How fintech startup Coine.ai is reshaping lending for lower economic sections of India

Last year, amid the pandemic, Manideep Vasa applied for a bank loan. However, despite being a professional CA with a regular income, his application was rejected due to inconsistencies in salary credits. This led Mani to think — if this could happen to him, what about people who don't have formal credit scores?

The World Bank reports that close to 90 percent of Indians don’t have access to formal credit. Additionally, around 81 percent of employees in India work in the informal sector.

Spotting a business idea, Mani discussed this crucial problem with his friends Vasava Chaithanya, Raghu Muvvala, Manikanta Racharla, and Rajesh Kumar, and the five set out to solve it.

“Security guards, street vendors, call centre executives, workers in small and medium-sized enterprises…they have no access to formal credit. Even low-paying employees working for big corporates can't get a loan from a bank,” he says.

Determined to resolve this pain point, in December 2020, the five colleagues founded Coine.ai, a Hyderabad-based fintech startup that is making credit accessible to people in the lower economic sections with digital lending. The team partnered with Goyal Associates Ltd., a listed NBFC in BSE and Liqui Loans.

Coine, which provides small ticket loans between Rs 1,000 and Rs 30,000, makes lending accessible to millennials who are new to credit with low or no-CIBIL score for any unforeseen expenses.

The startup — which has a team of 100 today — uses digital, professional, and social footprint to evaluate the individual’s financials, and follows strict data protocols.

Access to credit

Rajesh, Manikanta, and Raghu have previous experience in building a mobile app that helped small businesses create and manage invoices with Payfix. In 2014, they sold the technology to NASDAQ-listed company QIWI and started their next venture ShopTap, a B2B ecommerce startup. Within two years, the startup had established a strong merchant base of 6,800 outlets across India.

Chaitanya, on the other hand, is a CA and advocate. According to Mani, the five founders have “complementary skill sets” that help them gel and work well together.

When the five founders started, they chose to look at the problem from a credit writing lens. Access to credit is restricted for most of the population in India. The problem arises from two factors: first, most of the population has no formal borrowing history and thus no bureau (CIBIL) score, and are consequently invisible to banks.

Since banks don’t have enough information on the borrower, they ask for collateral — that's why most lending is secured.

Second, due to their large branch network and employee base, banks have a heavy cost structure. They need a certain size of loan to be economically viable.

“There’s a reason why you can’t apply for a Rs 10,000 personal loan. Again, most people are not in a position where they can borrow and afford to repay a loan of Rs 10,000 or more, which further encourages informal money lending at high rates,” Manideep says.

He explains that the advancement in machine learning models, data science, technology, and the Indian government’s ‘India Stack’ infrastructure allow companies to create products that the underserved need and want. This made it easier for the team to build Coine.ai.

“By having an operationally light, fully digital infrastructure, not only can we provide the underbanked with products relevant to them, but we can also provide a better lending experience,” Manideep says.

From sourcing customers through digital platforms (Instagram, YouTube, Google) to performing AI and ML-based paperless risk assessments using prediction algorithms and automated disbursements, the end-to-end customer journey is seamless on Coine.ai.

Competition and the differentiation

In 2020, the Reserve Bank of India (RBI) issued notifications to Non-Banking Finance Corporations (NBFCs) and banks, mandating additional disclosures/compliances, and an advisory to borrowers warning them against fraud platforms.

The Digital Lenders Association of India (DLAI) has also issued guidelines, with a regulatory pipeline on this front as well. 

Coine’s competition includes MoneyTap, NIRA, and Pune-based EarlySalary, which disbursed more than 1.6 million loans until 2020, amounting to more than Rs 2,850 crore, and recorded more than 10 million app downloads. There also is Ahmedabad-based Creditt, which offers small ticket loans, and Mumbai-based CashE. 

Manideep says “Our solution is 100 percent digital, which saves 90 percent of the costs compared to traditional lending cycles. The digital underwriting process takes less than five minutes with Coine.”

The core steps are:

1. Digital KYC
2. Aadhar and PAN validation with UIDAI, NSDL
3. Machine-learning based risk assessment (proprietary).
4. Stable fund score system for underserved customers (credit score-proprietary)
5. Bank statement analysis – cashflow analysis with ability to forecast income vs expenditure ratio (proprietary)
6. Digital loan sanction letter, loan agreement

Revenue and the future

Coine has on-boarded 1,42,600 users, received over 78,000 applications, and processed over 38,000 loans with a book value of $1.3 million. It has reported $231,000 in revenue in 9 months and is operating EBITDA positive.

The platform charges a processing fee ranging between Rs 200 and Rs 1,500 from loans disbursed to customers. The startup also gets a portion of the late payment fees.

“Amid the pandemic, we at Coine disbursed loans to users and supported them with their basic necessities. Of the total customers we onboarded, we could retain over 68 percent of the customers on our platform with a customer satisfaction rate of 92 percent,” Manideep says.

He adds Coine aims to build a full-stack platform for underserved Indians living in Tier II+ areas with simple credit products, bite-sized insurance, no-frills bank accounts, and microsaving options, enabling financial inclusion across the country.