It was late in the night and two friends — Akshay Mehrotra and Ashish Goyal — couldn’t help but discuss the financial woes the end of the month inevitably brings. Even though they were no longer students, the end of the month almost always meant a flat wallet.
Although they began by talking about their own situation, they realised this problem couldn’t be unique to them and that most young working professionals had to have the same woeful tale to tell. When they decided to scout the market for financial solutions, they didn’t find any product that could help them.
“We felt the need for a product that could bring an end to the month-end money woes faced by young working professionals,” says Akshay. After meeting over a 100 working professionals across cafeterias, IT parks, and coffee shops, the duo decided to build a mobile app — EarlySalary.
The app’s workings
Powered with social media underwriting, EarlySalary gives instant cash and short-term loans to young working professionals in India.
The app targets young salaried individuals between 22 and 35 and works in much the same way as a salary advance or short-term bridge cash loan. The personal unsecured loans are available for as low as Rs 10,000 to Rs 1 lakh for up to 30 days with an interest rate of 0.09 percent a day.
The consumer can apply with his/her Facebook ID, PAN card number, or bank login verification or statements. Once he or she applies, it takes about an hour for the money to get transferred.
“The core of EarlySalary is our risk assessment module and decisioning — ‘Social Worth Score’ — which analyses the credit-worthiness of the individuals beyond financial credit scoring,” says 35-year-old Akshay.
The score includes a traditional credit score and a social media score. The eligibility of the individual is ascertained within 10 minutes. EarlySalary is backed by NBFCs (non-banking financial companies).
Working along a non-traditional model
Akshay explains that while most of EarlySalary’s use cases are for lifestyle maintenance like shopping, holidays, and celebrations, some of the cash requirements also come in for house or city shifting, job changes, and medical emergencies.
For Ashish and Akshay, both former Bajaj Allianz employees, setting up a fintech startup was the next logical step. It was when they realised they needed someone with underwriting expertise that the chairman of their board, Hemant Kaul, advised them to meet Vimal Saboo, a CA with 18 years of experience. He soon joined the core team. Also, knowing that technology was the key for EarlySalary, they knew they needed someone with strong experience.
So when Akshay met Vivek Jain, a former principal architect at Infosys heading the banking technology division, he thought he had found the final piece of the puzzle.
However, when they began building the product, they found that there were a lot of pieces that still needed to fall in place. There was a need to build acceptance and topline volume, choose the right customers to lend, and get a strong control on bad loans.
Looking at a non-traditional way of credit scoring and decision making, the duo decided to build technology to develop mobile- and cloud-based decision systems, bring in data science and risk modelling, work on a digitalised repayment and collections system, and create digital and machine support for the underwriting model.
“The strong part was that almost everyone who joined us believed in the journey and within 20 days of starting operations, we had nearly 20 of our key resources on board,” says Akshay, a former Future Retail Ltd, PolicyBazaar.com, Big Bazaar, and Bajaj Allianz employee.
The payday loan market
Starting out from Pune, EarlySalary is now also operational in Mumbai, Delhi, Noida, Gurgaon, Chennai, and Bengaluru.
The ‘payday loan’ concept is rather popular in the US, with both banks and startups in the fray. The market has also attracted investor interest in the US. The trend finally seems to be catching on in India, with payday loans — in fact, the entire short-term lending segment — gaining traction. In the first half of the year, over 10 deals amounting to $741 million were made on fintech lending platforms.
Apart from EarlySalary, platforms like Pune-based Kadki follow the payday loan concept.
Numbers and future
Akshay adds that their underwriting system is churning out loans to young working professionals using a machine-learned algorithm called Social Worth. It has also claimed to process applications for more than 4,500 customers across locations and has disbursed loans worth Rs 2 crore.
EarlySalary provides short-term loans for 30 days, and aims to focus on the age bracket that most traditional banks and lending platforms are wary of. The team is also in the process of launching new products catering to various needs of the same consumers. They raised seed funding of $1.5 million from Ashok Agarwal of Transcorp Group and are looking at the next round of funding.
EarlySalary aims to reach seven metro cities in the next one year by adding one city every 45 days.
“We are optimistic that in the next 24 months’ time, we can build a lending book size of Rs 200 to 300 crore. The company aims to deliver a revolutionary new business model which is set to change lending market in India,” says Akshay.