Instamojo plans to expand into SME lending, logistics: CEO Sampad Swain
For Instamojo’s foray into SME lending, chief executive Sampad Swain says it will initially aggregate loans from NBFCs and banks
Bengaluru: Online payment solution provider Instamojo Technologies Pvt. Ltd plans to expand into business loans, logistics and advertising services for small merchants, as more small and medium enterprises (SMEs) turn to digital means to sell and market their product, a top company executive told Mint.
Bengaluru-based Instamojo, which focuses primarily on SMEs, currently has 400,000 SMEs using its payment service, and it is also targeting to onboard at least 1 million SME customers by the end of FY19, the company’s chief executive Sampad Swain said in an interview.
Several start-ups have sprung up in the past that focused on SME lending, including names like Aye Finance, Capital Float, Namaste Credit, and Lendingkart among others. Some of these firms manage their own loan book by borrowing from non-banking financial companies (NBFCs) and banks, while others aggregate loans offerings from private and public sector banks on their platform.
As banks struggle with rising NPAs and bad loans, online lending firms seem to have picked up interest among investors and consumers alike. Several fintech companies in the consumer segment also have also forayed into lending, as wallet businesses are being hit by stringent eKYC (e-know your customer) regulations.
Mint reported in April that consumer-facing payments firms PayU plans to expand its credit business as demand for small ticket consumer credit loans picked up amongst online users. Paytm is also reportedly seeking a licence from the Reserve Bank of India for offering a P2P lending product.
For Instamojo’s foray into SME lending, Swain said it will initially aggregate loans from NBFCs and banks.
“As we scale up the (lending) process, broadly in FY19, we will be looking at applying for an NBFC licence so that we can offer loans directly from our own balance sheet. Initially, when we will use third-party balance sheet, we will deploy our own data modelling and risk analysis to process loans online,” said Swain.
Currently, Instamojo allows merchants to manage payments online using a payment link, which is sent to the merchant’s buyer or customer on-demand. On clicking the link, the buyer will be prompted to make an outstanding payment online using debit/credit card, net banking, wallets, among other methods.
Instamojo competes with other B2B focused payment services like Razorpay, CCAvenue, CitrusPay, and PayUbiz among others.
Swain said that rather than using a payment gateway service, SMEs are better off with a payment link which can be generated at any time for any value. For a payment gateway method, SMEs will need to list their products on a website which can be costly and time-consuming.
To solve the problem of online listing of products, Instamojo allows merchants to list their products on a web store so that SMEs don’t have to take the burden of setting up a standalone website.
Swain added that the company is also planning to introduce GST compliance software, tax filing services, cataloging, and shipping services for SMEs that sell products online on its platform.
The company had raised an undisclosed amount in pre-series B funding from Japanese payments firm, AnyPay in August last year. Overall, it has raised around $7 million from investors like Kalaari Capital, Blume Ventures and other in the past.
It processed 3 million transactions in FY17 and has achieved an annualized run rate of Rs1,000 crore in the same financial year, according to Swain.
“Broadly we are looking to grow by 3X to 6x growth i.e. between Rs3,000 to Rs6,000 crore revenue run rate by FY19. Right now, we are well capitalized for next 2 years. However, fundraising is always a function of how fast market is growing…So we will continue to engage with relevant investors to raise additional capital to expand our product suite and grow brand awareness of Instamojo” added Swain.