In 2015, a statistic captured the attention of four ISB Hyderabad friends.
Abhishek Kothari, Deepak Jain, Manish Lunia, and Ritesh Jain were shocked to realise that India had more than 60 million small businesses and more than 80 percent didn’t have any credit. This created a staggering $250 billion credit gap with a direct impact on the country’s GDP.
The four, who had worked for decades across banking, telecom, and startups, decided to solve this problem and founded FlexiLoans at the end of the same year. The SME fintech aimed to provide fast and affordable credit to SMBs in India with a branchless, agent-less, paperless business model.
“India was witnessing a digital transformation and this was the perfect moment for traditional banking to be disrupted,” Abhishek says.
Abhishek says the technology platform at FlexiLoans is built to be the operating system for lending, and can be used as a SaaS by any ecosystem.
Today, it offers onboarding, document handling (with 12+ computer vision embedded algorithms that recognise, extract, and classify documents), CRM, customer communication, bank statement parsing, bureau integrations, risk models, underwriting, risk management, KYC, escrow management, digital disbursement, and digital collections.
“Within six months of our launch in 2016, we had about 10 ecosystem partners like Flipkart, Uber, Ola, Shopclues, Voonik etc. Today, we are one of the leaders in embedded finance, with more than 120 partners using our lending infrastructure to offer loans to SME partners. Five of the top 10 ecommerce players and six of the top 10 non-banking payments and QR players are deeply integrated within our technology platform to utilise the plug-and-play capabilities,” Abhishek says.
“We have disbursed over Rs 1,000 crore through the platform across more than 40,000 loans,” he adds.
Within the first four years of the business, FlexiLoans had been witness and part of demonetisation, launch of GST, launch of UPI, the ILFS crisis – and now COVID-19.
The user growth – Data by FlexiLoans
“By this time, we had 100+ partners using our platform. Our next steps were to take this platform to the next level. This was the time to infuse our proprietary data science algorithms in workﬂows and create a full-stack lending platform that can easily integrate with multiple ecosystems and enable credit solutions on those platforms,” he says.
Abhishek says all this has helped the startup in becoming a specialist in underwriting for ecommerce sellers, digital payments accepting merchants, foodtech, and bank statement based lending.
Building the MVP
The first prototype of the product was launched in 2016. Abhishek says they were still exploring product-market fit at this time. Digital lending was still picking up and there was no software in the market that offered ready-to-use infrastructure.
“We tried to answer a few questions ﬁrst: ‘How will our customers ﬁnd us?’, ‘How will our customers apply to us?’, ‘How will we connect with our customers?’, ’How will the Risk team underwrite an application?’, ’How will our operations team manage the loan?’
“We created multiple lanes in our MVP plan to answer each of these questions. Each question was then broken down into epics and stories for prioritisation,” he says.
Technology and product talent was not available in the early days for an unknown startup, so the team decided to give interns a shot at this.
A basic customer portal where customers could submit their applications and see the application status was created. It was just a three-page website but it served the purpose of self-serve. A Loan Origination System (LOS) was built for the CRMs and credit team to process applications.
“We opted for a vendor for a cloud-based Loan Management System (LMS) for our operations team. Within three months of the idea stage, we had our beta launch in April 2016. The focus was to ensure that customers could do everything digitally while internal processes still remained largely manual. We only had a desktop version of the customer website for beta launch,” Abhishek says.
By September 2016, they had the internal systems launch for better eﬃciency. That’s when the team raised their ﬁrst round of $15 million and fast-tracked development to match growth. By then, Flexiloans had started attracting organic traﬃc and onboarded 20 partners. By April 2017, they launched the Android App with an improved version of the LOS platform.
Moving away from monolith systems
“The monolith codebase had served us well in our initial days. But we started facing issues of failure due to high traﬃc, rapid development errors etc on our platform. And we were working with giants like Flipkart, Amazon, and Paytm, who wanted their partners to be the best,” Abhishek says.
The team went back to the drawing board and started unbundling the architecture. The ﬁrst step was to break the monolithic architecture into microservices and do context-based grouping.
They created template-based front end assets and separated the front end assets from the backend services. They added caching, stateless load balancers, and containerisation to manage high traﬃc and scale. Security and compliance are always key riders when it comes to being a regulated entity, which led to bringing in identity management and access control.
Abhishek says after a year of monitoring our MVP, they witnessed something unique.
- Enormous growth on the platform: With partners like Flipkart, Amazon, PayTM, Snapdeal, PineLabs on board, they witnessed thousands of applications a month and over two million events on the platform.
- Shift towards mobile devices: More than 60 percent of their applications were using the mobile website or Android app.
- Digital transformation: Macro events such as UPI, demonetisation, and GST led to increased digital data and footprint.
- Customer feedback on experience: The NPS surveys and app reviews revealed that customers were demanding a better experience. The buying experience offered by ecommerce giants was driving experience expectations high.
Building OKRs for better focus
During this time, the team realised the need to build and implement OKR segments for a better product approach. The platform KPIs were aligned with organisational goals: improve conversions, decrease operational costs, reduce TAT, and maintain customer centricity.
“We exposed all the lending workﬂows via APIs. Our partners were able to share leads with us via these APIs and also get real-time updates on each of those leads,” Abhishek says.
Once the team started ﬁnding the product-market ﬁt, Flexiloans made a big change: investing in design and UX. Loans is a pull category and borrowers want money so the ﬁrst aspect to solve was the core ﬁnancial proposition.
“As we progressed, a big customer need was a ‘buying like’ experience that they were seeing on other ecommerce platforms. And so came the UX and design team that made sure we were consistent, customer-friendly and innovative. Today, not a single release goes without a UX signoff,” he says.
Focusing on stronger microservices
The team created multiple engines on the platform to perform speciﬁc tasks and work ﬂows. Flexiloans currently has around 200 microservices that are contextually grouped under these engines.
- The Digital Lead Generation Engine with an enhanced borrower’s experience and a quick integration with your existing consumer products.
- An AI-powered Risk Engine with bureau and banking connectors, alternate data connectors, policy orchestrations, scoring engines, and eligibility calculators.
- The customer Onboarding Engine that can enable consumers to digitally sign documents, verify bank accounts, do digital KYC, and get instant money transfers.
- The Co-origination Engine allows easy integration with multiple lenders and manages a healthy capital ﬂow.
- A Loan Servicing Engine that comprises an eﬃcient loan management system, customer service, and BI systems.
“We have opted for a mobile-ﬁrst strategy for the last two years. Our mobile app has received great traction in the SME ecosystem. It is one of the highest rated (4.5) in the SME Lending ecosystem. We have seen huge growth in customers installing our app since we loaded the app with a lot of industry-ﬁrst features,” Abhishek says.
The segment and future
The MSME sector is growing at a fast clip, and its contribution to India’s GDP continues to soar. According to Confederation of Indian Industry (CII), MSMEs contribute 6.11 percent to the manufacturing GDP, 24.63 percent to the GDP from service activities, and 33.4 percent to India’s manufacturing output. Despite the huge contribution, the sector is considered laid back.
Flexiloans is an embedded finance platform with more than 120 partners using the lending infrastructure to offer loans to their SME partners. Others in the lending segment include India, LendingKart, NeoGrowth, Vivriti Capital, Shubh Loans, Happy Loans, KhataBook, and OkCredit.
“But we are still scratching the surface of the $250 billion opportunity. Our ambition is to be on every SME’s phone directly or indirectly. They should get access to fast and affordable credit by coming directly to FlexiLoans app or accessing our services through any partner app,” Abhishek says.