Gone are the days when students were completely dependent on parents for buying motorcycles, laptop, smartphones or paying semester fees. Now, with an emergence of tech-driven new age lending platforms, students can secure loans within a day.
New age lending platforms such as Creditmate, Slicepay, KrazyBee and many others are solving the ‘loan access’ pain for students seeking credits. Bengaluru-based KrazyBee positions itself as a loan provider to graduate and postgraduate students pursuing their professional degrees.
In the past, students have faced challenges to get funding from the formal financial sector, which either caused them to borrow from the unorganized market at a higher cost or their needs were mired.
Filling the aforementioned gap, KrazyBee offers financial aid for e-commerce purchases, two-wheeler loans, student education loans and top-ups. Top-up loans are provided over the virtual master cards to pay small expenses such as hostel fee, purchase books, fund projects, buying train or flight tickets, fund emergency expenses amongst others.
“KrazyBee aims to provide students with a way to avail short term credit not only for emergencies but also to realize their dreams and passion,” explains E Madhusudan, founder, and CEO of KrazyBee.
Floated by Madhusudan Ekambaram, Vivek Veda, and Karthikeyan Krishnaswamy – KrazyBee claims to disburse more than Rs 100 crore in 2017 alone. “Metros such as Bengaluru, Chennai, Hyderabad, and Mumbai contribute higher traction for our loan products,” adds Madhusudan.
Madhusudan is an alumnus of National Institute of Technology, Surathkal and Rotman School of Management, Ontario (Canada). Vivek has graduated from Delhi University and is a qualified Chartered Accountant with over a decade experience working in the financial sector.
Karthikeyan is an alumnus of the National University of Singapore. He has over 12 years of experience in technology and products. Prior to KrazyBee, Karthikeyan has worked with organizations like NTT Solutions, Huawei Technologies, and Innvo Solutions.
KrazyBee: Disbursing 350,000 loans in 18 months
So far, the company claims to process over 450,000 loan applications and disbursed over 350,000 loans since its inception 18 months ago. Although, the average loan amount would vary across loan products. For instance, the average would be Rs 60,000 for semester fee while e-commerce loan product (like mobile and PC), the average would be Rs 12,000. It claims to disburse a total loan amount of Rs 100 crore in the fiscal year 2017-18.
Bringing data science & ML together for gauging creditworthiness
“Our credit underwriting algorithms primarily based on merit. Merit-based credit assessment is the key focus of our algorithms, which relies highly on data sciences and machine learning,” says Madhusudan.
It ensures 24 hours of turnaround time to assess creditworthiness and identity validation for loan requests using artificial intelligence based algorithms that employ alternate data to arrive at results, much beyond traditional credit models.
The core of credit underwriting relies on the quality of college or universities attended by the student, the merit score of a student in his/her education, the amount of fee or expenses incurred by the guardians to support student’s education and other qualitative and quantitative factors.
Importantly, KrazyBee specializes in credit scoring and assessing the credit risk of individuals who have never had a prior banking or credit history.
Besides disbursing loans, the company also educates college students about the loans products, EMIs, repayments, and credit score.
Major challenges: CAC and loan generation
Customer Acquisition Cost (CAC) and loan generation are major challenges for KrazyBee as well as other players operating in the space. “Both should be as low as possible,” mentions Madhusudhan.
He adds, “The volume of the loan will be large in microloan segment, therefore technology is key to reduce operations cost to service and maintain large volumes of loans.”
Market opportunity, funding, road ahead, and competition
The current graduate and postgraduate student population in India is anywhere between 36-38 million. This is roughly the size of an entire population of Malaysia. “According to our internal estimates, the credit needs of students is higher than $8 billion in India,” says Madhusudan.
It had raised $8 million Series A round led by Chinese smartphone-maker Xiaomi Technologies and Shunwei Capital.
KrazyBee plans to expand across 30 cities in 2018. It aspires to serve more than 10 million students across India. “Before venturing into any new city, we evaluate the student demographics, the eminence of the college and universities situated in the city, and statistical insights from our models to determine the demand and risk mitigation factors,” concludes Madhusudan.