Flexi Loans debuts on Google Pay in India. It is the first lender to do so with an aim to transform the MSME lending scenario. The company was founded by Manish Lunia, Ritesh Jain, Deepak Jain and Abhishek Kothari. All of them ISB graduates, which is a bit eerie. Nevertheless they have come a long way within a short span of time. In it’s press release it mentioned about it’s plan of giving loans to 50,000 small businesses in the next 12 months. They are targeting the small merchants and entrepreneurs who otherwise don’t have access to formal credit. In March, 21 they entered into an agreement with PAYPAL and deliver online loans to MSMEs, freelancers etc. Over 1000 crores of unsecured loans have already been disbursed in over 1400 cities in India. Over 100 partners provide a solid base of more the 5 million MSMEs to the company, which in itself is a huge bucket to choose from. Other competitors include Lendingkart, Indifi, Zip Loan, Bharat Pe etc.
Partnering during COVID:
The timing of the partnership is crucial. There are definite expectations that the COVID situation will improve going forward. At the same time online disbursements will help businesses get much needed liquidity to sustain and grow. Lockdowns all over the country has already wrecked havoc for small business and this tie up comes as a relief. Collateral are also at an all time low with businesses hit hard by the pandemic.
They have a whole range of products, which includes term loans, loans against POS, line of credit, vendor financing and other value added products. The value added product consists of a current account from ICICI Bank along with automated accounting services and GST compliant invoice creation.
Win win for both:
Google Pay has also benefited from the relationship considering it has further solidified it’s hold in the payment business. Flexi Pay will reap the benefits of synergies gained from the outreach of Google Pay. However, it remains to be seen, if Google Pay will open it’s network of business accounts for offers from Flexi Loan. Most likely it would be shared as then an ecosystem is created within the payment app. Value added services like GST compliant invoice creation with a Current account can also be introduced as the bundled service is not yet provided on the app.
Collateral free loans:
The company is planning to deliver collateral free loans via Google Pay, which can be a huge driver. They may also tinker with alternate data for the underwriting process. The target segment usually deals with cash and hence little credit history is expected. The only way forward for them would be to check the GST return filings etc before extending the loan.
This tie up is in line with Google Pay’s India strategy, wherein it had announced $ 15 million investment in the SME sector in India. I would be interested to know how Flexiloans, plans to manage risk. Specifically related to recoveries and the interest rate fluctuations. Will it have differential pricing for high risk clients. All of the product details are still unclear. With the collateral free online lending model learnings, I see a high possibility of Microfinance sector also adopting this delivery channel soon.