Catch them young and make them stay seems to be the mantra for a bunch of startups that are offering financial products aimed at students and professionals who are just starting out.
Prepaid cards, small loans and apps offering discounts to students for streaming platforms—these fintechs are pulling all stops to make loyal customers out of youngsters who find it difficult to get what they need from banks and non-banking financial companies.
For students who want to shop online, the only way is through their parents’ cards or cash from their pocket money.
Bengaluru-based early-stage startup FamPay is offering them a cashless option through a prepaid card and they don’t need a bank account for that. It has partnered with IDFC First Bank to give students a card and a UPI ID that can be used for online as well as offline payments.
Developed by the National Payments Corporation of India, Unified Payments Interface allows real-time transfer of money across multiple bank accounts.
“The attempt is to become their partner right at the habit formation stage. If we can create this as a habit, we can hold on to them even after they turn 18 and expand our product offerings for their financial journey,” FamPay co-founder Sambhav Jain said.
FamPay wants to create a curated marketplace that will help the startup offer deals and products to the consumers, who in this case are teenagers.
Before the coronavirus outbreak, the startup had started with offline partnerships but is now trying to onboard as many online brands as possible.
With schools and colleges shut and a lot of interaction moving online, the startup has also had to make changes to its product offerings. It is tying up more with ecommerce, entertainment channels and other products consumed by these digital natives.
Jain wants to make money from brands looking to target these students and also through transactions through MDR (merchant discount rate).
To keep the process safe, Jain said parents can keep a track of where the money is spent and can also restrict transactions to certain merchant points.
Since it is a prepaid account, parents can load money into the wallet, just like cash, but in this case digitally.
Jain started FamPay with his IIT-Roorkee batchmate Kush Taneja in 2019. The two even skipped placements and headed straight to Bengaluru to launch their startup, which has since raised a seed round of $4.7 million from Sequoia Capital, Venture Highway, few angels and is backed by Y Combinator.
Another Bengaluru-based early-stage startup KhaaliJeb, which loosely translates to empty pocket, is working on a similar product.
Its app allows students to make payments and get discounts at restaurants, salons and other services.
The startup has partnered with brands like online music streaming platform Gaana, fitness startup CureFit, streaming service Zee5 and a few others to offer deals on memberships. It also has tie-ups with restaurants in Bengaluru, where students can get discounts against payments made through the app.
KhaaliJeb offers a subscription of Rs 49 for three months.
Started by four IIIT-Allahabad students, KhaaliJeb is looking to raise institutional funding.
The startup has around 8,000 users who have taken the subscription product. What started with discounts is now moving into identity verification to ensure only students and young professionals get the discount.
The startup wants to foray into bill splitting, a feature popular among teenagers, thereby attempting to create an ecosystem for this segment of consumers.
Lending but with caution
Digital payments is just the first step, a couple of startups are trying to find lending opportunities for this segment too. Kolkata-based mPokket, for instance, wants to lend small amounts of money to youngsters who are above 18. The idea is to help them build a credit history by giving out small-value loans and not overleverage at the same time.
“We cater to students in the age range of 18 to 30 years. I want them to look for mPokket for their different needs like recreation, fees, buying stationeries and others,” mPokket chief executive officer Gaurav Jalan said.
Jalan, a post-graduate from Columbia Business School, launched mPokket in 2015. The startup raised funds from Village Capital to seed the business. Since he was capital constrained, Jalan said he chose the segment where the ticket sizes and tenure are small.
It has over a million KYCed users and a total annual disbursal run rate of Rs 1,000 crore. The company has grown in terms of overall business two times over in the last year.
Slice, another Bengaluru-based startup, is eyeing a chunk of the pie as well. Its target group is young professionals, especially fresh graduates in their first job, and students.
Slice recently raised Rs 46 crore in a pre-series B round from Japanese investor Gunosy and others.
Slice wants to give a card to professionals. The credit amount gets loaded into the card and the consumer can use it for any activity. While COVID-19 initially hit business, as consumption was down, things are looking up now, founder Rajan Bajaj said.
“Grocery and medicine have emerged as the top use cases. From April, transactions have bounced back 150 percent. From pre-COVID levels, transactions are still down 20 to 30 percent,” he said.
The average age of a customer is 22 years and the idea is to get the customer into the Slice ecosystem and then extend different financial services.“I want to build a solid distribution base, so that young consumers think of Slice as a default product once they get a job. This will ensure that our cost of acquiring customers will be cheaper,” Bajaj said.