‘Covid-19 boosted demand for loans up to ₹2 lakh’3 min read . Updated: 06 Jan 2021, 10:38 PM IST
Bhavesh Gupta, chief executive officer, Paytm Lending talks about entering this crowded market at a time when demand for loans has taken a hit from covid-19
Financial services platform Paytm has entered the personal loan segment with plans to offer credit to one million customers by the end of this year. The company, which has launched the service in partnership with Clix Capital and ArthImpact, aims to add two more partners in the current quarter. Instant personal loans is the third consumer credit product that the company has launched after its co-branded credit card and Paytm Postpaid, which offers a 30-day purchase finance option.
Bhavesh Gupta, chief executive officer, Paytm Lending, talks about entering this crowded market at a time when demand for loans has taken a hit from covid-19. Edited excerpts:
How do you plan to leverage the advantages of the app-based distribution model for the instant personal loan business?
We have around 150 million monthly active users and, in that large traffic, Paytm Postpaid, which is the buy-now-pay-later vertical, is driving the consumer credit in a different manner. We were able to originate 2-2.5 lakh new customer loans every month and this is expected to hit 3-5 lakh over the next 6-12 months. We are leveraging the same digital journey and the distribution channels through our app, because similar customers are looking for personal loans as well. While we have just launched and opened access to only a million customers to begin with, we are already seeing very high intensity traffic on a daily basis.
How did you arrive at the figure of loans to one million customers by the end of the year?
We have more than a million active users for Paytm Postpaid and are adding 2 lakh customers on a monthly basis, which is expected to become 3 lakh a month in the next 12 months. We expect Paytm Postpaid to have 4-5 million customers by the end of this year. Our idea is that at least a quarter of these people will migrate to personal loans. We are looking to up-sell to some of these postpaid customers. So, delivering a million loans doesn’t seem to be a problem. Our idea is to hit around 50,000 loans per month by April-May and one lakh by September.
Demand for personal loans is down and might take some time to pick up. What’s the idea behind entering this business at this time?
I don’t agree that the overall demand is down. There are high-ticket prime borrowers, who generally take loans for marriage or travel, and these are basically catered to by banks. There, the demand is low because the general consumption is low. Then there are people who look at personal loans as bridge financing, as they are self-employed and don’t have access to formal credit. Our focus is on customers who are looking at loans between ₹50,000- ₹2 lakh, as there the need is not discretionary spend and is more of emergency use, which has not really got impacted by covid-19 and in fact is getting accentuated by covid-19.
The overall lending space is very crowded. How do you plan to distinguish yourself?
While it is crowded, there is a very high demand for credit, but supply is restricted. Access to credit is not easy for people, especially for borrowers, who might not have all the necessary financial documents for getting loans from large banks. The crowdedness is surely there at the top-end of the funnel, wherein a lot of lenders are targeting borrowers that take home loans or high-ticket personal loans. If you actually go down to the next tier, which is in the age band of 25-35 years, people who earn may be who earn ₹2-4 lakh, are self-employed or young professionals getting into their first job. This segment does not necessarily get that seamless access to credit. Paytm is a mass customer acquisition company and our customer profile resonated with this segment.
How would you measure customers’ credit worthiness? Would you use traditional means to evaluate customers, such as credit reports, or will there be new metrics to evaluate eligibility?
Paytm will not be underwriting the loans and only augmenting the lending capabilities of our partner banks or NBFCs (non-banking financial companies) . It will be a combination of metrics. Based on the combination of the data with Paytm, the financial data and the data with the credit bureaus, we have developed a proprietary decision model, which is being used by our partners to underwrite the loans.
Moreover, we won’t be handling the recovery of the loans and this will be handled by the partner lenders.