With a revenue pool of over $200B, financial services in India continue to be one of the largest and single most important sectors that powers the very backbone of the Indian economy. Over time , it has also gained the reputation of being one of the most technologically agile sectors in India, with a world leading UPI and payments infrastructure being a testament to that fact. Despite that, the financial sector here generates a low level of credit compared with other countries. India’s credit-to-GDP level is 51 percent. That compares with 136 percent in Malaysia and 70 percent in Brazil. This trend has taken hold despite the fact that India’s gross domestic savings rate, at nearly 30 percent of GDP, is in line with peer countries. The savings are sufficient, but the system doesn’t use them effectively.
To reach the PM's goal of building a $5-trillion economy, credit will have to grow at a much brisker pace while maintaining good credit quality and avoiding excessive risk taking. Productive credit growth would benefit the poor. Hundreds of millions of Indian citizens, and millions of businesses and entrepreneurs, operate in the informal economy, with only limited access to financial services. Many of them could use credit effectively to build a business or buy a motorbike to get to work.
The lending value chain today is split across distribution, underwriting and collections. The first wave of digitization, focused on distribution, saw e-wallets, microfinance companies and aggregators like PolicyBazaar gain traction. As internet penetration and online banking became mainstream, a second wave focused on underwriting using alternate data saw the emergence of companies like Moneyview, Drip Capital etc.
And this brings us to the present where the industry is moving to a third wave of digitization that is going to increasingly focus on collections and debt management. While other business processes got increasingly digitized, processes in collections still remain archaic. It has therefore led to a classic 'chicken and egg' problem statement where new pockets of the market can increasingly open up only post setup of a robust collections engine.
As collections get digitized, it can create massive opportunities in the ecosystem. At the core, it will help lenders solve the ever increasing problem of NPAs, estimated to be a $25B+ market, in a scalable and automated manner. The borrower experience, which traditionally was always superseded by the need to collect, will increasingly gain center stage and become a differentiator for institutions. Additionally, by having a layer of repayment behavioral data over the existing bureau data, lenders can in the long term use it to enhance retargeting and underwriting models leading to increased financial inclusion and scale.
This is why we were so excited when we met Rishabh Goel, Anand Agrawal and Mayank Khera from Credgenics — three young entrepreneurs who are uniquely suited to solve this problem. After completing their engineering from IIT Delhi, Rishabh and Anand went their separate ways — Rishabh making his way through Deutsche Bank and Blackrock while Anand joined the early-stage team at 1mg where he was integral to scaling the technology. It was while working on distressed asset portfolios at Blackrock that the idea of Credgenics as a debt management solution for lending institutions was conceived. This was when they brought on Mayank, a certified mediator and a Fellow at the World Mediation Organization, Berlin in order to help charter out and realize the full potential of the product.
Credgenics is a debt resolution SaaS platform that assists lenders in streamlining and digitizing collections and legal workflows. It also offers on-demand dispute resolution and mediation services by becoming an intermediary between lawyers/mediators and borrowers. The 'plug and play' SaaS solution digitizes the entire collections process in an easy-to-use interface and provides an AI-powered personalized collections strategy which optimizes and automates action through SMSs, call centers, field agencies and legal notices. The uniqueness of the product is around the lawyer-led mediation services which results in better resolution efficiency, quicker time to collect and a more empathetic experience for the borrower. We believed this could potentially reimagine a more sustainable and 'borrower centric' paradigm in the post default recovery process which further cemented our conviction in the idea.
Within just a couple of months, Credgenics was able to demonstrate a strong product market fit. Today over 30 lenders are using the SaaS platform which include notable names like ICICI, Axis and IDFC First Bank. Results from early success on the mediation product have signaled a 10%+ improvement in resolution efficiency and reduction in TAT by ~15 days which is not only a great win for Credgenics but also for the broader ecosystem at large. With a highly scalable product that has a strong early mover advantage, a product suite for all types of lenders and one that is deeply invested in customer success, it is safe to imagine that the future is indeed bright and exciting for such a platform.
Interestingly, our investment in Credgenics was the first to be done entirely digitally. We were introduced to the team at the outset of the COVID-19 pandemic, and we invested effort into getting to know the team over multiple online sessions. We’re super excited for the next leg of our journey together as partners.
Credgenics’ mission is to enable "an automation first, cost-effective and one-stop solution to minimise bad debt." We believe this will underpin a great business and create a trusted brand, and we are happy to be joining this journey alongside our other investors — ICICI venture, DMI finance and Titan Capital
1. The Partner Series: The Importance of Mentorship with Barath Shankar Subramanian
2. The Partner Series: From Aspiring Entrepreneur to VC Partner with Prayank Swaroop