Chennai: Alternate finance firms flourish where traditional regulated banks and capital systems have lost out. It is safe to say that the new age startups have concentrated on a segment that was neglected by big players due to various reasons.
OpenTap is an AltFin firm that caters to the low-income demographic. Its co-founder and chief executive officer, Senthil Natarajan, in an email interaction with News Today and revealed more about his firm, their ambitions, future of alternate finance, etc.
Excerpts from his interview-
Q) OpenTap states that it focuses on the low-income demographic. Could you explain more on that?
A) The underserved salaried blue-collar workers are OpenTap’s main target audience. This population is not only underbanked, they are underserved as well. Within this population, the salary range varies vastly – between Rs 6,000 to Rs 25,000. The upper / higher salary range unfortunately is the basic criteria for several players to disburse loans. Our maximum salary criteria stops where other organizations’ starts – this is the population OpenTap is addressing. For them, OpenTap has devised a methodology to analyze their credit worthiness and is introducing them to the world of alternate finance – starting off with short-term personal loans.
Q) What do you think are the factors for middle and low-income groups to look for alternative finance?
A) The biggest factor that drives this segment of the population to look for alternate finance is that traditional financial institutions consider them risky and do not offer any additional services other than simple savings bank services. The other factor for this segment of the population to look for alternate finance is the usurious money lender market (in which) they end up paying ridiculously high rates of interest, face extremely harsh collection methodologies and put themselves in harms way. Our single largest objective is to financially include this population and bring them into the mainstream financial system.
Q) Explain to us the economic challenges in this sector
A) A majority of this segment lives a hand to mouth existence and barely manage to make both ends meet. In situations like these, the concept of saving does not exist at all. And with that, comes all the complications of not being able to afford a ‘better’ future for their children, lack of access to good health care and the like. So, when planned expenses are difficult, emergencies are even worse. That’s when the chances of them getting into a vicious circle with usurious money lenders is extremely high – they are at their vulnerable most and would agree to just about any condition that is put forth to them.
Q) How is OpenTap different from other startups in financing space?
A) OpenTap has a three-point differentiator from other players in the market – the target population, the product and the business model.
Q) Could you explain to us about your origin and USP?
A) The idea was the culmination of a desire of the co-founders to bring structured financial services to the underserved population in India after reading and hearing about many forms of usurious lending. The founders got together to see how they could solve the issue.
Q) Tell us about recent partnerships and future outlook of the market for OpenTap.
A) Our partnerships are driven by our customers’ requirements. OpenTap is working towards becoming a one-stop-shop for all financial needs for our customers. Basis that need, new partnerships and new products will be introduced. Our current product line includes short term personal loans and loan against gold. Affordable housing and two-wheelers loans are soon to follow. We currently have tie ups with three financial organizations – a large financial conglomerate, a small finance bank and a mid-sized NBFC. Two more partnerships are in the pipeline.
Q) Could you share with us statistics pertinent to the underbanked population of India?
A) There are approximately 70 Million aspirational Indians in the country who are needlessly denied credit. It’s not just the lack of loans that affect their day to day living. It’s the financial exclusion on the whole which affects these people and their families directly. Right from access to a good educational system, medical care, insurance and expenses for life events. Each of these impacting or affecting the next stage of life, more often than not – negatively. And because of financial exclusion, this population is unfortunately socially excluded as well. It’s a vicious cycle that organizations like OpenTap have to help break.
| Opportunities galore |
| Senthil says, ‘The opportunities for alternate lending in our country is immense and is definitely set to redefine lending services in India. The mid to lower segment of the blue-collar workforce lack the security or the credit scores needed to raise a loan in time of need from traditional financial institutions. Changing this situation and bringing this population into the mainstream financial system is our life mission’ |
| Numbers speak |
| * Total transaction value in the alternative lending segment amounted to $249 million in 2018. * Transaction value is expected to show an annual growth rate (CAGR 2018-2022) of 52.3 per cent resulting in the total amount of $1,339.7 million by 2022. * The market’s largest segment is crowd-lending with a total transaction value of $170.8m. * Globally the highest cumulated transaction value was reached in China at $425,564 million in 2018. |