Neobanking platform Fi launches mutual fund investments, peer-to-peer lending to follow

Representative image.

Neobanking platform Fi will now allow customers to invest in mutual funds and will soon launch a peer-to-peer lending product, the startup said on May 5. Fi is tying up with 11 asset management companies (AMCs) for mutual fund investments and with Matrix Partners-funded Liquiloans for the P2P lending product.

Until now, Fi mainly focused on providing banking products in partnership with Federal Bank. Customers could open a Federal Bank savings account through the platform, get a debit card and open a fixed deposit in which money could be deposited in small amounts.

These new offerings will be a diversification for the startup, which is valued at $315 million. The mutual funds product will be integrated with Fi's current savings product called FIT Rules where a small amount is automatically set aside from the savings accounts based on predefined conditions set by users, for eg. - setting aside Rs 100 each time you order food, etc.

The P2P lending product will give a return of up to 9 percent per annum, and customers can invest anywhere between Rs 10,000 to Rs 5 lakh. Customers will be allowed to withdraw their investment at any point, the company said.

Addressing the press on the announcements, Fi co-founder Sumit Gwalani said, "We have designed our investment products keeping in mind, both the beginner investor's need for simplicity, along with the degree of complexity that an advanced investor looks for."

Founded in 2019 by former Google Pay executives Gwalani and Sujit Narayanan, Fi competes with other consumer neobanking platforms such as Jupiter, Freo, Niyo, among others. Its mutual fund offering will set it against players such as Groww, Paytm and PhonePe, and its P2P lending product is similar to CRED's CRED Mint and BharatPe's 12% Club.

The company said that it will not be charging any commission for mutual fund savings and partner AMCs will include ICICI Prudential MF, Birla Sun Life MF, Tata MF, Axis MF, Canara Robeco, L&T Financial Services MF, DSP MF, Nippon India and Kotak MF.

"While there are no direct revenue opportunities as far as mutual funds are concerned, we think it drives up engagement, balances and transactions as a whole. The key ask of a lot of our users was for us to create investment opportunities," said co-founder Narayanan.

Going forward, the startup plans to add more lending products, which is one of the most revenue-generating areas for fintechs.

Narayanan said, "We will look at products on the lending side over the next 12 months. We are working in close partnership with our banking partners to be able to offer lending lines. We will start off with unsecured products like credit cards, personal loans etc., and then slowly expanded to other categories."

On how the company will deal with concerns around defaults for its P2P lending portfolio, he added, "We are looking at a tightly managed portfolio and have opened it up only for a small base of users. Slowly as a highly curated and high credit score kind of a portfolio is made available by Liquiloans, we will slowly start enhancing and providing that as an opportunity for our users."

A formal set of guidelines on digital lending from the Reserve Bank of India (RBI) are still awaited.

The company said it has one million registered users, 70 percent of which are active users. The platform sees an average of 25 transactions every month per user and is adding three lakh users every month.

In November 2021, the startup raised $50 million led by B Capital and Falcon Edge Capital. Fi's other investors include Sequoia India and Ribbit Capital.

Amid the slowdown in startup funding after a frenzied year, Fi does not see a challenge if it wishes to raise funds.

"We are extremely bullish based on our numbers and features. We think that we will grow our user base by 3x in the next 12 months. We are not seeing any constraints from a funding perspective," said Gwalani.