New Delhi: EarlySalary, an app that offers cash advances and short-term loans to young professionals, has raised $4 million from IDG Ventures India Advisors and publicly traded lender Dewan Housing Finance Corp. Ltd.
Managed by Pune-based Social Worth Technologies Pvt. Ltd, EarlySalary was rolled out in February 2016. It offers loans in the range Rs8,000 to Rs1 lakh based on a proprietary algorithm which determines the credit worthiness of an applicant. The credit is handed out for a period of seven days to one month.
The company will use the fresh funds towards product development, customer acquisition and expanding the team, co-founder and chief executive officer Akshay Mehrotra said in a telephonic interview. It had raised $1.5 million in seed funding from Ashok Agarwal of Delhi-based Transcorp Group in November 2015.
Unlike some of the other start-ups in the sector—which use data to help traditional financial institutions disburse loans to applicants with negative or no credit profile—EarlySalary is itself a non-banking financial institution.
This essentially means the company raises money from banks and non-banking financial companies (NBFCs) and on-lends it to customers.
Mehrotra said Social Worth Technologies, which is registered as a technology company, acquired a firm called Ashish Securities that had an NBFC license, thereby acquiring the license itself. It has tie-ups with two of the country’s largest NBFCs and one bank, from which it continuously raises institutional funding, he added.
The venture was founded in October 2015 by Mehrotra and Ashish Goyal, who have earlier served in senior leadership roles at insurance provider Bajaj Allianz. Mehrotra, who also served as the chief marketing officer at Future Retail, was part of the founding team at Policy Bazaar.
Since its launch, EarlySalary app has been downloaded over 350,000 times (with about 20,000 downloads on Apple phones) and has handed out loans totaling to Rs22 crore to 16,000 applicants. It charges Rs9 to Rs10,000 per day as interest.
Mehrotra said the company is aiming at 50,000 users and a loan book of Rs100 crore by the end of the year.
“The problem we are solving is that young people do not get access to quality credit,” Mehrotra said. “Either they borrow from friends and family or use a credit card. If you borrow say Rs20,000 from a credit card, the transaction will cost you close to Rs1,700 and we charge around Rs600.”
To sanction loans, EarlySalary uses an under-writing system that uses machine learning on data derived from the applicant’s social media profiles (carrying information on location, contacts and job history), bank statement and credit bureau data.
“We believe fintech firms are changing the way India will bank and EarlySalary’s capability of using social media-based underwriting decisioning will help many young working professionals get access to credit which is otherwise not possible. This over a period of time will create a wealth of information on credit-worthy customers, to offer more diverse products through partners,” Karthik Prabhakar, a director at IDG Ventures, said in a statement.