'Customers Want Products To Be Very Flexible And Convenient'

Led by CEO Bala Parthasarathy, MoneyTap plans to extend easy, 'one-click' credit to over one million Indians in the next three years. In conversation with Aniruddha Bose, BW Businessworld editorial consultant, Parthasarathy discusses what inspired him to conceptualise MoneyTap, what unique needs the business fulfills, and the company's business model and plans for growth.

Please tell us a little bit about your professional experiences prior to launching Money Tap.
Prior to MoneyTap, I was the co-founder and managing partner of AngelPrime (now Prime Venture Partners), a seed - stage fund based in Bangalore. During my time at Angelprime, I was deeply involved with startups such as ZipDial (acquired by Twitter), Ezetap, SmartOwner, Vidgyor, Happay, HackerEarth, Synup, Quizziz and more. Before turning VC, I have built three companies, one of them being Snapfish, bought by Hewlett Packard in 2005. As general manager and MD for Snapfish International, I led its growth into becoming the world's largest online photo site with 100M+ users, and expansion into 20+ countries in Europe and Asia Pacific.

In my early days, I was the co-founder of iSelect and then Wyatt River Software that was acquired by SafeNet. I started my career as one of the early engineers and built Digital Link, which went public in 1993. From 2010- 2011, I worked with Nandan Nilekani, Chairman, UIDAI, and played a key role in defining the application strategy and developer ecosystem on Aadhaar. In 2006, I was recognized by University of California, Santa Cruz with its highest honor for alumni as a "Distinguished Alumnus". I am a graduate from Indian Institute of Technology, Madras.

What inspired you to conceptualise and launch MoneyTap? Was it a personal experience or more of a general observation?
It was a combination of personal experiences as well as general observation. We observed the market need and realised that the middle income group (the salaried class) has always been facing challenges with respect to credits, especially small amounts. People are not comfortable going to banks for loans for minimal amounts - this could be anywhere from Rs. 3000 to Rs. 50,000 to 1 or 2 Lakhs. Asking for money from family and friends always has an embarrassment factor. The needs are what most of us have, that could be anything from medical, birth, death, school fees, deposit to take a rent on house, etc. In many cases, people even have fixed deposits that they just don't want to break for a small need. This is where we thought of MoneyTap and wanted to be like a friend who could be reached out at fingertips.

My father was in government service and while growing up in India in the Seventies and Eighties; money was always tight at home, especially after the middle of the month. Years later, upon returning from the US and while working as a volunteer for Aadhaar (UIDAI), I had the fortune to see how the power of technology could be used to solve real world problems. This is when I first came across the term, "Poverty Premium", a peculiar problem where those who earn less seem to pay a higher fee for accessing certain financial services, though they may be more creditworthy than the rich. From then on, finding ways to use technologies such as Aadhaar and Smartphones to solve the "Poverty Premium" problem has always been at the back of my mind and since last year, it has become an obsession. Credit card penetration, the most popular product for offering credit that is not secured by a collateral, is shockingly low in India with just 24 million cards for a country of 1.2 billion! Personal Loans, another product offered by banks, has negligible uptake. Instead of trying to figure out how to sell more of the same credit cards or loans, I decided to find out what customers really wanted.

What gaps does MoneyTap aim to fulfil? How is a consumer better off using MoneyTap, compared to traditional sources of borrowing?
Middle income customers making Rs. 25,000 per month or more, facing frequent cash crunch for regular needs like education, medical, birth/death, etc. are not serviced by financial institutions today without putting up collateral such as gold. Large needs, such as buying a vehicle, house, etc. are addressed by financial institutions unlike online and off-line shopping. Though the latter often involves very high credit card interest rates of 40% if one doesn't pay on time. This is the clear unaddressed need.

When we spoke to customers, they not only wanted the above needs addressed but also wanted the product to be very flexible and convenient.

What role does RBL play in the overall equation, and what made you decide to partner with RBL and not a larger name?
RBL is a very progressive bank, and this was one of the key reasons for us to partner with them for our launch. In addition, they have very strong assets to lend, regulatory oversight and deep experience in the domain. Not only they have a committed management team but an amazing team in technology, credit, marketing, operations, etc. All of these expertise is essential to build a deep partnership possible.

RBL Bank is our launch partner and we've signed up a number of others too. We will be letting out the word soon.

How do you plan to control credit quality - will the ease of transacting not impact the process of due diligence? How do you plan to overcome this challenge?
We do a thorough evaluation per banking guidelines. But it is our firm belief that deep evaluations don't have to be painful. We can be friendly, fast and thorough at the same time. Not everyone will get the money; the users are qualified/ disqualified right on the app depending on their credit history and worthiness. If they're not eligible we do not waste their time further.

We're an enabler and we facilitate the credit line, lending is done by our partner banks. All the actual money movement happens between the bank and our customer, per RBI security guidelines. We're working with progressive and forward thinking banks making sure we're regulated. Convenience through our technology platform is provided and extra efforts have been put in by us to ensure that deserving candidates get the right amount of credit at the right time.

What is MoneyTap's revenue model - how much funding has been raised so far, and what is the projected breakeven point?
We are seriously funded by leading investors and will reveal the details shortly.

We get a small portion of the transaction from the bank, we do not charge the customer.

There is no fee for downloading the app and getting the approval. Even if you are denied for any reason, you will pay zero fees. Rs. 499 + Service Tax is charged as an Annual Line Setup Fee in order to avail the MoneyTap facility. This amount allows us and our banking partners to "block" the amount of money so that one can withdraw money 24 hours a day, 7 days a week. The fee also includes the initial home visits and processing of one's KYC.

What are the entry barriers that prevent other competitors from entering this space?
MoneyTap has created a new category - App-based credit line, addressing the middle-income customer's basic needs. We fully expect both online players as well as large banks to jump in and address the need. Such an enormous need will have multiple players.

Pulling this off successfully requires a combination of User Interface Design, building scalable multi-tenancy systems, Data Science & Machine Learning, Consumer Credit & Risk Modeling, Deep Integration with banking systems, Digital Customer Acquisition expertise, Strong banking relationships at both the senior and mid-levels. In addition to a high quality team and serious investors.

Neither a startup by itself, nor a bank by itself will have all this expertise.

Lastly, what are your plans for growth and expansion? Are you a people intensive business or will you run with a lean team?
Our goal is to reach one million Indian consumers in the next three years. To meet our goal, we aim to cover 30 cities by the end of this year alone. We will also be partnering with a number of banks in the coming months.

Right now we are looking at increasing our customer base and investing in the technology. We are and will always be a lean team.