Bengaluru-based Stanford graduate Chaitra Chidanand (35) came back home in 2014 to an unpleasant surprise — used to a credit card-led life in the US, she was not eligible for a credit card due to permanent address issues and because she has never paid tax in India. It took her eight weeks to open a bank account and get a debit card.
Around the same time, her husband’s friend Nitya Sharma (37) had returned to Mumbai from New York. A Master’s degree holder in finance from the University of Michigan, Nitya ran an advisory firm but even his hedge fund experience couldn’t help him open a bank account. It took three weeks, many application forms, a new fixed deposit, and multiple visits to the bank for him to get a platinum card.
The two friends noticed that although e-commerce was on the rise, online payments were not as efficient as they should be, which was when they decided to put their heads together and come up with a solution. Nitya’s experience at Goldman Sachs with trading consumer credit risk and statistical methods to price credit risk was useful in building scalable risk models. Chaitra with her Silicon Valley experience brought expertise to building scalable tech products. Together, they came up with a ‘simple’ solution.
In March 2016, they launched ‘Simpl’, an online payment instrument that allows a consumer to buy now and settle for the purchase at a more convenient time. It aims to provide simple, transparent financial services to everyone with a smartphone with a click of a button, in real time. The best part is that there are no hidden charges — if you pay Rs 100 on their partner platforms, you need to pay their bill for the same amount, after two weeks.
Simpl is basically a technology platform working with NBFCs and banks. They have now partnered with online platforms such as BookMyShow, Faasos, FreshMenu, and Nykaa, among others. With Simpl, merchants can also refund you for a return in real time.
They target the young, mobile-savvy Indian middle class, who use mobile commerce to address their regular purchases. Very often, online transactions fail due to infrastructural impediments — cards are declined, OTPs are not generated, bank servers are down, or wallets are empty — making it hard for customers to get accustomed to digital payments. “Merchants use our product to often delight a frustrated customer when such an event occurs. A merchant can pop up the Simpl Pay button when someone’s transaction fails,” says Nitya.
Simpl’s revenue comes from the fee that merchant partners pay for facilitating payment. Nitya claims that Simpl increases cart conversions by 70 percent and that payment failures are near zero. “Simpl increases loyalty and retention for online merchants. Also, 60 percent of our current users used to prefer COD but now they use Simpl several times a week,” he adds.
About 90 percent of India’s population has limited access to financial services, creating a huge opportunity to reimagine financial services for a world of smartphones backed by incredible amounts of data. But Nitya believes that true product innovation with a consumer-centric approach, and not cash backs, will enable mass adoption of electronic payments in India.
He wanted to build a payments business for the emerging world rather than copy from the US or China. “It is very important to build a business that has a massive payment and data network effect and very high gross margins. That’s what Simpl is building,” he says.
The limit for every customer is personalised to account for the risk, ability to pay, and their expected usage amount which is based on the transaction data, mobile data etc. Nitya explains: “We look at thousands of structured and unstructured data points and have developed proprietary machine learning models to arrive at the limit. Once the initial limit is set up, it is updated in real time based on the timely repayments, formation of trust networks, etc.”
If a user is not utilising the full limit or transacting with merchants that require higher limits, his/her spending limit will be accordingly lower. It is also determined by how a customer enters the system, which is where the trust network plays a part. Typically, the spending limit ranges from Rs 750 to Rs 5,000. Nitya says that the limits will be made higher than Rs 5,000 soon as they are including larger merchants.
Former Visa CEO Joseph W Sauders' fund Green Visor Fintech Venture Capital has invested an undisclosed amount in seed funding in Simpl, along with New York-based IA Ventures.
According to Nitya, UX/ &UI is the starting point for everything Simpl does. He says: “We always ask, ‘Can someone pay using Simpl in two seconds with just one finger?’ or ‘Can someone chat with a bot and pay with Simpl securely?’”
Simpl grows on technology, data, credit risk management, and lots of courage. Their technology provides easy UI/UX on interface on chat, mobile, voice, or web. In the team of 24 which works out of Mumbai and Bengaluru, about 20 are in technology and data science.
Offering credit for no collateral comes with great risk. But Nitya reiterates that Simpl is a trust network. “We use data, design, communication, and network for timely payments. We have created a fully automated collection system that uses data and machine learning algorithms to optimise the collection process in a highly personalised manner,” he adds.
Simpl’s data collection engine assembles structured and unstructured big data and predicts customer behaviour. Chaitra says, “We use social engineering and behavioural economics to find out how financially responsible they are. We conduct a deep analysis of transaction history with the merchant and use publicly available information.”
Simpl claims to have 85 percent customer retention, growing 50 percent monthly. Nitya adds that they have positive unit economics on every transaction. Simpl has had 1.5 million approved accounts in the six months since launch. Their target is 100 million users in the next few years.
Nitya is confident — his biggest surprise was how much consumers are “loving” the product. There are more avenues yet to open up though. On how the government can back fintech startups, he says: “Large financial services institutes are not meant to be technology firms, but they should aim to partner with the best technologies. Differentiated products can transform how you service your customers.” Simpl has virtually no competition although startups like ZestMoney, which provide instant loans without credit history, are also disrupting the fintech space.
Simpl aims to get 20 partners on board this fiscal year, although they are not keen on offline players yet. With the recent government ban on Rs 500 currency notes aimed at curbing the black money menace, digital payments is gaining prominence more than ever before. The government should look to startups and technology for improving financial services and creating the mechanisms that will drive financial inclusion — whether to the young professional or the last mile.