Professional Documents
Culture Documents
Passionate about
research, analytics,
Lucas B innovation, and the
Co-Fou
nder & ianchi,
Promot financial markets,
e
r of Na
maste C
redit Lucas Bianchi is now
focused on building
Namaste Credit, an
exciting new financial
technology platform
for loan facilitation
and servicing in
India.
Namaste Credit has
developed several
patent-pending
systems designed
to streamline and
improve the loan
creation and
servicing processes.
Interviewed
by
Dr. Nagendra V. Chowdary
As a co-founder, Lucas is excited to be working with a great team at Ref. BFS-2-0010B-1
Namaste Credit to build amazing technologies that are revolutionizing November 2016
finances for SMEs and individuals across India.
ET CASES
Interview with Lucas Bianchi P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space
1. What according to you is P2P (Peer-to-Peer) lending and how does it work in general?
What distinguishes P2P lending from the moneylenders/pawn-brokers (still prevalent
in some pockets of Indian landscape, especially in rural and semi-urban areas)? Would
the presence of traditional moneylenders affect the business prospects of serious P2P
players?
P2P lending happens between two parties that come together online only and most likely
would have not known each other before the transaction. In this case, the introducing
platform provides the comfort. Traditional moneylenders could significantly broaden their
potential scope of clientele, but would need to change their existing modus operandi and
way of thinking. I believe that traditional moneylenders could be good partners for online
P2P platforms. Transparency of transaction and funds may be one of the issues.
good partners for online P2P platforms
2. What are the differences between financing through banks and financing through
P2P platforms? Is P2P financing a complementary or competitor to conventional
banking?
Financing through banks is an opaque and typically in-person process. Financing through
the P2P platforms is transparent and online. P2P financing could largely be competitive
with banks, but if it includes banks as potential funding partners, it would be complementary
(as is the case with Namaste Credit).
ET CASES
P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space Interview with Lucas Bianchi
3. In India, we get to see two types of P2P lending players largely Social P2P lenders
(Rangde, Milaap, Kiva, etc.) and Business P2P lenders (Faircent, i-Lend, Namaste Credit,
IndiaLends, InstaKash, Lendbox, i2iFunding, etc.). What distinguishes these two types
of P2P lenders apart from their respective purposes? Which of these two do you
foresee to have a sustainable business over the next few decades?
By this definition, I believe that the first set of lenders (Social P2P lenders) focus largely on
smaller ticket size loans for socially responsible activities and funded by individuals. The
second set (Business P2P lenders) would have any range of end-users (such as those
planning for weddings or expanding any range of businesses). They would have slightly
larger ticket sizes and would include institutions as funders. It is quite possible that both
have sustainable models over the longer-term.
market to date.
4. How do you see the growth parameters of P2P lending in international as well as
Indian scenario? How different is it operating such a business in India vis--vis global
platform?
P2P Lending has grown very significantly in the US and in several other developed markets
(visit finovate.com/blog/). In India, it is still in its infancy. I believe that a few reasons for
this include:
a. Comfort level with and penetration of internet usage across the population
b. Conservatism of business and lending practices in India vs other countries
c. Depth of the online and start-up community, especially in FinTech
d. General ease of doing business
ET CASES
Interview with Lucas Bianchi P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space
5. What according to you are the business revenue models of P2P lenders? How do they
make money? What are the different models/formats that P2P players adopt to
differentiate themselves?
Most P2P lenders are paid a transaction fee, when the deal is consummated (either by the
borrower, the lender or both). However, few socially-focused platforms may not charge the
users, but rather operate with funds received from donors. What differentiates various
P2P players are:
1. The customer segments they operate in
2. The lenders they work with
3. The value they add as an intermediary
4. The ease of using the platform for all parties involved
funding side.
6. How do P2P players reach out to the potential borrowers? How does one go about
lending using these platforms?
This varies widely based on the platforms. For Namaste Credit, we reach out to borrowers
directly and through channel partners. We work only with institutional lenders on the funding
side. Effectively, we provide a competitive environment that gives an experienced borrower
the best result.
7. The interest rates charged by P2P lenders, as several industry veterans and analysts
argue, are quite high (ranging between 9.5% and 36%). How does this help in increasing
penetration of P2P lending in India?
I am not sure I understand the question exactly, but the way I see it, the three main questions
that customers would ask are:
1. Am I getting a loan? 2. Is the interest rate competitive?
3. Is the process to get the loan swift?
ET CASES
P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space Interview with Lucas Bianchi
Bottom line is that the interest rate charged to a particular borrower may seem fair, high or
low to them based on their alternatives. If P2P lending is expanding the range of possibilities
to more borrowers, then it would likely help to increase overall lending penetration across
India.
9. What according to you are the potential risks for a P2P lender and how can they be
addressed effectively?
A few potential risks for a P2P lender that I can think of are:
1. Only borrowers who cannot find financing from any other place would come online to
look for finance (thus self-selection of poor quality borrowers)
a. Namaste Credit has a rigorous screening process in place
2. Possibility of misrepresentation by customer owing to less face-to-face interaction
a. Namaste Credit has the P2P platform enable face-to-face interaction
ET CASES
Interview with Lucas Bianchi P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space
10. What is the role of technology in shaping P2P landscape in India? Wouldnt the cost
of technology be an entry barrier to serious potential P2P players?
Very open-ended question with fully open-ended answer.
There is a huge possibility to leverage technology in a much more meaningful way than is
being done today, using Aadhar, mobile phone data, etc. This may eventually pose an
entry barrier to new P2P players or enable them to become dominant in the market.
done today, using Aadhar, mobile phone data, etc.
12. Many industry analysts and quite a large number of customers complain that
regulatory framework needs to be strengthened bereft of which P2P lending may go
the same way as that of Micro Finance Institutions (MFIs) in India. What are your
suggestions for strengthening the regulatory framework? What are the specific areas
that need to be strengthened?
Laying out a regulatory/legal framework of any kind for P2P lending would be a good start.
This happened with the MFI industry only after a significant negative event and has since
then enabled the industry to flourish. Any kind of regulatory certainty would enable equity
investors to get more comfort with funding startups in the space.
ET CASES
P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space Interview with Lucas Bianchi
13. One of the biggest global success stories in P2P lending has been Lending Club in the
US, becoming the 14th largest bank in the US. What lessons and best practices can be
learnt and adopted in India from the successful model of Lending Club?
1. Set up a platform that works very specifically within a defined legal and regulatory
framework
2. Enable alternative/private lenders to provide financing during a credit crisis (2008
2009 is when Lending Club flourished)
3. Build a system that enables full transactions to be completed online in a seamless
manner for investors and for borrowers alike
4. Open up the information and data on the system for a broader set of people to get
comfort with the underlying data and veracity of the transactions
5. Initially focus on borrowers where the credit decision process is simple and straight
forward
6. Engage a set of lenders who are open to taking higher risk for higher return potential
good start.
14. How do you see the competitive landscape of P2P financing space in India over the
next decade?
It is not very clear what will happen over a 10-year period, but I am sure that there will be
very significant and meaningful innovations and impact on the overall credit market. I
believe that there will be many more players of various shapes, sizes, formats, etc., that
emerge for various end customer segments.
ET CASES
Interview with Lucas Bianchi P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space
15. What do you think are the impediments for the future development of P2P lending
in India? How do you foresee the future of P2P lending in India? How do you see the
investments into the sector to maintain the growth prospects?
Impediments for future development include, but are not limited to:
ET CASES
P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space Interview with Lucas Bianchi
17. What was your background and what triggered you to kick-start a P2P lending business
in India? What has been its financial performance since inception? Do the margins
warrant risks? What are the unique features of Namaste Credits platform vis--vis its
competitors?
Before founding Namaste Credit, I worked in New York for nearly 15 Years, half of them in
Sales to Financial Institutions and half of them as a Research Analyst and as an Investment
Banker. I was interested in starting a business and India seemed like a good place to do so
given the growth prospects and lack of meaningful solutions in the market to date.
Performance of our company to date has been slower than I would have liked, but certainly
positive and growing month/month and quarter/quarter. We do not take any credit risk, so
margins unaffected by the loans we facilitate. Our business is entirely dependent upon
volumes and those have not been sufficient to date, but have been growing in the right
direction.
for lenders.
ET CASES
Interview with Lucas Bianchi P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space
SMEs from India
c. We have a live white labeling mandate from a leading MNC bank to digitize
their entire loan process across SME products and LAP
d. We have developed partnerships with several leading B2B e-commerce
marketplaces to develop credit-financing programs for their SME customers
18. What are the business and operating models of Namaste Credits P2P lending?
Namaste Credit acts as an intermediary that makes the application process easy for
borrowers, customer acquisition and vetting process easy for lenders. Lenders pay us based
on:
1. Lead provisioning
2. Loan sanctioning and disbursal
10
ET CASES
P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space Interview with Lucas Bianchi
19. What should be the profile of lenders and borrowers who wish to offer or lend credit
through your P2P platform? Can one person act as both a borrower and an investor?
What is the process of due diligence at Namaste Credit and how would Namaste
Credits technological tools help in providing the credit score to the borrowers?
A company registered as an NBFC or a Bank in India.
Yes, someone can act as both a borrower and a lender.
Namaste Credit does:
1. Verification of KYC documentation
2. Financial spreading into XLS of annual results for business and self-employed borrowers
3. Credit scoring of application based on proprietary credit scorecard that has been
developed using data from a database of 30,000 SMEs from India
11
ET CASES
Interview with Lucas Bianchi P2P Lending in India: Delivering Disruptive Innovation in Alternate Lending Space
21. How does Namaste Credit calculate the interest rates for its borrowers and what is
the average rate of return for lenders?
The rate of interest that lenders provide is entirely determined by them. We do not set
pricing.
The average ROI for Home Loans is 9.5% for LAP it is 11%, for Secured CC limits 10.5%, for
unsecured business loans 17%, for personal loans it 14%.
22. One of the biggest casualties of MFIs has been loan recovery rate. What has been
Namaste Credits experience in loan-recovery? Does Namaste Credit adopt any unique
recovery practices to encourage effective recovery process?
To date we have not been involved in loan recovery. Our new product (ASAP) will enable a
more standardized and efficient recovery (servicing) tool. We are very optimistic that this
could improve recovery dynamics significantly.
23. What are the three biggest challenges for Namaste Credits business prospects and
how would they be overcome?
At present, the three largest challenges are:
1. Getting institutional lenders to move more of their own processes online and related
to that, getting them to accept information and related documentation in a digital
process
2. Finding and onboarding productive and honest sales people efficiently
3. Fully launching and effectively marketing our new product ASAP
24. What are your plans to propel the size and reach of Namaste Credits business prospects?
We plan to further build our sales teams in key geographies, onboarding a larger number
and higher volume key channel partners. We will also be white-labeling our loan platform
and the ASAP product to certain strategic partners.
12
ET CASES