Exclusive: Ola goes slow in credit-card lane as COVID-19 takes a toll on its core, cab aggregating business

Given that Ola users are not commuting regularly due to the pandemic, the customer acquisition model stands broken.

Awaiting forward movement

In a statement, an Ola spokesperson said: “Our flagship ‘Ola Postpaid’ offering is now usable at over 20,000 key merchant partners outside of Ola. We continue to expand this offering to hundreds of thousands of merchants across the country to make Ola Postpaid the most preferred pay-later option for consumers.”

An SBI Card spokesperson said that the company has been facing multiple restrictions with regards to open-market sourcing of customers because of the pandemic. Now, with the unlock measures in place, acquisition of customers has reached 60 percent of pre-Covid numbers.

“Similarly, as the situation evolves, sourcing will get ramped up for other categories, including for the Ola Money SBI Card,” the spokesperson added.

The credit card company said its acquisition strategy is backed by advanced risk management and data analytics capabilities and that it continuously monitors the macro environment and calibrates its business approach accordingly.

The Covid Effect

COVID-19 has had a disastrous effect on mobility startups, be it ride hailing outfits such as Ola and Uber or ride sharing entities such as Yulu and Bounce. Some industry estimates suggest that during the peak of the lockdown Ola saw a 95 percent decline in its business. While there has been some recovery as the country unlocks, daily commutes have drastically fallen.

“The office commute was something that gave cab aggregators the biggest base of sticky customers. Since people are working from home, that segment has taken a massive hit,” said one of the sources mentioned above.

It is this base of customers who were the likeliest target for credit. Further, lenders have also slowed down on their credit business, causing an overall slowdown in customer acquisition, the source added.

Banks were aiming to use consumer-focused platforms such as Ola, Paytm and Flipkart to source quality customers. Moneycontrol wrote on August 19 about how State Bank of Mauritius and IDFC First Bank, among others, are working with startups to democratise credit cards.

The Ola-SBI Card partnership was a typical example of this strategy. However, given how COVID-19 has decimated the travel and tourism sector, cab aggregators have suffered a massive decline in their core business, which, in turn, has affected their lending play.

Shifting business priorities

In Ola’s case the other reason has also been a shift in business priorities during the pandemic. The company is looking to restore its supply of drivers and riders to pre-Covid levels. While many drivers have returned to their villages and home towns, a chunk of riders is avoiding public transport because of the fear of the virus.

The source cited earlier added that the exit of Chief Executive Nitin Gupta from Ola Financial Services could also be partially to blame for the slowdown in decision making at the top, over and above the deteriorating macroeconomic conditions.

However, a third source close to the company, said: “There have been some management changes here and there, but the overall plan has not been affected and the business targets have not been reduced.”

Interestingly, Dara Khosrowshahi, Chief Executive of Ola’s biggest rival Uber, recently said in an email to employees that Uber will de-prioritise several finance-related projects such as credit cards and digital wallets.

Unlike Uber, which uses third-party mobile wallets, cards and UPI for payments in India, Ola had built its own payments offering, Ola Money, and continues to be bullish on the financial services play.

“We continue to deepen our partnership and introduce more variants to suit consumer spends,” the Ola spokesperson said. “We will continue to build consumer-first financial products and services for a billion people in the time to come with unique, innovative offerings for the digital world,” he added.

Top-of-the-funnel approach

Ola has designed its credit products based on the Ola postpaid programme. The ‘buy now, pay later’ product allows customers to take multiple rides and make one bulk payment after a fixed tenure, usually 15 days. Depending on the customer’s profile and its internal algorithms, Ola assigns different credit lines.

Once the customer repays the postpaid amount on time and this becomes a habit, Ola opens up a larger credit line of, say, Rs 20,000, which is run in partnership with IDFC First Bank. The top customers were to be offered a credit card with a limit of maybe a few lakh rupees, in partnership with SBI Cards.

“This was the perfect sourcing mechanism, through a top-of-the-funnel approach — get the best customers through small credit products and eventually expand the line — but the pandemic has disrupted many such plans” said one of the sources mentioned above.