[Exclusive Interview] KarmaLife Is Unleashing Financial Revolution For 40 Crore Blue Collared Employees

Recently we interacted with Mr. Rohit Rathi, Co-Founder & CEO, KarmaLife, which is aiming to empower 40 crore gig and contract workers, and provide them with a financial cushion.

Here are the highlights from the interview..

1. What is KarmaLife? Please tell us more about the business and when did you start?

Karmalife is India’s 1st real-time credit solutions provider that empowers blue collar workers to access low-cost, highly-relevant and easy-to-use financial services across their full spectrum of needs. Today, our services are intermediated through employers and aggregators of aspiring but underserved worker segments. These include many new-to-credit users, who regularly earn, spend and have recurring financial needs, but are left out of the formal financial ecosystem and have to rely on expensive and inefficient alternatives. 

At the core, we offer Earned Wage Access which gives workers future earnings-linked credit at little to no risk, enabling them to better align their income and expenses. And around this we’ve built deeper liquidity, savings, investments and insurance solutions with which workers’ can manage longer term financial needs and become more resilient. We do this by using high-frequency data associated with workers, their activities and transactions, which feeds into our proprietary risk score called KarmaScore, and applies deep AI to understand, assess, predict and influence behavior to drive better risk outcomes. 

We started this journey in early 2020, and have deployed our solution with most top digital gig platforms across sectors like ecommerce, B2C and B2B logistics, food, mobility, home services, and flexi-staffing.

2. Who are the founders and how do you differentiate KarmaLife from its competitors?

KarmaLife’s founders, Rohit Rathi, Naveen Budda and Badal Malick, bring a strong mix of skills and leadership experience.

Rohit, CEO & CoFounder, has been a serial entrepreneur since graduating from IIT Kharagpur in 2008. He founded two devices-based companies: Notion Ink, which designed and built India’s first tablet PC, and Smartron, an IOT-based smart device brand. He has operating experience of 14+ years having built startups from ground up

Naveen, CTO & Cofounder, created AI labs at Smartron under their signature tronX platform. Having worked across Samsung R&D, Celstream, Sasken & Pinexe, he brings deep product execution experience. Naveen has 10 patents to his name across key technology areas including Machine Learning.

Badal, CBO & Cofounder, has a deep financial inclusion background. He led Catalyst, a USAID-sponsored innovation platform focused on digital finance for micro-businesses, before which he built Snapdeal’s online-to-offline ecommerce platform. He has two decades of financial sector experience having worked at organisations like Intuit, McKinsey, and the World Bank.

KarmaLife has built a pioneering alternative data-driven risk scoring engine (powered by KarmaScore) which allows it to dynamically underwrite non-salaried workers. This allows us to cover the entire spectrum of a Partner’s worker base – including gig, contract and even on-payroll workers – with personalized financial wellness benefits. 

Our coverage model starts with short nano loans, followed by progressively deeper credit products over time, based on the past repayment behaviors. In this manner, we reward and empower users based on their digital karma.  Further, we offer a diversified financial platform that offers liquidity as well as savings and insurance products, all under transparent, user friendly pricing that reinforces user trust.

3. How can fintech companies restructure credit availability for the blue collared workers in India?

India is expected to generate over 90M digital gig jobs over the next decade across key sectors like logistics, home services, retail, construction, and manufacturing, which conservatively translates to over $200B in annual wage processing. As wage payments are notoriously delayed and create endemic shortages, this opens up the unmet potential of short and long term liquidity products for this segment of workers.

Given the sector’s deep digital trail intensity, Fintechs can innovatively use technology and trust to create appropriate models for this unique user segment. This has to go beyond mere digitisation of traditional processes like underwriting and collections, to entirely transforming business models to significantly increase coverage and create new sources of value.

In particular, there is an opportunity for fintechs to partner with employers to give workers access to their earned income and extend credit against forecasted earnings. Fintechs can leverage such partnerships to access large worker pools, access rich work activity and earnings data, and also deduct payments from worker payouts with prior consent. Financial liquidity to workers in turn leads to a more productive workplace and higher worker retention for Partners.

In the next five years, this will become a default offering from most employers, and a critical employee engagement tool.

4. How KarmaLife aims to solve the gap of financial liquidity for the Gig Workers?

KarmaLife provides a range of liquidity products mapped to different gig worker needs. This includes Earned Wage Access against accrued earnings so workers can cover daily expenses like fuel and food or even sudden unplanned expenses, especially since most workers tend to live paycheck-to-paycheck. For workers with steady earning histories, KarmaLife can extend Lines of Credit against forecasted earnings, which helps workers address larger recurring expenditures like rent, EMIs, insurance premiums, or mini-emergencies. Further, once workers stay with the platform and show strong repayment behaviors, they are able to access multi-month, installment-linked loans to cater to larger and lumpier expenditures ranging from smartphone purchases to training courses to vehicle repairs. Overall, this suite of products comprehensively addresses the problem of short term liquidity faced by a majority of workers. 

For workers that are able to generate income surplus, we have introduced a digital savings product that gives them attractive interest rates (almost three times that offered by banks), without any minimum contribution requirement and with the ability to liquidate funds on 24 hour notice. This complements access to liquidity by allowing workers to build a wealth-generating corpus that can be easily accessed in emergency situations. We have also begun to experiment with insurance, wherein extremely relevant covers like personal accident, health and hospicash are offered in sachetized and affordable packages, and with assisted claims processes. This caps worker financial risk exposure from adverse health events, a key reason for them to enter debt traps. Overall, a combined credit, savings and insurance offering allows gig workers to become more financially resilient as well as to stabilise and slowly grow their incomes. 

5. Please explain to us about your flagship Dhara (Earned Wage Access) product and how it works?

KarmaLife’s Earned Wage Access (Dhara) provides seamless credit-on-tap to workers acting as a buffer for recurring cash shortages. Its product design has ensured workers can access such liquidity instantly in time of need, that they understand the value proposition, and that pricing is simple and affordable.  

Our EWA supports workers across various payout cycles – weekly, fortnightly or monthly. Eligible workers can digitally self-onboard through a simple 3-minute process requiring them to authenticate themselves, understand and sign the loan agreement, and complete a regulatorily mandated KYC. This can be done either through the KarmaLife mobile app or a web-app, which can be seamlessly integrated with the Partner app itself. The worker can link a bank account to which the needed level of credit can be instantly drawn.  

KarmaLife dynamically sets limits based on accrued or forecasted earnings, which allows for sustainable levels of credit that can be more easily repaid from future earnings. So while a worker can see an increase or decrease in level of credit based on work performance, the endeavour is to progressive increase credit limits based on demonstrated responsible financial and work behaviors that in turn also supports building/strengthening of worker credit scores.

For use of credit in a given cycle, we charge a nominal subscription fee that is flat, transparent, and charged only when credit is used, without the complexity of interest rate calculations. This fee is typically much lower than any available market alternative for this form of unsecured credit. Loan repayment schedules are aligned with worker cash flows and automatically deducted from employer payouts, with the ability for arrears to be rolled-over to subsequent cycles when the worker faces extenuating circumstances. KarmaLife also ensures complete financial transparency and responsive support to users for any issues related to KarmaLife credit access or financial transactions.

According to a third party benchmarking survey conducted by 60 decibels in 2021, 76% of KarmaLife users reported reduction in stress levels, 78% reported feeling more in financial control, 82% reported improvements in quality of life, and 85% said they could not easily find an alternative.  

KarmaLife’s EWA solution has also demonstrated tangible benefits for partner platforms in the form of 20%-30% increase in worker productivity, as well as 30%-50% higher worker retention. Partners are able to offer valuable financial benefits without any risk liability or major overhead cost, and can access new worker insights to better manage their business. 

6. Lastly, what is your vision for the next 6-12 months? How do you wish to expand KarmaLife in terms of Business, team size, operations, etc..?

Over the next year, we will scale our business to over a million users across 150+ partnerships. Our credit disbursements have been growing at 40% month on month, and we plan to surpass the Rs 500 crores mark in this fiscal. At the same time, we will evolve our Karmascore by increasing its prediction efficiency. This will allow the company to deepen its user value and increase average-revenue-per-user,_, while containing risk. It will allow us to make bigger bets.  

KarmaLife will invest in capabilities to offer a one-stack platform for all gig worker financial needs, deepening its liquidity suite to offer additional products like vehicle and personal loans, and smartly expanding relevant savings, investment, insurance, and old age retirement solutions. This will propel KarmaLife towards evolving into a neo-banking solution for a segment that it understands well. We will also expand our engineering and sales teams to support these product development and user base growth goals.

We believe fintech for the blue collar segment will consolidate into 1-2 prevailing models, and we’re confident in our ability to win with our unique data-driven approach.