This fintech startup is changing the credit focus of businesses from ‘ability to pay’ to ‘intention to pay’

While 32-year-old Kamath started his business of digital services in excitement, 10 months into the business and he still finds getting payments from other businesses a rather harrowing experience. In a country where small businesses are believed to attribute close to 45 percent of India’s economy, getting timely payments has become rampant.

Ridhi Doongursee, an entrepreneur, found that close to 98 percent of small businesses reported to give credit and close to 97 percent faced late payments. For this University of Warwick graduate, this was a terrifying problem and an excellent opportunity.

Bringing in the review angle

Ridhi realised that instead of concentrating on innovating and managing their businesses, most hapless entrepreneurs spent valuable time following up on payments in the fear of not getting paid.

This is when she decided to start CreditMonk in May this year. Working as a crowd-sourced, review-driven portal that rates payment habits of businesses, CreditMonk enables businesses to review and rate payment habits of clients and other businesses that they have dealt with.

Transparency is the key

Being an entrepreneur in the manufacturing space, Ridhi herself would spend considerable amount of time and effort dealing with credit issues. Explaining the problems she faced, Ridhi says,

We spent years setting up a great business, offering a good product and giving good service. But after spending considerable time and effort on trying to bag accounts with big companies as customers, we faced massive setbacks and lost a lot of money.

There wasn’t any guarantee of payments, nor were there means to get information on a company’s payment habits. This made getting accountability from a company or stopping others from giving them credit difficult. Ridhi, therefore, strongly believed there was a need for transparency and clarity in the whole process.

Incidentally, while Ridhi was toying with the idea of CreditMonk, her partner who is an investor, advisor and CEO of a pan-India distribution house, happened to mention that a public shared information network to rate business payment habits was the need of the hour. There are websites to rate hotels and restaurants, but there is no website currently to rate this big issue plaguing businesses today.

“A crowd-sourced and review-driven model makes organisations publicly accountable and facilitates a foolproof way of assessing a company's payment habit before dealing with them or extending them credit,” says Ridhi.

Making it easy to use

The platform is simple to use and the sign-up process is free. After signing up, one can find companies the user has worked with and rate them based on their overall payment habits, what credit the user usually offers them and the terms, if there were bad debts, and on the approachability of the senior management.

Explaining the transparency of the process Ridhi says:

It takes less than a minute to add a company that’s not listed on the website and you can rate them immediately after. Rating them will make businesses publicly accountable and will make companies take heed of the feedback on their payment habit.

As the reviews build, the payment habits of businesses can be checked along with the historic data of intention to pay. Equipped with this information, terms can be decided by companies. Ridhi adds that a company can reply to reviews, take negative reviews as positive feedback and eventually enjoy better credit facilities.

A closely-knit team of four members focus on the product, while part-timers are hired for business development, design and communications.

Market gap

Credit rating has become important as many organisations feel the gap in the market. While there are players like CreditMantri, backed by Elevar Equity, in the space, these platforms are yet to see the same kind of investment and traction as the rest of the lending and payments space.

Although there are platforms that give people loans, and marketplaces that connect individuals, banks, and NBFCs, creditworthiness was the basis of loan disbursement.

These platforms work on three types of individuals — negative credit history, no credit history, and credit-healthy. They begin with profiling the individuals and creating a ‘Credit Quotient’, where the team learns more about the individual through social media profiles, bank statements, and other data.

However, Ridhi believes that these platforms do not determine whether people have an ‘intent to pay,’ and they are based on an individual’s 'ability to pay'.

“Further they are based on financial documents, which could be incomplete and biased. We are the only website globally giving you information on the market reputation of a business with a focus on 'intention to pay' and not just 'ability to pay', adds Ridhi.

Dun & Bradstreet for small businesses

Ridhi cites Dun & Bradstreet as a similar player. The US-based business services company with a turnover of $1,655 million, provides commercial data to businesses on credit history, counter-party risk exposure, lead scoring, supply chain management, B2B sales and marketing.

While they cover the top one percent, CreditMonk, Ridhi adds, is focussed on the missing 99 percent.

CreditMonk works on a subscription-based model, and the team believes that in the coming years they can foresee a turnover of over Rs 1,000 crore. Additionally, the team also has premium value-added services and P2P lending planned.

Traction and future

CreditMonk has a database of over 15 lakh companies, with reviews added on a daily basis since inception, on large and smaller businesses alike—from payment values and default of Rs 50,000 to Rs 25 lakh. The team is aiming at a month-on-month growth of 30 percent.

The team has even companies like Wipro, Asian Paints and Hindustan Lever rated on their platform.

Explaining the massive gap in the market Ridhi quoted the Payments Barometer report on India and said that 40 percent of the respondents intentionally delayed payments. Over 2.2 percent of their receivables or topline is uncollectable and a lot more delayed.

Currently bootstrapped, CreditMonk aims to further build its business before seeking VC funding. However, they are in the process of speaking to advisory partners and mentors. Explaining their future plans, Ridhi says:

We aim to be an integral part of making business in India easier and more productive. In five years we would like to make CreditMonk a global shared information network that is the primary source of reviews on the payment practices and work culture of businesses to ensure credit can be given freely and without undue stress.

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