[Turning Point] How SaaS startup Perfios pivoted from personal finance management to credit underwriting analysis

Bengaluru-headquartered Perfios was founded in 2007 by former executives of Aztecsoft, VR Govindarajan and Debasish Chakroborty.

Perfios, which provides Software-as-a-Solution (SaaS) service to financial institutions for credit underwriting, raised $68 million earlier this month from returning investors Bessemer Venture Partners and Warburg Pincus as part of its ongoing Series C round, as per documents it filed with the Registrar of Companies (RoC).

On March 16 this year, Perfios said it acquired Mumbai-headquartered Karza Technologies, a SaaS platform for financial institutions, for nearly $78 million.

The startup is a real-time credit decisioning and analytics focused product company at present. However, when the company started in 2007, this wasn’t the problem statement it began with. 

The beginning

Perfios initially began as a personal finance management firm. 

In 2007, it started building a technology platform, which had the ability to acquire any kind of data and then do the analysis. Its first product was also in the personal finance space.

“It aimed to help people manage all finances -- whether it is across bank accounts, credit cards, loans, insurance, or capital markets. It had the ability to suck this data in three ways and do the analysis,” Govindarajan told YourStory in an interaction. 

In case of firms, this extended more towards the likes of cash flow and capital gain statements analysis, and automatic income tax filing. 

“But, we had a challenge monetising it. There were not too many people willing to pay for it,” Govindarajan says. 

That is when the company decided to pivot and approach businesses rather than consumers directly.  

“We flipped the model, but leveraged the same technology platform and instead of doing it as a B2C (business-to-consumer), we converted it to a B2B (business-to-business) model, doing the same thing for digital lending systems,” he says. 

Aware of the difficulties different stakeholders such as banks and borrowers face in the lending process, Perfios founders felt the problem statement could be to make the lending process smooth and simple. 

They did a proof of concept for 12-18 months, adding an analysis layer specifically on top of the original product, after which they took the product to market. 

“But the technology platform is still the same. It acquires the data it aggregates from different data sources. The difference is that in the case of lending, the analysis it is doing is more of what an underwriter or a credit manager would be looking for,” he adds. 

While the personal finance management still exists and has 7,000 users, the credit underwriting and analysis platform is its main business. 

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The journey

“Initially, it was an upsell. It was a category creation and it was not like this was existing already,” Govindarajan says. “It took a lot of initial evangelisation effort.”

“We could not go and say that we have this platform that is faster, cheaper, and better than what you were using. We had to explain to them why they should get this platform,” he adds. 

However, a lot of things worked out in Perfios’ favour such as digital transformation initiatives by the government and by companies, especially the fintech ecosystem. 

“There were a lot of  fintechs getting funded, and their primary USP was digital. They were looking for a partner who can help them to differentiate from a typical banker or an NBFC,” he says.

For a lot of these startups, Perfios turned out to be this partner. “Most of the larger fintechs in the market today used to work with us from day zero of their existence,” he adds. 

By 2017, before it raised its first round, Perfios had about 50-60 customers with the largest financial institutions in the country, including NBFC, banks, and fintech as its clients. 

Perfios raised $6.1 million in 2017 in Series A from Bessemer Venture Partners to fuel its expansion. In 2019, it closed another $50 million in Series B led by an affiliate of private equity funds managed by Warburg Pincus and Bessemer Venture Partners.

Today, Perfios has more than 300 customers, out of which about 250 are in India. 

The company says it derives about 50 percent of its revenue from banks, 30 percent from NBFCs, and 20 percent from fintechs.