Recently, we interacted with Me. Vivek Veda, Co-Founder & CFO, KreditBee – a platform that facilitates loan transactions between borrowers and personal loan providers such as NBFCs/Banks.
As a co-founder and CFO of KreditBee, can you share the journey of how KreditBee came into existence?
In India, obtaining credit poses a chicken-or-egg dilemma. To secure a bank loan, applicants are required to demonstrate a credit history. However, building a credit history becomes possible only when an applicant receives a loan, credit card, or any other credit instrument. This circular problem creates challenges for financial inclusion in the country, as many individuals remain excluded from credit opportunities due to the lack of a credit history. As a result, the issue of limited financial inclusion continues to persist in India, requiring concerted efforts to address and overcome this barrier. This problem led us to question the need and fuelled us to fill the huge gap in the credit market.
In 2018, Madhusudan Ekambaram, along with Karthikeyan Krishnaswamy and myself founded KreditBee with the mission of democratising credit. However, our larger goal is financial inclusion for the underserved population, including self-employed and salaried professionals.
KreditBee provides loans of varying sizes and repayment tenures, all accessible through our user-friendly digital platform. Our customers can apply for loans directly from their smartphones, without the hassle of paperwork. We have streamlined the entire process, from eligibility checks to application, disbursement, and repayment, making it a smooth and convenient experience for our users.
India’s credit market is vast, untapped and underserved market. We understand the issues many individuals face when trying to obtain credit in India. To address this issue, we consider alternative lending data points beyond just salary and bureau scores. This allows us to extend loans to individuals who are new to credit or fall into the non-salaried category, such as self-employed professionals. By doing so, we aim to help those who were previously underserved by traditional financial institutions and foster financial inclusion in the country.
Can you discuss the funding strategy of KreditBee and how the company has secured capital during the funding winter to support operations and expansion plans?
Our journey has been characterized by a challenging and rigorous initiation. We’ve had to overcome significant obstacles from the very beginning. Despite these obstacles, our vision was very clear, and we focused on what we wanted as a company. We have never been a burn company. We have been profitable from FY19 barring the COVID period. Despite the Covid-19 pandemic, our loan books looked better than most others in the industry. This was because we had the processes in place and we were quick to adapt. Investors like to see due diligence and processes being followed and it plays a very significant role in raising funds.
During 2020-2021 when the pandemic was at its peak and we were amidst a challenging macro-economic environment, we re-engineered the company’s cap table within two months. We closed a $150M round in March 2021 wherein renowned and reputed Indian and global funds such as Premji Invest, Motilal Oswal Private Equity, TPG Newquest, Mirae Asset, Alpine Capital, etc participated. Out of $150M, $50M came into the company as primary equity infusion, and the balance of $100M was secondary wherein the existing investors took an exit and were replaced by the new incoming investors. This was one of the largest funds raised in the Indian Fintech sector at that time.
We closed our Series D fund raise in January 2023 wherein we raised $200M from our existing investors and new investors, Advent International and MUFG Bank who joined our cap table. This fund raise was at a time when the startup ecosystem was witnessing “funding winter”. These fund raises are testament to the systems & processes that we have built and they reflect on the performance of the company which gives Investors the comfort to invest in our company. With the recent equity fund raise, we are well-equipped to grow and expand our customer base.
We have realized that if the business is managed efficiently and the company is profitable, there is no dearth of capital when you are in the market for raising the same.
How has technology played a role in shaping KreditBee’s financial operations and decision-making processes? Are there any specific innovations or advancements that have contributed to the company’s success?
Our core focus lies in digital lending, where we have established an end-to-end digital process covering customer onboarding, underwriting, disbursement, and collections. Our success and scalability can be attributed to our strong reliance on technology. The remarkable achievement of our swift operational scale is underpinned by a turnaround time of approximately 20 minutes, wherein critical decisions about a customer’s creditworthiness, loan amount, and applicable interest rates are made. To ensure transparency and informed decision-making, customers receive comprehensive information about the associated charges prior to loan disbursement. This commitment to convenience and clarity encourages repeat business as customers readily opt for additional loans following the closure of previous ones.
When disbursing loans, we either manage the entire process through our in-house NBFC or adopt a collaborative co-lending approach. In the latter scenario, a fraction (10%-20%) of the loan is disbursed by our in-house NBFC, while the remaining portion (80%-90%) is disbursed by partner NBFCs such as Cholamandalam Finance, Poonawalla Fincorp, Piramal Capital, Mirae Asset, and Credit Saison, among others. Ensuring real-time synchronization, we seamlessly share crucial information with our partners, which is promptly reflected in their Loan Management Systems (LMS). This process is meticulously executed within the 20-minute time frame to prevent any delays for the customers. Given our substantial disbursement and collection volumes, daily reconciliation with our partners is a priority, and this task is expertly handled by our automated systems. The remarkable efficiency achieved through this automated reconciliation underscores that our operational scale could have been unattainable with manual interventions.
What are some of the major challenges or trends you foresee in the fintech industry, and how is KreditBee preparing to navigate them?
The fintech industry is continuously growing, bringing both opportunities and challenges for companies. One of the major challenges we face is the ever-changing regulatory landscape due to the evolving nature of the fintech industry. With the tremendous growth that Fintechs have showcased over the last 5-6 years and the further growth potential it has in store, regulators have become active with respect to ensuring that the interests of the consumers are protected. To navigate this ever-changing regulatory landscape (which will benefit the industry in the longer run), we prioritise compliance and work closely with regulatory authorities to ensure that our operations meet all necessary legal requirements. This includes data privacy and security regulations to protect our customers’ information and keep their data safe.
We take this responsibility being one of the largest players and ensure that we educate the customers regularly. I don’t think digital lending has gone without its own problems. There have been so many issues, from illegal lending apps to Chinese lending apps where customers have fallen prey to illegal practices. Now, it is the responsibility of some of the key players to either independently or as a company or through an industry body, continuously spend and dedicate resources on educating the customers.
In line with industry trends, we are embracing digital transformation and the use of advanced technologies. Additionally, we explore opportunities to integrate with open banking initiatives and leverage artificial intelligence and data analytics to optimize decision-making, risk assessment, and customer service.
To stay competitive in the fintech landscape, we understand the importance of continuous innovation and differentiation. Our team remains committed to creating value for our customers and stakeholders. We closely monitor market trends, respond to customer feedback, and invest in research and development to enhance our offerings while delivering exceptional user experiences.
As a co-founder, what is your long-term vision for KreditBee, both from a financial perspective and in terms of the company’s overall impact on the market?
KreditBee is poised to transform into a comprehensive financial conglomerate, offering a diverse array of financial solutions tailored to meet individual customer needs, business needs and other financials needs of customers. The company will expand its services to cover various financial requirements, reflecting its commitment to addressing the multifaceted aspects of customers’ financial lives.
As part of its growth trajectory, we are actively planning to enter the capital markets in the coming years. This strategic move will grant the company access to a wider pool of capital, which it will leverage to fuel its expansion, drive innovation, and foster continued growth. Going public will also significantly enhance KreditBee’s market visibility and credibility, solidifying its status as a leading player in the financial services sector.
