Credit will play an important role in India’s journey towards becoming a $5T economy: PayU Finance CEO

Prashanth Ranganathan, CEO of PayU Finance, now has plans to build PayU’s credit business in India.

Formerly the founder and CEO of PaySense, a digital lending startup that was acquired by PayU in January 2020, he believes credit will “play an important part in India’s journey towards becoming a $5 trillion economy” and that PayU is well-positioned to support India’s evolving credit landscape.

PayU Finance provides consumers with easy access to affordable short-term loans up to Rs 5 lakh through personal loans, point of sale EMIs, and express loans. PayU India entered the alternate lending business in 2017 with LazyPay, its Buy Now Pay Later offering to provide consumers with convenient checkout options. The platform has merchants like Dunzo, Swiggy, Zomato, GoAir, and Samsung.

In a conversation with YourStory, Prashanth talks about the growth of PayU’s credit business in India and its plans to become one of the largest digital lenders in the country.

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YourStory (YS): Tell us about PayU Finance’s plans? How do you envision the credit segment for PayU?

Prashanth Ranganathan (PR): India is a young market, where credit awareness is just coming in. The pandemic has boosted the demand for lending and consumers are looking at credit as a means to improve their lives. I think that, combined with the fact that almost every Indian consumer now has a smartphone with a low-cost data connection, means access to that consumer is well established.

Credit will play an important part in India’s journey towards becoming a $5 trillion economy. PayU is well-positioned to support India’s evolving credit landscape, given our combined DNA of how to use data, technology, and serve customers digitally - when and where they are to be served.

We have the ability to remove risks, enable seamless access to credit, connect businesses to consumers, and onboard new customers digitally - invigorating both rural and urban economies of India. PayU Finance will continue to leverage data as a differentiator in serving customers through our digital channels.

We will continue to expand our credit offerings beyond traditional bureau-based underwriting with banks and other fintech firms by leveraging alternative data analytics. Moving forward, we will continue to tap users between the age group of 20 to 35 years of age, who earn less than Rs 10 lakh per annum.

YS: How does PayU Finance aim to increase its focus on serving the underserved market in India and create a credit ecosystem?

PR: In a country of almost 1.4 billion people, as many as 191 million people over the age of 15 were unbanked as of 2018. This has not significantly changed over the recent few years. There are limitations in terms of access to credit for the unbanked Indian population and the new-to-credit population, especially the youth.

We would like to serve all forms of credit directly or via partnerships. We believe no single player can address the unmet need for credit. We are targeting ‘new-to-credit’ customers who need quick, small credits. This segment has not been addressed by traditional institutions before.

We aim to do this by leveraging robust AI and ML models and data science to identify, flag, and resolve the problem of NPAs, thus extending credit to eligible consumers. PayU Finance leverages alternative data that takes a 360-degree approach to a profile, mapping location data and habits before extending a loan. Deep data wins PayU Finance the NPA game.

Our aim is also to serve the underserved through strategic partnerships across banks, NBFCs and other consumer tech companies. While we already have a couple of partners such as IIFL, RBL, we are on a journey to explore more partnerships to offer credit to a wider audience, in not just India, but also Bharat. 

As a testament to our efforts, we are witnessing an increased adoption of Buy Now Pay Later (BNPL) through UPI in Tier III and Tier IV cities. We aim to double BNPL transactions by the end of 2021, using robust AI/ML technologies with enhanced data models that will approve more users.

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YS: Credit lending is still the same. The tools are primarily the same and so are the tools for choosing whom you lend to, especially in the consumer space. There was talk on it changing, but the same mechanisms are used. How do you work around that?

PR: We rely on our state-of-the-art, futuristic AI-based alternative data analytics to map consumption data, device data, location, product category, purchase timeline, and historical purchase data to determine the risk.

At PayU Finance, when a consumer applies for a loan, we take their permission to access their contacts, through which we build a graph of our consumer base. This graph helps us identify other customers and evaluate their credit worthiness. PayU’s process is a self-learning model, and with every customer added, the ML application keeps getting better.

Our goal is to create a journey for our customers where we require the least documents or verification to process loans. This is the model that we follow.

YS: What is the impact of the second wave of the pandemic on PayU Finance’s business?

PR: There is no doubt that the second wave of COVID-19 has disrupted people’s lives. As the country battles the pandemic, there has been an increased spotlight on healthcare, resulting in medical emergency expenses shooting up.

Healthcare has become an absolute necessity amid COVID-19, and in a country that is under-insured when it comes to financial cover, a majority of Indians depend on personal loans as a quick financing avenue, thus turning to digital lenders.

Last year, PayU Finance maintained its delinquency rates at 2-3 percent due to our superior tech capabilities that enabled us to mitigate credit risk.

YS: What are the future plans of PayU Finance?

PR: PayU Finance is on a path to evolve into a fully functional consumer business, by expanding its product line to offer a range of financial services, in addition to credit. Our ambition is to create a full-stack digital financial services platform to serve all, tapped and untapped, financial needs of customers through technology. We aim to achieve this through strategic tie-ups with licensed banks, startups, and other financial institutions.

On the lending side, PayU Finance has set the ambitious goal of building a $1.5 billion loan book and a profitable combined credit entity over the next five years by combining PaySense and LazyPay. This would make us the largest digital lender in the country.

In the coming months, PayU Finance wants to be a much bigger player in the affordability checkout segment by partnering with more merchants in the edtech, commerce, auto and consumer durable sectors.

We will be doubling and tripling down in checkout finance as it is a big strategic priority for us. In the coming days, LazyPay will also introduce a card where consumers will benefit through the power of their social network to transact digitally and be rewarded for it.

Additionally, after lending on our books for the past couple of years, we now want to bring the best-in-class lending to the partner ecosystem via our APIs. We have the intelligence, data, technology, and capital to enable this.

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