Covid threw a lot of challenges but despite the adversities, fintechs are slowly gaining momentum. To understand the gamut and strategies initiated by the Fintechs amid the pandemic, Elets News Network (ENN) spoke to Gaurav Jalan, Founder and CEO, mPokket. During an exclusive discussion hosted during the 5th BFSI Leadership Summit, Jalan spoke at length about the opportunities for fintechs in the post covid world.
Excerpts of the discussion
Gaurav Jalan, Founder and CEO, mPokket speaks:
mPokket is a five-year-old start-up. We started with our focus on providing credit to college students. Our customer base was slightly and we felt that it is a big underserved opportunity in India. And, even after serving the segment for five years, we believe that our penetration is still very low in the market.
Our product has been designed to cater to college students so; we typically offer a small ticket loan. Our loan starts at Rs 500 and the average ticket size is within the three to four thousand rupees range. Our growth trajectory in pre-covid times (until March) was very strong. We saw a good product-market fit and very good customer acceptance. A very large part of our customers used to come and still come through organic channels and referrals. Pre-covid, our business was going very strongly and the matrix was looking good with very good acceptance.
In the pre-covid times, we were disbursing around 100 crores per month and we were onboarding around more than 50,000 customers a month. Also, in terms of portfolio quality, our delinquencies and the default rates were very low and were in single digit. Which was very low considering the nature of the product. Covid changed a lot of things and when it hit us, the first challenge was business continuity. It was important to ensure that the business keeps running because we had to shift the reasonably large employee base to remote working in a very short time span. We managed to get through that. 90 percent of our employees were sent to remote work mode. Only 10 percent were not sent to remote work because they did not have proper internet connectively in the areas they were staying and several other issues. During covid, our experience was quite similar to what other lending businesses faced.
We faced a lot of cash flow stress for the borrowers. Clearly, people did not have the money to repay and then there was the Reserve Bank of India-based moratorium. So, we had to weave those things together. For us, given the nature of our product, not very large numbers of our customers were in the moratorium. But, then delinquencies definitely went up.
The positive thing that happened is we reduced disbursements significantly during covid because we changed our underwriting parameters and tightened them because we did bit want to over indebt borrowers. We were very careful about how much money we are lending etc. Compared to the pre-covid era disbursements were much lower.
We did not stop our disbursements completely and we also kept onboarding new customers even during covid. Our new user acquisition dropped dramatically but kept onboarding because we did not want to lose the data that came along to see how people were onboarding during covid and how they perform. And, that is what we felt as a business was important and therefore we kept that channel open. Post-covid we have seen a good bounce back. Our delinquency rate, even though did not go back to pre-covid levels, they came close. So, I think things are definitely normalizing. A lot of the borrowers who even availed moratorium and deferred their due dates have comeback and repaid, this is about the majority of them.
So, the delinquencies of the covid cohorts ended up being better than our expectations and that’s a good thing. We started ramping up our disbursals from September 2020 onwards. Now we have exceeded our covid level. We are now 130 crores in terms of our monthly disbursals. We are again back to onboarding 50,000 new customers per month. Cumulatively as a business, we are now close to 1.4 million KYC-approved users, given out about 14 million loans through our existence. The business momentum has now come back.
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