P2P lender scales up to 90,000 loans a year
LenDenClub leverages a variety of technologies to increase speed and reduce risk:
LenDenClub is one of the fastestgrowing peer-to-peer platforms in India. It offers investors a convenient platform to go through thousands of loans proposals to earn better returns compared to fixed deposits, mutual funds, etc. Bhavin Patel, Co-founder & CEO, LenDenClub, says with 100% funding record for its borrowers, his firm currently enjoys a user base of over half a million and disburses on an average 90,000 loans annually. “While the platform hosts investors across India ranging from small-time entrepreneurs to NRIs, the borrowers are currently active in 7 states of the country,” he adds.
AGGRESSIVE GROWTH
Identifying a huge need for small-ticket loans and addressing this significant requirement of customers, the company offers short-term, small ticket loans of less than `10,000 and this has been one of the key reasons for its aggressive growth. Patel cites facts: “We started our operations in 2018. Last year, we offered around 125-150 every day, which has increased to 500 loans per day now.”
INSTAMONEY APP
LenDenClub aims to foster financial inclusion by leveraging technology so that customers can avail hassle-free loans, even in the remotest parts of the country. At the same time, it offers a new-age investment option for investors.
InstaMoney is the app offered by LenDenClub, which is the go-to platform for borrowers to avail instant personal loans. Dipesh Karki, Co-founder and CTO of the company, says the whole process is extremely user-friendly as the app requires only basic KYC details and the applicant’s salary statement. “Since it does not require any credit history, it is a more accessible route for instant personal loans than banks,” says he.
In the last 5 years, Dipesh and his tech team has built a robust LOS, LMS and POMS, or Performance of Operations Management System) and the technology framework today caters to more than a million investors, borrowers, channel partners and business partners globally. He says it is essentially a marketplace for quality loans for individual investors. The algorithm-driven platform connects investors to pre-verified borrowers and InstaMoney provides small-ticket loans, which are disbursed into the bank accounts of salaried individuals within 24 hours. “We attribute our growth to our InstaMoney platform,” he adds.
PAN-INDIA FOOTPRINT
The paradigm shift brought about by the pandemic has driven LenDenClub to roll out an update of InstaMoney. States Dipesh: “From a presence in 7 states, InstaMoney loan service has expanded its footprint to pan-India, enabling borrowers from over 19,000 PIN codes who can now apply and get P2P loans. During the lockdown, we became an ‘App for Bharat’. This helped the section of people living in tier 3 or below centers, who are not covered by banks when it comes to small ticket loans.”
LENDER’S RISK DIVERSIFIED
LenDenClub maps a borrower to multiple lenders thus reducing the size of the oneto-one ticket from `50,000 to `1000. Bhavin explains: “This change diversifies the lender’s risk and increased returns. The platform helps its investors to earn healthy returns through a hassle free and easy to create diversified lending portfolio. Higher RoI compared to lending rates, higher returns compared to fixed deposits and mutual funds and auto-investment are some of the key features the platform offers its investors.”
The platform offers borrowers quick loans at an interest rate ranging between 0% (minimum for no cost EMI finance) to 4% (maximum) per month for a tenure of 1-3 months. It is applicable for people without any default/write-off in past.”
BREAKEVEN, PROFITABLE
The company has already achieved breakeven and had been eyeing profitability by the end of financial year 2020-21. “In fact, we turned profitable in September 2020 during the adversity and it has made us the first P2P platform to turn profitable. Currently, our annual run rate for number of loans is above 250,000,” says Bhavin.
MORE VALUE TO CUSTOMERS
One of the main shifts brought along by the pandemic was the acceleration of all digital processes, and it achieved what demonetization had set out to do. Due to the fear of transmission, a huge chunk of
the population decided to go contactless with regard to financial services, forcing banking entities to rethink their business strategies to realign priorities - and make it about consumer centricity. Organizations that were already digital-driven, like LenDenClub, added more value to the customers. Dipesh elaborates: “Since we have always had a digital-first approach, we didn’t find any difficulty disbursing loans to consumers as compared to traditional lending organizations. Those who were apprehensive about technology had to face enormous challenges and later started embracing it at a faster pace.”
FULFIL DEMAND DIGITALLY
Covid has made organizations redraw strategies to cater to the changing behavior of the consumers. Businesses have started focusing on the fundamentals of customer care. As compared to earlier times, today’s consumer needs extra information, handholding, guidance, support to steer through a set of challenges from protecting their families or helping kids learn when educational institutes were shut. It is of utmost importance to keep customers engaged and offer them honest support. Dipesh believes that customers are looking for fewer touch points and for products and services that fulfil their demand digitally. “We have experienced it, and we believe digital experiences will continue to propagate it. The industry has started reaching out to their doorsteps rather than pulling them to physical touchpoints,” he says.
Bhavin strongly believes that lending automation can play a huge role in the financial inclusion goal in India, which has been the cornerstone for LenDenClub.
TECHNOLOGY INITIATIVES
Technology plays a huge part in helping lenders adapt to the new normal. Dipesh says building a digital spine to leverage the microservices architecture, automation and cloud computing to automate processes and introduce contactless transaction options, virtual cards and card-not-present (CNP) transactions are critical for inclusive finance at a point where a large percentage of the population is struggling with accessibility.
“Our tech stack is Django with Postgres on the back end and React and ReactNative on the front end. They are all deployed on the Amazon Web Services (AWS) cloud,” he says.
LenDenClub has multiple technology partners for onboarding, verification, disbursal, collections etc. Among them are Karza, Hyperverge, CIBIL, CRIF, Ingenico, ICICI Bank, etc. “We have 25+ tech team, with about 3 members in the leadership role, 5 in the middle management and the rest in the pure development,” he adds.
CYBER SECURITY
LenDenClub has been always wanting to enable safe and secure last-mile connectivity. Dipesh says using tech to mitigate cybersecurity risks through AI-driven KYC platforms, customer authentication, financial grade APIs, firewalls, smart networks, and other solutions has been a practise at the company and through cloud computing, effective APIs and security audits security is scaled up even while maintaining security compliances.
REPEAT BORROWERS
Borrowers have realized the importance of having a good credit history and relationship with lending companies in turbulent times like the pandemic. Says Bhavin: “Our repeat borrowers have increased 7 times since the lockdown, with an improvement in the default rate. Another interesting trend identified across our platform is the reason for borrowing has shifted from emergencies to seeking salary advancements due to the widespread pay cuts across sectors.”
A major trend LenDenClub has witnessed is the rise of technological adoption among the age group of 30-50 years and Dipesh says this gives the company a new segment to work with and extend the potential of digital lending.
STRINGENT UNDERWRITING
Having seen growing defaults during covid lockdown, many lenders made the underwriting process more stringent. However, Bhavin says LenDenClub has not seen stress in static portfolios other than the one originated between January-March 2020. This portfolio has also shown steep improvement post September 2020.
DATA ANALYTICS, AI
While new-age lenders are already using digital tools, traditional players would also look at them optimistically. Dipesh is of the view that against this backdrop, lenders will need to deploy digital tools such as data analytics and artificial intelligence in gauging the risk profile of prospective as well as existing borrowers.
By introducing a video-KYC or C-KYC, the RBI has been facilitating a more reliable, inexpensive mode in lieu of field verification of customers during on-boarding. Dipesh feels that while lenders are accelerating their digital actions, the regulators/authorities have also been encouraging a digital first approach by creating an enabling environment via select policy initiatives.
DIGITAL FIRST FIN MARKET
Dipesh also points out that visualizing the overall situation, covid may end up becoming a catalyst for digitization of financial services products. It might be an instrumental reason to make India a digital first financial market over this decade, he says.