College students and young graduates bring in new avenues for startups

Startups have shifted their focus to a segment largely ignored by traditional banking sectors – college students. They are now offering them instant micro-loans ranging from Rs 200 to Rs 10,000 for a variety of needs such as online food payment and air travel, as per a report in Business Standard.

In practice for the past three to four years, companies such as mPokket, KrazyBee, SlicePay and Udhaar among others offer loans that can go up to Rs 30,000, intended for students and fresh graduates who do not have a steady income yet, it said, adding that these startups use mobile apps linked to the client's credit card to track spending patterns and ensure payback of the loans.

Since many customers are first-time lenders with no credit history, they are measured on parameters such as spending habits, education, demographics and social network contacts, among others, it adds. SlicePay asks customers to take selfies or videos to complete the process without physical verification.

Kolkata-based mPokket, which began in December 2016, today lends close to Rs 500 crore annually, the report states. While the loans range from Rs 500 to Rs 10,000, the average amount is around Rs 1,100 to Rs 1,200, Founder and CEO, Gaurav Jalan is quoted.

Bengaluru-based SlicePay, with a customer base of around 180,000 in seven cities was set up by Founder Rajan Bajaj in 2016 after graduating from IIT-Kharagpur, it says, adding that the company has acquired NBFC status and offers loans ranging from Rs 200 to Rs 30,000 for online food payment, flight bookings and clothes shopping.

To make the deal sweeter, incentives such as referral linked cashbacks and interest-free periods are offered, and the annual average interest rates range between 0-30 percent. Most of these start-ups have tie-ups for funds with NBFCs.

Compared to banking and financial institutions, investment in technology to verify customer details and track their spending habits has led to positive results, Bajaj points out in the report, adding, "Automation helps in risk assessment and bypasses the cost involved in physical verification. We use various automated risk assessment techniques. For example, if we see a lot of requests for loans coming from one particular locality, immediately a red flag is raised. The space is large and there is not enough competition."