Finding product-market fit
LenDenClub was restricted to offering personal loans to salaried customers — a product being offered across banks and NBFCs.
“We realised that customers always had small requirements. So rather than running after them for long duration loans, which even other lenders were offering, we started focusing on smaller ones and aimed to become experts in that area,” the founders say.
In May 2018, LenDenClub launched InstaMoney for customers in the salary range of 30-35K per month and looking for loans of Rs 5-10k. Within three months, the platform was able to disburse small-ticket loans (five to six months’ tenure) within 24 hours, which eventually came down to two hours.
The product became an instant hit and the numbers started growing. The repeated user ratio was improving, and to date, this has been one of the most prominent products of LenDenClub.
By the end of 2019, the startup tied up with another P2P lending platform, Loanmeet, and shifted focus towards merchant loans, which forms 75 percent of the company’s disbursement today.
“Smaller businesses will require small ticket capital – we realised this long back,” Bhavin says.
From op-driven to tech-driven
Launching InstaMoney was a part of LenDenClub’s strategy to move towards becoming a tech-driven startup as the product introduced the customer to a digital system.
A customer is able to avail of a loan under InstaMoney within 10 minutes — 11 minutes application, 30-second verification, and lending completed in the next 13 seconds, except disbursal, which has certain requirements.
“We set a record of doing this entire process – from onboarding to disbursal – within 18 minutes, just to test our limits,” says Dipesh who takes immense pride in the startup’s strong backend tech.
Keeping defaulters at bay
The platform gets over 2.5 lakh applications every month, of which only 20,000 are disbursed.
Different stages of filtering and criteria have been set up. Strong backend algorithmsare used to create a borrower’s risk profile and the decision of lending is made on the basis of the credit model created. The risk profile is evaluated and the interest rate is decided based on tech-based due diligence. The model is proprietary to LenDenClub, says Dipesh.
The platform uses customised auto calling bots post disbursal of a loan. With 80,000-90,000 customers paying EMIs each month, setting up a call centre would have required a team of at least 100 people. However, with tech, the number is zero and a process of merely three to four hours, including follow-ups.
“90 percent of our process is automated, which is the reason we have been able to sustain ourselves even with a smaller ticket-size loan,” the co-founder says.
Learning from failure
In 2018 end, LenDenClub tried its hand in the Buy Now, Pay Later (BNPL) category by partnering with Flipkart. Somehow, the product didn’t work for the startup.
“There were a lot of customer support issues from the sellers’ side and EMIs suffered. We couldn’t fulfil requirements and dropped the plan after six months,” Bhavin says.
Learning from the experiment, the startup is now building a similar product “in a completely different way” and is due to launch it in the next four to five months.
“If you don’t experiment, you wouldn’t learn,” the founding duo says.
A foundation of tech
LenDenClub prides itself on thinking about “tech first” and in its tech-backed platform and architecture, which “no other player possesses”.
“We do not launch any product without tech. We have been able to process such heavy applications only because of our tech-driven approach and scalability prowess. Today, more than 80 percent of customers are approved automatically, and we do not think twice before adding new products and services,” Bhavin says.
Besides tech, the startup benefits from a strong focus on the specific product and strong execution.
“We do not jump into any product. We understand each and every rupee coming in and going out. That is one of the reasons why we hit profitability, something other companies are still struggling with,” Bhavin says.
The founders claim to have a stronghold on unit economics, a reason for their green balance sheet. Providing short-tenure loans and building a simple business model has also worked in the company’s favour.
“We were able to see the outcome of COVID recovery issues, which a lot of P2P and digital lending players struggled with as their loan tenures were much longer leading to restructuring. This is one of the reasons why our NPAs are maintained at 3.95 percent,” Bhavin explains.
Outlook for the future
LenDenClub registered loan disbursements close to Rs 600 crore in FY21 as against Rs 60 crore in FY20 and Rs 13 crore in FY19. The company reported year-on-year growth of 1,000 percent, catering to over 1.3 lakh unique borrowers.
As it eyes further growth, the focus will remain on its two main products — InstaMoney and merchant loans.
“We have been growing 6-7X in the last three years. We target to disburse around loans worth Rs 1,200 crore and want to reach a monthly average run rate of Rs 2,500 crore by the end of this fiscal,” Bhavin says.
Despite apprehensions during the pandemic, the 75-member team startup did not stop disbursements and was delivering in April-May 2020 as well.
The business was a little slow in Q1 2020, says the co-founder, but it started picking up in the second quarter. “In fact, we closed our default numbers slightly better than the last fiscal,” he adds.
The startup’s recent product, InstaMoney Plus, allows selected customers to use the company’s UPI and card-based product – they can use it online or offline. The product already has 2.5 lakh borrowers.
“New features and products are lined up. We want to make lending technology as adaptable as payment gateways so that the next revolution could be in terms of credit availability in India. This is already happening but we want to tap Tier I cities and expand to Tier II India as well,” Bhavin says.