October 12, 2015
Faircent is one of the pioneers in P2P lending in India. With their technology platform and partnerships, they are looking at empowering the borrower by providing multiple lenders for his/her requirement. We had the opportunity to talk with Rajat Gandhi, the CEO and Founder of Faircent, on his view and vision for the company.
LTP: Could you give us a brief on how the idea for Faircent came about?
Rajat: The idea of Faircent was born with a personal experience that I had from one of my colleagues in 2011. He used to borrow small loans from multiple other friends to fulfill his needs at a specific point of time. For example, he once wanted to buy a Bullet and he had posted on Facebook requesting his friends and family for a portion of the funding, and in a week, he was riding his Bullet to office. This incident, coupled with my knowledge gained from reports on mobile payments, online media and my experience in building exchanges previously (for matrimony, jobs & property), I felt that Faircent could be the next logical step to move into P2P finance. However, that was in 2011, and personally, I believe that the ecosystem then was not conducive for P2P finance platform. There are two big building blocks for this business to make it scalable and viable. Bureau data, which provides personal information on credit history and other details, and the second, is payments. The ecosystem for payments back then was not really pro-electronic. But in 2013, we felt that the time was correct for an entrepreneur to build his business and that’s when we incorporated, spent close to a year in building the product and launched the product in 2014.
LTP: How do you see the P2P loan market evolving in India? Can you give us a little brief on how you see increased adoption in your platform?
Rajat: These are very early days. This model, especially the one we are building, will take time and we are looking at a horizon of 10+ years. That’s when a real impact could be visible with existing lending institutions starting to feel the pressure. For the next 10 years, we will still be called alternative lending/financing companies.
On the adoption part, we understand that marketplaces are built over time and we are building a marketplace. Enough number of success stories is required to gain faith. Unfortunately, our success stories take anything between 6-36 months. A success story is built when a person lends out his money and gets his money back. If he doesn’t get his money back, there is no success story. So our gestation of a success story is very long. That’s the reason we are taking baby steps and building an ecosystem that is conducive for them.
LTP: How do you look at the regulation aspect within your business model?
Rajat: At present, there is no regulation for our model, but we are a legal business. The P2P marketplace business model is not under any regulation as of date, but it comes under the legal framework of the country. The contracts are enforceable—people can lend money, people can return money; there is Section 138 in The Negotiable Instruments act, etc. As a platform, we come under the Information Technology Act. Beyond that, we are trying to engage with the regulator for the past one-and-a-half years and we will closely monitor any moves coming from that space.
LTP: Any plans of moving to a mobile platform or building one? Do you believe that we can have funds at the click of a button?
Rajat: We are already in that process. We have built a lender app and that should be live by next week. For us, all streams are important. As long as there is a single customer in a particular channel, we will try to service them there. Our strategy is not device-driven, it’s consumer-driven. Coming to the disbursal of funds at the click of a button, we are working on an app that will disburse the loan in 10 minutes, and that should be ready by next year.
LTP: According to you, what is the USP of Faircent?
Rajat: Our USP is simple. We bring down the costs and we empower the borrowers, not the lenders. A typical reverse model where the borrower raises the request and the lender bids for it. The borrowers can then accept/reject it, and hence, it empowers the borrower.
LTP: What is Faircent’s back-end technology that enables underwriting for a borrower? Do you have any specific partnerships to enable this?
Rajat: We have tie-ups with Transunion, Yodlee, Lendo and Jocata. Yodlee provides the bank scraping technology, where multiple bank accounts can be linked, along with loan accounts, credit accounts, etc. Transunion helps with the e-KYC and bureau scores. Lendo helps with the social scoring and Jocata helps with the income tax pull. So this is the kind of technology integrations that we have already done with top of the line companies in the world. We are the only company in Asia—especially with Transunion and Yodlee—who are doing this. We have a rule engine that breaks the borrowers and buckets them into different profiles. The bucketing is done based on a scoring model (out of 400) that we have.
LTP: Any update on the demand that you are seeing?
Rajat: We are a very transparent organization. The statistics page that we have one our website provides everyone with the live data that we are seeing. The demand is actually much more than the number shown there. The number of loans disbursed shown are only the validated demand on the platform; 90% of the borrowers are actually rejected.
LTP: What is your business/revenue model?
Rajat: We charge borrowers fees of Rs. 1,500 to get them on to the platform. This is because we do a lot of things on the back-end to create their profile. Also, if we don’t accept the profile/don’t make them live, then we refund part of that amount (~1,000). From the lenders, we charge 1% for the lending amount. The initial fees would be Rs. 1,500 for investments of up to Rs. 150,000. So, irrespective of the amount that a lender plans to invest—it can be anything between Rs. 1,000 to Rs. 150,000—we charge Rs. 1,500. Beyond that, we charge Rs. 1,000 for every additional lakh. It’s a listing-based model/subscription model.
LTP: Are you looking at any other sources of revenue currently?
Rajat: No, not at the moment. Though we know there can be a lot of things that can be done, we are highly focused on building the marketplace as of now.
LTP: What is the kind of disbursals that you are seeing in the near future?
Rajat: In the last 12 months, we have seen disbursals of close to 1.5 crores and are now at a run rate of 35-40 lakhs. We are looking at seeing 1 crore a month the next three to four months and aim to reach 400 crores in the next two to three years.