Truecaller believes that Truecaller Pay holds much more revenue potential than its messaging services. Co-founder Nami Zarringhalam and Sony Joy, Vice President of Truecaller Pay, explain how they plan to tap the opportunity.Tarush Bhalla
Swedish startup Truecaller forayed into digital payments only in 2017, but two years on, it expects revenue from Truecaller Pay, its financial services offering, to outperform those from messaging, the service with which the company started in 2009.
Truecaller Co-founder and Chairman Nami Zarringhalam believes there is definitely a positive trend, and that Truecaller Pay holds the potential to be the number one revenue driver in India. Keeping this long-term bet in mind, the communication app made its first acquisition globally, last June - Mumbai-based startup Chillr. The caller ID app is banking heavily on this partnership, and Nami says,
“Truecaller is working to enable Chillr, and has bought into its vision.”
A year after the acquisition, the stakes are high as Truecaller Pay readies for its entry into the financial services space, making its first bet on the $1 trillion Indian digital lending opportunity. The company is looking to launch digital credit for Indian users in the second half of this year.
But competition in the space is rife. Apart from Truecaller, Indian homegrown payments major Paytm is expected to launch its standalone credit offering to its 310 million claimed users in the coming weeks. In August last year, even search giant Google said it was teaming up with HDFC Bank, ICICI Bank, Kotak Mahindra Bank and Federal Bank to offer instant, pre-approved loans to customers.
But Truecaller doesn’t have an eye on India alone. With plans to launch Truecaller Pay in its second biggest market, Africa, and digital credit to its 150 million Indian users, Truecaller’s Nami Zarringhalam and Sony Joy, Co-founder of Chillr and Vice President of Truecaller Pay, explain to YourStory how the caller ID app is making the leap into financial services, the kind of products it has in mind, and the global vision that is helping take the plan forward.
Edited excerpts of the interview:
YS: We have seen you launch digital payment services through Truecaller Pay. How do you see this category evolving?
Sony Joy: ‘Payments’ through Truecaller Pay will largely be kept free since user engagement is a priority. But there will definitely be a transformation beyond fund transfers, utility and bill payments.
The evolution is financial services, no doubt. Under this, ‘credit’ is a priority, considering its high-potential contribution to Truecaller’s total revenues. Subsequently, in the future, we will also be foraying into the investment and insurance spaces.
YS: So, when will Truecaller Pay launch the full financial stack (including insurance and wealth management) on its platform? Do we see it this year?
SJ: It all depends on how the ‘credit’ product pans out. It is operationally extensive, and we do not want to compromise on it and jump on to releasing other products.
If everything goes well, we expect insurance and mutual funds to be launched by the second half of the year. However, we are still experimenting and piloting with sachet-sized products (in insurance and wealth management categories) before finalising them.
YS: So, why did Truecaller Pay choose to go with digital lending for its foray into financial services?
SJ: Out of the three (credit, wealth management and insurance), credit is more pull than push. It doesn’t make sense to push our consumer base to start investing before they are ready to do so. There needs to be a lot more education and a learning curve around investment options and insurance, which continues to be a big change for majority of our users still.
The average Indian has bigger problems related to credit, and we wanted to start with something that already has a huge demand.
Truecaller is well positioned to get into credit, since the narrative is not just distribution alone. We have the right data sets and the platform to provide not only the loan, but also manage collections.
Looking at our scale, we also see serious potential to open up the space, and get users, now relying on the unorganised banking sector, into the formal segment.
YS: The past few months have been tough for the digital lending industry, owing to the liquidity crisis and the Aadhaar authentication issue. What still gives you confidence in ‘digital credit’?
SJ: There are two aspects to this.
Firstly, the SME segment was the most affected. However, we are focused on end customers, not so much SMEs to begin with. As our lending operations expand, we will continue to bring more consumers than SMEs to borrow from us.
Secondly, the issue around eKYC authentication (through Aadhaar) broke the fundamental perception of companies who thought the dynamics of cost would be in a certain fashion. For most of these companies, the customer acquisition cost is high. For us, on the other hand, it is an internal cost when it comes to identifying users. We are competing with our internal advertising space to find the right customer (which would have gone to an external advertiser). We need not bleed money, but it would be competing with our advertisement space.
YS: What kind of credit products do we see you releasing?
SJ: We do not want to be in the ultra-low value or the payday loan market due to the cost of authentication.
Consumers are most likely to be provided personal loans on our platform, starting from Rs 30,000 to Rs 3 lakh. The tenure of these loans will be between three and 24 months.
YS: What interest rates will Truecaller Pay give these loans at?
SJ: The interest rates will be dynamic for different consumers. But mostly, they should be in the spectrum of 20 to 30 percent, depending on the consumer’s credit history and payback patterns (of past loans).
A consumer who has taken a loan on Truecaller and paid it can get a loan for a much more competitive interest rate, considering the “zero acquisition cost” and her financial behaviour.
The interest rates are priced keeping in mind the user segment we will be catering to. We believe that a big chunk of our users who will apply for credit will be underserved by financial institutions.
YS: Any particular use-case Truecaller Pay is looking to target or leverage credit for?
SJ: It depends. We will first see what segments our credit attracts in the beginning and work on optimising them, while delivering a good experience throughout.
We may then delve into sub-segments. Of course, credit for consumer durables or credit for offline goods and services is what we are looking at.
But, at the start, we are looking to provide credit to a user’s bank account, which s/he can use for any purpose.
YS: What is the global vision you share for Truecaller Pay as a category?
Nami Zarringhalam: We have plans to enable Truecaller Pay in other markets like Africa and are not restricting services to India. This is despite the fact that we are building it in India first, owing to the regulatory landscape.
This year, we plan to launch Truecaller Pay in Africa, a fragmented market. Global expansion is largely to do with opportunities that exist in different markets.
Sony’s team will also lead operations for Africa.
YS: What will be the approach to launch Truecaller Pay (and financial products) in other countries?
NZ: The products are mostly going to be similar, but the experience may vary from market to market. It will depend on what users like and the areas in the ecosystem we can have the largest impact and contribution in.
YS: In the next two fiscals, how do you see Truecaller Pay contributing to Truecaller’s overall revenues?
NZ: Financial services will be a significant contributor, not necessarily this year though. In this year and the next, we only expect to ramp up financial services; revenues around them are a long-term bet.
When we decided to acquire Chillr or get into payments, it was a long-term bet for us. And we estimate that financial services will be a 5-10 years’ bet, where incumbents may not be the same in the coming years.
At our scale, the significance of Truecaller Pay, in terms of revenues, is bigger than that on the messaging side. Pay is going to be a big one, and has the potential to be the number one revenue generator for us in India.