How this fintech startup is providing India’s blue-collar workers with access to credit

India has more than 300 million blue collar workers, and the number is growing as new graduates are added to the workforce every year and agricultural employment drops.

Logistics/delivery, manufacturing, and retail employ the largest number of blue-collar workers in India, who were all adversely affected in the wake of the COVID-19 lockdown. The fact that they lack access to credit – banks don’t reach out to them because of the lack of credit scores - made survival even more difficult.

But Gurgaon-based fintech startup Bueno Finance aims to change that.

Backed by San Francisco-based Y Combinator and Mumbai-based 100X.VC, the startup is a credit building platform for blue collar workers. Started by Sandeep Arora and Saurav Gandhi in Gurgaon, Bueno Finance aims to connect blue collar workers to the mainstream financial world.

"Bueno Finance aims to improve the financial health of the blue-collar segment and is working towards building the credit history of these customers," says Saurav Gandhi, Co-founder of Bueno Finance.

A recent CIBIL study indicates that there are around 120 million households (45 percent of total Indian households) with a yearly income between Rs 2 lakh and Rs 5 lakh.

"Most of these households are still not part of the formal credit economy as they do not have a credit score, or they are new to credit. Bueno Finance acts as a bridge between customers and big banks/NBFCs, and aims to provide access to formal credit for the next billion,” Saurav says.

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How it started

Saurav has an MBA in finance from MDI Gurgaon (2011 batch) while Sandeep Arora is a BTech graduate from IIT Delhi (2008 batch). The founders have 10-plus years of experience in companies such as American Express, Citi Bank, Capital One, PayU, and Swiggy.

When the duo met in 2014, they were leading parallel teams in Citibank. They agreed that there was a huge gap in blue-collar financing. Many workers were receiving money directly into banks, salaries were increasing, but credit had not picked up pace for this segment.

Sandeep had seen this problem first-hand while interacting with Swiggy delivery executives during his time at Swiggy. The co-founders had also seen how small credit was very powerful – it played a role in improving creditworthiness of customers and could be super-efficient in acquiring customers.

This led to the launch of Bueno Finance in 2019.The founders invested Rs 10 lakh in the business and work with their NBFC partners, Stashfin and Liquiloans, to disburse the loans.

Bueno Finance has a hybrid approach. A customer can apply for an instant personal loan/credit line that also helps build credit history and get higher ticket loans at lower rates. The customers can avail this loan in their bank account, directly from NBFCs registered by RBI. It focuses on new-to-credit customers (NTC) where it offers small credit to help people build their credit history.

It also ties up with B2B employers that employ gig workers and blue-collar workers, such as Swiggy. This helps in fraud prevention and helps offer better products.

"In our industry, there are few players who are doing either B2B and B2C. Fintech players and small NBFCs have started targeting this segment, but they charge exorbitant interest rates to compensate for the higher ‘risk’ associated with this segment. Bueno Finance wants to change this situation and bring this segment to mainstream financial lending. Bueno Finance prime customers can get a loan of Rs 2-5 lakh at 15-18 percent interest,” Saurav says.

Their "Scan Now Pay Later" product is a digital credit card over UPI. This is a multi-functional product; the customer can use it as a credit card or request money in their account like a cash loan. They can transact using UPI in both online and offline world.

Bueno provides a UPI handle, which is backed by a credit line approved by Bueno Finance; this can be used to transact at any online merchant. Through the app, customers can also use this credit line to transact in the offline world via QR codes available at every merchant.

This small credit and the repayment history help customers improve their creditworthiness, and get bigger loans in the future at lower rates. The product gives the startup a higher share of the customer wallet along with expense data, to obtain a 360-degree view of the customers.

The company ran its first pilot with Swiggy to offer the micro-loan product to their delivery executives in Gurgaon region.

“We have more than 70,000 customers on our platform with 60,000-plus downloads of the Bueno Finance app. There is a huge demand for credit in India and most of the traffic is organic in nature. This is really impressive as our Cost to Acquire Customer (CAC) is really low,” Saurav says.

The fintech startup makes money via the processing fee and interest commission income.

"Customer education” has been “critical” as establishing trust and the brand are the key components of driving this business. “One of the key issues is financial education. Almost 75 percent of the Indian population does not understand basic financial concepts and there is a huge opportunity to educate customers, especially in this segment. Bueno Finance is India’s first credit building platform for blue-collar Workers,” Saurav says.

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Plans for the future

Bueno Finance wants to more acquire customers in a cheap and effective way, using short-term credit line products that will help solve immediate financial needs.

It plans to offer a suite of financial services to this segment with personal loans, credit cards, auto loans, and insurance. The startup plans to make money as a percentage of the amount disbursed through its platform by helping banks acquire new customers.

“We want to acquire customers and grow around 20X in the next 18 months. We also want to build a cross-sell engine that can offer a suite of financial services to our customers,” Saurav says.

The current addressable market for its product is $450 million, and Bueno competes with startups like SuperMoney, Kosh, and Niyo. The market is going to go beyond a billion dollars in a couple of years.

The founders have raised an angel round of $300,000, a pre-seed round of $125,000 from Y Combinator, and a seed round of $275,000. One of their investors is the founder of Cred, Kunal Shah.

It is also funded by Dheeraj Jain of RedCliffee Capital.

“We are in the very early phase and don’t want to disclose revenues,” Saurav says.