Just imagine having a personal line of credit at your disposal, where you could pull out money at any point of time, without having to answer questions or go through painful formalities.
Now go a step further, and imagine that money getting replenished in your account as you pay back the borrowing amount, available for borrowing in the future.
Doing exactly this is Bengaluru-based MoneyTap, which claims to be India’s first app-based personal line of credit for consumers.
And what is a personal line of credit? Still an unheard concept in India, a ‘line of credit’ or ‘credit line’ is a facility where a bank issues a certain amount of money in lump sum to you based on your credit score. While having access to this money all the time, an individual can take out certain amounts from that lump sum and pay back the bank accordingly in comfortable installments.
But MoneyTap brings certain other twists to the equation.
Started by three founders, Kunal Verma, Bala Parthasarathy and Anuj Kacker, the company was incorporated in October 2015. Being in stealth mode, the firm had been working on their product for close to a year, launching it earlier this month.
The MoneyTap app, launched in partnership with the RBL Bank, issues credit up to a limit of Rs 5 lakh, collateral-free. Further, the founders tell us that consumers can borrow anywhere between Rs 3,000 and Rs 5 lakh from the app and choose from among several repayment options with regards to time, ranging from two to 36 months. Further, consumers pay interest only on the amount borrowed, with rates falling as low as 1.25 percent per month.
Being aimed at salaried professionals at present, the consumers have to pay a one-time setup fee of Rs 499, along with taxes, which is payable to the banking partner directly for blocking the credit-limit. Anuj says,
“We are trying to get the middle income group to use our application. For us, the sweet spot is someone who earns in the salary bracket of Rs 40,000- 50,000 monthly. However, we also don’t mind it being lower.”
The founders also claim that the money gets replenished as the customers start paying their EMI. For example, an amount of Rs 30,000 borrowed (out of the credit limit of Rs 5 lakh) will get replenished as the person pays their installment over time, becoming available for further borrowing.
Further, onboarding of customers happens through a chatbot interface, where the system instantly connects to the banking system and the credit bureau to find out the credit history of the customer, approving the money accordingly.
But what if there are defaulters? The app sends the consumer reminders of the EMI that needs to be paid and how much is due. However, according to the founders, after multiple defaults, the onus is on the banking partner to decide the future course of action.
Hence, Kunal says the firm is solving three major issues. First being that of the convenience of taking money on credit; second, that of paying it out with flexibility; and the third being that of getting paid back over time, allowing the credit to be taken again, giving the firm a cost advantage.
But it is not just the concept of the firm that stands out; it is also the background of the founders.
Being the co-founder and Managing Partner of seed stage venture fund Prime Ventures, Bala co-founded web-based photo sharing and printing service Snapfish, which got acquired by Hewlett-Packard in 2005. He also co-founded iSelect and Wyatt River Software, which got acquired by SafeNet.
He refers to starting up again as a homecoming.
On the other hand, there are Kunal and Anuj, who, before starting MoneyTap, co-founded TapStart, a job discovery platform for consumers in 2013. Having grown the company to 300,000 users, the duo made a soft exit by selling off the business in September last year.
With strong inroads in the startup space, the firm's app is right now available in Delhi, Mumbai, Bengaluru, Chennai and Hyderabad. The app has been downloaded by 10,000 customers and is available on the Android Play Store.
Currently present only on Android, the team is working to build the platform, integrating eKYC and helping the system make smarter decisions with the running of machine learning algorithms. With respect to business metrics, the firm is looking to serve credit to 1 million unique Indian customers in the next three years.
The firm is backed by Prime Venture Partners, along with other VCs and angel investors. However, the firm prefers not to disclose who these other individuals are.
Shripati Acharya, Managing Partner, Prime Venture Partners, tells us that it was the strong team, monster market and category creation characteristic that made them invest in MoneyTap.
“Rather than just trying to offer another way to lend money, MoneyTap's innovation has been to offer a first of its kind product - an app-based line of credit - that effectively addresses this opportunity. And it is led by a rock star cast. Bala is a serial entrepreneur with a keen eye for spotting disruptive opportunities - I know this first hand as I have had the opportunity of working with him in the past. Given this confluence of opportunity and team, it was a no-brainer for us to invest in MoneyTap.”
On asking him as to how the line of credit will disrupt the lending space, he says,
A credit line fundamentally re-imagines the notion of a loan, being more like a constant companion that provides financial peace of mind to a person. In other words, a credit line provides a level of frictionless access to credit that has hitherto been impossible. And since the consumer only pays interest for the actual amount of loan outstanding at any time, it is fair and stress-free.
Currently, Bala is not a part of Prime Venture Partners and sits only on boards of companies whom he invested in while being a part of the seed venture fund.
In a country where there are as few as 25 million credit cards (for a population of 1.2 billion), will these credit lending players ever flourish?
Further, they themselves claim that unsecured personal loans offered by banks are a relatively slow-growing credit product, standing at only Rs 45,000 crore. But it is the time-consuming process of applying for unsecured loans, followed by the cumbersome process of drawing funds that the firm seeks to address.
According to the founders, the informal market, which includes moneylenders and family, is roughly estimated to be 50-100 times bigger than the personal loan market. They also say that aspirational living and the basic standard of living are increasing dramatically, causing customers to opt for credit. And with a growing middle-income population (of 400 million), lending and credit will become the norm moving forward.
Also, at the moment, the lending segment seems to be the hottest segment in fintech after the payments space, with close to $197 million having been invested in these startups over the last two years.