Loan repayments is a tricky business as any delay creates considerable stress for both lenders and borrowers. Gurugram-based startup Creditas Solutions promises to streamline debt collection using technology.
Creditas was founded in 2015 by Madan Srinivasan and Anshuman Panwar, who understood the power of analytics and technology in the collection of debt while they were working together at a UK based fund house.
The duo, who had long experience in the financial services industry, decided to apply technology in the debt collection process back in India With this idea, they began their entrepreneurial journey.
“The collection of debt is done by people and this can become coercive at times. This is when we decided to remove this layer and use the digital interface,” Co-founder Madan tells YourStory.
Creditas has built a technology platform where the entire process of banks or financial institutions recovering loans, especially credit card bills, personal or auto loans among others, is done solely through a digital medium with extremely minimal human intervention.
Pain points in debt collection
Traditional debt collection is riddled with issues. Madan says, “The classic approach is one size fits all in case of default but there is a difference between a borrower who has delayed by five days as against someone who has prolonged it by 500 days.”
In the founders’ experience, a majority of borrowers have genuine problems that prevent them from repaying the loan.
The second challenge is in terms of communication as no borrower wants to unnecessarily be disturbed about the repayment.
Third, lenders and borrowers need an effective resolution.
“Our technology platform takes all the information from the multiple sources to make deep segments of the borrowers,” says Madan.
Non-intrusive approach
Creditas says it sends out loan repayment messages to the borrowers in a non-intrusive manner where the individual can come to a resolution board at their convenience. According to Madan, there are symmetry and friction issues where the banks and customers have differing issues based on their own information.
Once, they come to the resolution board, borrowers are given various options on how they would like to repay and all this is done digitally.
“Customers love the fact that they are in control,” says Madan.
The technology platform of Creditas was launched under a website called ClearMyDues where the entire process of recovery of loans was conducted via a digital route. Although, the founders of the startup had a tough time in convincing the banks that this was possible as they were more accustomed to traditional methods of debt collection.
For the first three years, Creditas says it built up very strong traction through ClearMyDues where the startup would get certain portion of the banks accounts that needed debt recovery.
“We started by telling customers that your credit position is weak why don’t to you come to us and we will come out with some resolution,” says Madan.
He further adds that this resonated very well with the customers as they were not pushing but, in fact, were educating them about the problem.
This proved to be a win: win situation for both banks and the customers. According to Co-founder Anshuman, through their platform banks saw a five percent rise in collection with 40 percent reduction in costs while being compliant with all the regulations.
Evolving into product
This was also the time when the founders realised they had to evolve the startup to something different.
Creditas decided to white label its technology platform and provide its solution directly to the banks where it would be part of their recovery infrastructure. The product, Ethera, is deployed as a SaaS (software-as-a-service) platform.
“We felt that instead of asking banks to give us their accounts why don’t we white label our technology,” says Madan.
The founders also reason that there is a unique relationship between the borrowers and banks. Creditas wanted to be part of the system where it could add more value in terms of technology platform. This would mean integrating others players in the ecosystem such as credit bureaus on the platform to create a plug and play solution.
The business model of Ethera is a mix of licence and transaction success fee.
“As a platform our idea is to scale faster with the addition of new use cases and we also help banks modernise their technology infrastructure,” says Madan.
Anshuman says, “Our platform is very hyper personalised where we have different messages for various segments. There is a lot of gamification in the process which makes the customer much more involved.”
The founders of Creditas believe their technology platform brings a certain familiarity, context and comfort for the borrowers where the banks continues to have smoother relationship with their customer base.
Future plans
Today, Creditas has over 20 private sector banks and its customers have over 30 million accounts on its platform. It has a team size of around 250 people.
As the technology platform operates on a SaaS model, there is a certain license fee for using their solution and there is certain transaction fee for any successful closure of the debt.
Around five years ago, the bootstrapped venture raised an undisclosed amount in angel funding. The founders claim the startup has been profitable over the last three years.
As part of its future plans, Creditas is looking to tap into other customers sub-sects such as public sector banks and smaller NBFCs (non-banking finance companies). It is also looking at newer use cases like housing finance, SME (small and medium enterprise) loans etc.
Besides, it looking to expand into other markets like the Middle East and South East Asia where there is a similar environment of debt collection.
“Our solution is a neo collection platform and there is lot of traction for this,” says Madan.
