Future of credit: How ecommerce startup Snapmint is changing the way EMIs work in India
The Indian ecommerce space is dominated by behemoths such as Amazon and Flipkart, which mostly serve top-tier cities. Together, the two capture nearly 60 percent of the ecommerce market share in India, according to a 2019 report by market research firm, Forrester Analytics.
While most online shopping demand stems from Tier-I cities, a spurt in smartphone and internet penetration across the country — thanks to Jio’s dirt-cheap launch plans — has created a huge demand for ecommerce in lower-tier cities as well.
Fintech services have also gained traction as a result of the smartphone boom in the country, and people, especially in Tier-II cities, and below, are now able to access a host of financial services.
Banking on the ecommerce demand, as well as the penetration of fintech services in lower-tier cities, Mumbai-based Snapmint set up shop in 2016, endeavouring to give consumer in these cities the opportunity to make online purchases, and fair access to credit.
“We decided to launch our own retail market place to pass the benefits brands want to give consumers, in terms of subsidised interest rates, while making the communication very simple for consumers in Tier II-V cities. Consumers today use our retail marketplace for its simplicity. They have a one-stop-shop for products and financing,” says Anil Gelra, Co-founder of Snapmint.
Its main customers are those who have a disposable income of Rs 3,000 to Rs 10,000, and cannot afford to pay for big-ticket items – such as laptops, refrigerators, etc – all at once. Snapmint allows such customers to convert their one-time payment into smaller, staggered payments – much like an EMI – often at zero interest rates. The entire purchase journey is instant, and smartphone-based, with minimal document submissions.
The startup boasts 3.5 million users across 1,612 cities in India. It does not want to disclose its revenue and investment.
The early days
Anil Gelra, Rahul Agarwal, Abhineet Sawa and Nalin Agrawal, the co-founders of the company, had known each other since 2000, but it was only in 2006 when Nalin, Abhineet and Rahul were working on a startup, a predictive display ads platform, that they stumbled upon the idea for Snapmint.
After carrying out an ad campaign to promote EMI as a payment option for a large ecommerce client, the duo noticed that even though their ad campaign attracted a completely new section of consumers that preferred the easy monthly instalments option, they kept dropping out after reaching the checkout page.
Upon further inspection, they realised that the dropouts happened because the EMI option was available only on credit cards and a Bajaj EMI card, which effectively excluded people who did not have either, from making online purchases.
Using that discovery as a jumping-off point, they started to experiment with a fintech service that let consumers who did not have a credit or EMI card, still choose the EMI option to pay for their online purchases.
The startup further found that the maximum number of people who did not have the credit or EMI cards, hailed from Tier- IV or V cities, and that there was a real need for a cardless, low cost, and predictable EMI option.
“A larger segment of companies in the purchase finance world is still focussing on the top 10-15 cities, with origination from offline stores similar to Bajaj and Home Credit. For their online counterparts, they are either providing consumers with high-cost personal loan options or high-cost credit limits/virtual credit cards to purchase goods. Traditional ecommerce players are also focussed on the top 50 million affluent customers,” says Abhineet, adding that it was the demand from those not being included in those tallies that compelled the group to set up a service like Snapmint.
The founders started off with checkout financing by integrating their product with electronics retailer Vijay Sales. Their first customer was an entrepreneur in Mumbai who had a credit card limit of Rs 50,000 but was in the process of relocating to another city. She knew that if she exhausted her limit with the credit card, she would land up revolving the credit balance the very next month at 39 percent interest per annum, along with several other charges mentioned in the fine print. She saw Snapmint’s option online on Vijay Sales’ website and went for it. "Over the last two years, the entrepreneur has done transactions over Rs 3.5 lakh with Snapmint," says Abhineet.
In the early days, the startup did not have any backing from any lenders, VCs, or angel investors. However Anil, Rahul, and Nalin had been active in the angel-funding world since 2012, and they saw the opportunity through that lens — ‘Build something quick, test the market, understand the customer needs, and then scale’. They built the technology at their own expense and integrated it with three online ecommerce stores - Vijay Sales, Jewel Souk, and the IT Depot.
“In the absence of any third party lender, we decided to invest Rs 1 crore from our own savings. We successfully recovered 100 percent of our investment within six months; a period during which we had understood a lot about the customers,” says Abhineet Sawa.
The startup later also launched a small version of an ecommerce store on its website, selling only iPhones.
After proving the business model, and that there was a real unaddressed need in the market for cost-effective EMI financing, the startup received funding from Kae Capital in 2017, details of which Snapmint did not disclose.
“The demand in the business of lending is not a constraint. The constraint is supply,” says Rahul.
“We faced some challenges in the business to attract debt at a good leverage. In the digital, real-time world you need to first gain trust from the borrower if you are to attract creditworthy look a likes to your platform,” he adds.
“To do this, the system has to be cost-efficient, simple to use, and one that should instantly gratify consumers without asking for too much personal information. In order to achieve such a setup, one has to focus on innovating across fronts - from product to underwriting to the collection with deep tech and ML at the core.”
Today, the company concentrates on the 95 percent of consumers in India who do not have credit cards, and are looking for liquidity options.
Snapmint’s business model and the market it serves
Its business model is simple: the startup makes a bulk of revenue from its brand and merchant partners who want to reach out to a new consumer segment and increase their engagement with consumers.
Brands and OEMs especially, make up a big part of its revenue stream. The two traditionally saturate metros and affluent markets, but it has been looking to penetrate deeper in smaller cities, and tap consumers - especially millennials and Gen Zers. And using Snapmint’s strong presence in lower-tier cities, and the startup's understanding of it, brands, and OEMs have been able to achieve that to an extent.
“These consumers don’t understand the concepts of credit limits and credit usage. The way to bring them onboard is simplicity,” says Nalin.
Now, the startup has set its sights on the Northeast region in India, which is massively under penetrated due to poor logistics. Apart from a few major cities, most others are still out of the delivery network of most third-party logistics networks. And despite customers having access to the internet to place orders, getting products delivered there remains a challenge for the startup.
It is also planning to launch more categories, such as insurance, travel, apparel, and accessories on its ecommerce portal soon.
The startup expects to attain profitability in the next 18 months, and the company is already scaling its merchant network to give consumers more options to buy. Its customer base is expected to grow at least four times by the end of 2021.
Edited by Aparajita Saxena