We Enable Online Shoppers To Create A Virtual EMI In Real-Time: Lizzie Chapman, ZestMoney

What led to the founding of ZestMoney? Was there a specific gap you were trying to fill that others weren’t able to?

RBI data says there are roughly 45 million credit cards issued in India. Given duplicity and dormancy, that suggests around 20 million people are actively using credit cards (maybe less) i.e. less than 5% of the adult population, a miniscule number in a global context. 

What’s more, very few people who use credit cards in India today, use them for credit. Almost all the users today see their credit card as a payment instrument for accruing loyalty points.

At the same time, Indian customers are shopping more than ever, they want to buy and experience all the things that makes life better – from holidays to education to electronics to home garnishing. These things are expensive and this is where financing is needed.

But, we don't believe people need to go to banks and take out heavy loans to finance these types of purchases. These can be financed instantly, at the checkout, using technology and AI – and this is exactly what we have built at ZestMoney.

We don't believe India needs credit, we believe Indian consumers need affordability solutions – things that spread the cost of expensive purchases.

Tell us about your business model. Are you a lender or an aggregator? Why did you decide upon your current business model?

We are an aggregator and not a lender. We are a consumer finance technology platform and we enable online shoppers to create a virtual EMI in real-time at e-commerce portals. Like Swiggy, Oyo and Ola and many other successful digital platforms today, we believe in aggregating both demand (customers who want EMI) and supply (NBFCs and banks who can supply credit). We simply sit in the middle and manage the whole process end to end for both the customer and the NBFC.

On the distribution side, we follow B2B2C model, working with partners to solve the affordability challenge in India.

You claim to have one of the highest approval rates in the industry. Tell us a bit about your underwriting process. How do you control default risks within your portfolio?

For starters, we have a completely automated and highly sophisticated decision engine that we’ve built over the last 3 years. We rely on technology and make use of Machine Learning and Artificial Intelligence to create a risk profile for a potential borrower.

We have seen millions of applications, and many of our loans have been fully or partially paid off, which means we have been able to build proxy models for characteristics of good and bad borrowers.

Importantly, we are able to consume different data sets for various types of borrowers, for example, new-to-credit customers where there is no formal credit bureau data, we may ask them to submit additional data points for our engine to analyse. A number of different models contribute to every borrower decision including an ‘affordability’ (ability to pay) model, a behavioural model and so on.

Affordability is very important to us and we are very diligent about perpetually assessing the affordability of a borrower so that a lending product does not ever cause financial stress.

What’s your target market? Is there a specific demographic and ticket size where you feel most comfortable operating? 

We’ve more than 300 million households in the country, who currently have no access to credit cards or any other formal financing options because of insufficient credit history. At the moment, we serve about 5 million consumers, which is only a fraction of the overall market size.

Since our product is completely digital, there’s no demographic bias. At the moment, we serve to customers from more than 10,000 pin codes. We’re happy to have built a product that can serve anyone in the country without any geographical barriers.

Our loan ticket size varies with categories. For electronics, our average ticket size would be about Rs 20,000, but for ed-tech or healthcare categories, that number would go up to about Rs 50,000. We’re very comfortable operating in this space because that’s where our customers are and everything we do is led by the needs of our customers.

Are most of your customer new to credit? How do you manage to ascertain default risks for new to credit customers?

Yes, most of them are new to the system, so when you’re granting loans to them, by definition, this will be slightly riskier than prime. But, it's just not true that people without scores are not credit worthy because credit bureau scores are fundamentally chicken and egg - i.e you need a loan to get a score and you need a score to get a loan.

In fact, our success has been in working out which of these customers are safer to take a bet on. We also consider it our responsibility to educate and communicate with our customers around what is good credit behaviour and how to get a good credit score.

This means, we’ve not only helped our consumers upgrade their lifestyles, but we’ve also significantly increased the number of ‘credit-worthy’ people in the country by introducing them to the market using an alternative credit scoring system that we’ve built.

Lastly, do tell us about some of your numbers. How many clients did you acquire in fiscal ’19? What quantum of loans did you disburse? What are your business goals for the next fiscal?

We’re currently on an annual disbursal run rate of INR 1,500 crores. By the end of 2019, we expect to hit an annual run rate of INR 4,000 crores. We receive about 500,000 applications a month and expect that number to grow significantly in 2019. 

We currently have 800 partner merchants and we plan to expand to about 8,000 by the end of this year. Our aspiration is to be one of the most-loved financial brands. When people think EMI, they should think of ZestMoney.