India, one of the fastest-growing economies in the world has been reporting gaps in when it comes to accessing formal credit, especially when compared to other developed nations.
To fill this gap, financial institutions are progressing towards introduction of new payments products and instruments to expand the access formal credit. While the credit card market has grown significantly in India over the years,, the COVID-19 pandemic affected the growth rate of India’s credit card industry and it grew by only 7% in 2020–21. To understand the landscape and the opportunities associated with it, Rashi Aditi Ghosh of Elets News Network (ENN) interacted with R.V. Ramanathan, Founder and CEO, Hyperface.
How do you define the credit card segment and the growth associated with it in India?
India has traditionally been a debit card market. Credit card penetration continues to be low with only 3 credit cards for every 100 people in India. As of July 2021, nearly 67 million credit cards were in use in India, compared to nearly 934 million debit cards in circulation. However, the growth in credit card issuance in the last decade has changed this narrative and credit cards are being used widely. This growth has been further accelerated by the various products and services being offered by FIs, and such products are being increasingly used by customers, especially the millennial population.
Credit card issuance has grown significantly in India at a compound annual growth rate (CAGR) of 20% in the last four years. The number of credit cardholders increased from 29 million in March 2017 to 62 million in March 2021. It has further grown by 26% and 23% respectively in 2019 and 2020. However, the COVID-19 pandemic affected the growth rate of India’s credit card industry and it grew by only 7% in 2020–21. The growth rate is expected to improve marginally in FY 21–22 but will remain slow due to the restrictions on card issuance by some large banks and payments networks.
A total of 31 card issuers in India have issued approximately 62 million cards till now. Out of the 31 issuers, the top six have a market share of around 81% while the rest account for the remaining 19%, as per RBI data released in March 2021.
How is Hyperface helping fintech companies, eCommerce firms and neobanks in simplifying their payments?
Both me and Aishwarya have worked closely with the fintech sector in the past. I am a 2X entrepreneur, an engineer from NIT Trichy, I started my career with Amazon and was one of the early employees of BankBazaar. I co-founded Juspay in 2012. An ardent computer programmer, I led technology at Juspay, a payments company that has been at the forefront of some key UPI implementations including the Amazon UPI stack.
My cofounder Aishwarya has been a banker, a communications specialist from MICA, she moved quickly to banking and has been a digital banking specialist who has led some successful digital revamps for Kotak Mahindra Bank (Kotak 811) and HSBC India Retail bank.
Our motivation to start Hyperface was to democratise the issuance of credit cards and other financial products thereby enabling other fintech companies to innovate.
Hyperface simplifies launching credit card and BNPL products for fintech companies, e-commerce firms and neobanks that want to embed financial products into their mobile apps. Credit card is a heavily regulated product that has been in existence for over 20 years now, powered by legacy technologies, making it difficult for issuers to move fast in a digital-first world.
Hyperface’s BNPL stack allows any lending technology company to issue a BNPL card to their customers with custom billing frequency and pricing.
Hyperface’s API first and platform-based approach enables fintech companies to set up a program in 4-8 weeks instead of the typical 18-24 months. Further, our APIs allow fintechs to manage the entire customer experience across the card lifecycle, create custom loyalty programs and drive customer engagement in a variety of ways.
Our aim is to reinvent and improve access to credit cards for brands by working with a bank issuer to provide simple card issuance and bespoke digital credit programs for customers of those brands. Currently, this is a complex and lengthy process. There has been a significant advancement in technology that will radically simplify this.
What are your views on the digital landscape in India? What challenges and opportunities do you see in the segment especially during the pandemic times?
India is likely to have 900 million active Internet users by 2025, up from around 622 million as of 2020. This would be a 45% increase in the next five years, according to a report co-authored by the Internet and Mobile Association of India (IAMAI), and data analytics firm Kantar.
The fintech landscape in India has also been changing at a lightning speed in the last couple of years and has become one of the world’s largest fintech markets after the US, UK and China.
Though some of the subsegments were severely impacted by COVID-19, everyone still remains bullish on the long-term growth prospects of the industry. While the first wave of companies was witnessed in payments and subsequently in lending space, 2021 was dominated by the new segment – neo banks powered by open banking APIs. We have already witnessed the entry of a few players this year, but many of the new players will be either coming out of beta mode or launching their services across customer segments, in retail starting from Gen Z customers to MSME space.
BNPL, as the loan product has also seen immense popularity amongst the millennial and Gen Z generations as well as borrowers in under-served and unbanked smaller towns into the world of credit.
Some challenges going forward are
● We need more banks to collaborate with Fintechs in broader areas like underwriting, customer service etc to elevate banking experiences for customers.
● FinTech is a dynamic industry, and real-time changes in regulatory compliance are needed to adjust with the dynamism.
● Digital-first solutions have become the norm and a lot of traditional, physical distribution led thinking needs to evolve from processes to API led thinking.
● Protection of data is crucial, and players will need to invest heavily in developing mechanisms to control this risk and comply with regulatory requirements for data security.
Would you tell us about your recent funding successes? How would you channel the raise?
We have received $1.7 million in funding till now. Some of our key Investors are Kunal Shah, Binny Bansal, Better Capital, GFC and seasoned fintech leaders in India and abroad.
The funding received will be used for team expansion, product development, expansion into BNPL and to pursue strategic initiatives for enhancing user experience.
What are your growth plans for 2022?
Our immediate goal is to go live with a handful of clients, seek feedback and iterate on our product to create an extremely high quality Stripe like platform. Our long term plan is to create a complete end-to-end offering for issuance wherein Hyperface becomes the only company that a fintech company would have to work with, for launching different credit & prepaid products.