1.

Introduction to Digital Lending among Indian Startups

Digital lending in India has come a long way from being limited to account aggregation and B2B
loans. The Indian consumer is fast becoming the low hanging fruit for many of India’s lending
tech startups. India’s digital lending wave is fueled by massive demand from the consumer side
as income growth has been weak in the past year. The growing role of credit is best indicated by
the fact that on average 5.6 Million credit cards are being issued annually.

With growing urbanization and rise of formal employment in Indian cities, the addressable
market for consumer credit is poised to increase, however, that does not mean that the sector is
without its own challenges. But the fact remains that formal employment as indicated by the
number of EPFO accounts has surged 4x from 44 Million in FY15 to 161 Million in FY21.
Lending tech startups are making the most of this opportunity with niche products such as sachet
loans, advance salary and BNPL (Buy Now Pay Later) products.

With over $2.4 Billion worth venture capital invested in Indian lending tech startups between
2014 and Q3 2020, the investor outlook towards the sector also looks bullish. And this sentiment
is reflected in the latest Inc42 Plus report— Lending Tech In India: The Rise Of Consumer
Lending, Report 2020. We bring you a clear juxtaposition of the opportunity for B2B and B2C
lending tech startups in India. Get a clear understanding of the overall lending tech market in
India, understand demand mapping, the lending tech startup landscape, the state of NPAs in
India’s leading digital lenders and more.

India is home to approximately 1,263 digital lending startups, out of which over 147 (12% of the
total 1,263) are backed by venture capital funding. With venture capital inflow in B2B lending
startups growing at CAGR (2015-2019) of 72%, it remains the most favored sub-segment within
the lending tech segment.

2. Evolution of the Digital Lending Landscape around the globe and in India

The Indian Lending landscape has undergone a dramatic shift over the past few years. The
legacy systems and practices that were prominent in this space are disappearing and getting
replaced with digital processes that are powered by data and AI. This transformation has been
further accelerated by the arrival of COVID-19 and the social distancing norms put to counter it.

The Digital Lending Ecosystem can be broadly classified into 6 segments.

The bottom layer consists of financial institutions like Banks and NBFCs. They are the backbone
of the entire ecosystem as they provide a major portion of the capital for lending. The players in
this layer are traditionally large and highly regulated by the RBI. They form partnerships with
fintech players, who provide them access to the untapped segments of the economy.

Another critical component of the ecosystem are the Data providers. These are the entities that
collate external data through their sites and provide them to the lender. This data helps the lender
discern the validity of the customer and also assess his/her credit-worthiness. This segment also
consists of Alternate credit platforms that have the capability to use non-traditional data and
Artificial intelligence to underwrite a customer. These players leverage sources of alternate data
to enable financial providers to provide credit to the underbanked, unbanked and first-time
customers.

It is extremely vital for any lender to have a robust Loan Origination System (LOS) and Loan
Management System (LMS). The LOS and LMS help to handle the origination and management
of a loan by following principles that are designed to ensure the smooth running of the lending
journey. These capabilities can be either built in-house, or can be acquired with a third party. The
LOS and LMS systems, when combined with the data received from the data providers, ensure
that the entire lending process remains seamless. Apart from LOS/LMS, this segment also
consists of players who enable collections.

3. Current Digital Lending Landscape and Scenario, Model Types in India

Since the start of the pandemic, the education loans segment has seen major funding activity.
Players like Eduvanz and Greyquest have raised funds to help them expand operations across
India and provide affordable loans to students.

Two new categories that have been added into this ecosystem this year are Chit Fund
Marketplace and Automobile Financing. ChitFund is a unique saving and loan product of a pre-
determined value, duration, and number of members. The total value of the chit fund is the net of
the contributions made by its members by the end of the term. Automobile financing players like
Kuwy and Credit wide capital as a separate category in the ecosystem as this space has seen a lot
of activity over the past few months and is expected to see rapid growth in the future.

A unique category that has been included into this segment is P2P lending. In this category, the
lending platform acts as an interface between 2 individuals. This is a C2C model which enables
individuals to procure loans directly from other individuals through the platform. This model is
appealing to investors as it provides an alternate investment opportunity and provides a higher
return than a CD or a savings account.
With the lending ecosystem adding new players every day, the borrowers are often confused
about which lender to avail credit from. This is where a loan marketplace comes in. These
platforms allow borrowers to compare the loan products offered by different vendors and choose
the one that best suits their needs. These marketplaces also play a role in ensuring that the
borrower receives a competitive interest rate for his loans.

4. Technologies Levelling the Digital Lending Playfield

Digital lending is the process of offering loans that are applied for, disbursed, and managed
through digital channels in which lenders use digitized data to inform credit decisions and build
intelligent customer engagement. The Covid-19 crisis has opened more than just one door. When
the world is crawling to normalcy, the pandemic has created opportunities for innovation,
learning and behavioral shifts. Digital transformation has accelerated, businesses have amplified
their technology investments on cloud-based products and services, and digital sales have gained
momentum with traditional retail stores going online for the first time. With all these changes in
place, digital lending is taking centre stage for the past ten months. Digitization of the lending
process brings a number of powerful benefits for banks, including better decisions, improved
customer experience, and significant cost savings. Banks are slowly opting for technology to
better organize the digital lending process. Some of the Artificial Intelligence (AI) applications
and its uses that serve as a major source in the lending process are:
 Robotic Process Automation (RPA)- Banking trade, financial services and insurance
industries are leveraging RPA technology. Lending Management Automation is the RPA
being broadly used within this section.
 Document automation- Document automation helps lenders to routinely extract
prospects’ knowledge from their paperwork.
 Enterprise automation- Enterprise automation permits prospects to fill digital varieties for
making use of loans.
 Electronic signature- Electronic signature feature allows signaling the paperwork online.

By using artificial intelligence, new models are being developed. These models factor in
information surrounding thousands of data points like employment history, education details, and
spending habits to verify if an applicant will be able to clear the debts on time. On the basis of
these insights, a new credit score is coming to the surface as the future of consumer lending.

Digital lenders have started asking their partnered fintech app development companies to use
machine learning for enhancing loans by making underwriting decisions. The algorithms can
help validate if the applicants are telling the truth about their income level. The process is best
suited for people having an insufficient credit history, less income, or anyone who is charged
higher interest because of the lack of financial data. Machine learning is also being used heavily
for its ability to detect fraud through analysis of customer behavior backed by the time they
spend answering applications’ questions, looking at the price options, etc.

Through the mode of blockchain, digital lending companies can develop a high trust, low-cost
platform. With the complete loan process existing online, people will be able to keep a record of
documents and transactions on an anonymous digital ledger platform thus eliminating the need
for third parties and intermediaries. 

The most common corners of the lending sector are – security, storage, and 24*7 upkeep
time. Cloud computing solves all these issues in addition to offering a series of additional
benefits like: Secure connections, Cost-effective and time-efficient management , Disaster
recovery, Simplified online processes, Automation of processes.

While these technologies are playing a key role in bettering the state of digital lending, what is
important for the sector to keep evolving. A way the sector can keep getting efficient is by
knowing the trends that are waiting for them in 2021 as the future of consumer credit. 

5. Startup company

 KOBSTER

A. About the company:

Kobster is a pioneer of B2B eProcurement and an eMarketplace providing Corporates an end-to-

end solution for their procure-to-pay cycle. Kobster is a Business–to–Business e-commerce
platform, facilitating businesses from small to big, to buy and sell goods online. Kobster enables
corporate buyers, retailers, SMEs, home offices, hotels, hospitals etc. to purchase business
products in bulk at wholesale rate. 
 B. History and background:

Kobster, which claims to be a pioneer in the e-procurement industry in India, was incubated and
graduated from PayPal on May 15, 2015, and is funded by Incubate Fund, Splice Advisors, and
LetsVenture. Kobster also counts Oracle, CoWorks, Virtusa, Altisource, BRG Energy, WeWork,
DB Schenker, Practo, GEP, and MindTree among its major customers.

On the rationale for starting a B2B e-commerce firm, Karthik said, “Prior to starting the
company, we did research in e-commerce in India and abroad. One interesting finding from this
study was that typically, in any growing economy in the world, the market first adapts to B2C
commerce. This is followed by companies adapting to B2B e-commerce.

More interestingly, many of the B2B e-commerce firms outgrew the B2C e-commerce firms. If
you take the top fiv e-commerce companies in the US, three (Grainger, Staples, and Amazon
Business) are B2B. So, in 2012, when people were beginning to buy online (B2C e-commerce),
we felt that five years down the line, B2B e-commerce would the next big thing,” he said.

Karthik and the other founders of Kobster went on to study the way procurement was done at the
company they were working for. And they found a lot of things that could be changed through
the use of technology in procurement, and drive efficiencies, including cost-savings. Thus, was
born Kobster.

C. Rationale behind the startup:

We are building kobster to help Indian manufacturers, distributors & wholesale sellers to

increase their reach and streamlining the procurement needs of a buyers using technology. Our
model connects brands to retailers/corporate directly by removing the layers of distribution. We
are a pure B2B online player.

D. Key Founders/ Members:

 Karthik Ramaiah Founder

 Mohan Gayam Co - Founder
 Vineet Neeraj Co-founder
E. Growth story:

Kobster claims that after Urban Ladder moved to Kobster’s platform, Urban Ladder’s efficiency
improved by 20 per cent. It positioned the procurement department as a strategic asset of the
organisation, saved 20 per cent in its overall procurement spend, and ended up purchasing from
one supplier for all its locations.

“With our e-procurement tool, Urban Ladder gained 80 per cent more visibility in their
procurement process,” Karthik Ramaiah, founder of Kobster, told BusinessLine.

F. No and Types of Digital and Funding Patterns of the startup in Last 3

years:
  UNIVERSAL SPORTSBIZ PRIVATE LIMITED

A. About the company:

Universal Sportsbiz is a youth-focused fashion company that offers a variety of clothing brands.
Since 2015, Universal Sportsbiz Pvt. Ltd. (USPL) has been shaking up the Indian fashion
industry with on-trend products, smart celebrity tie-ups, and an unerring finger on the pulse of
India’s youth. It has quickly created a mark for itself, and is today regarded as one of the key
players in the category. Headquartered in Bangalore, USPL’s brand portfolio includes Wrogn,
Imara and Ms.Taken.

B. History and background:

Universal Sportsbiz is a youth-focused fashion brand house. Its brand portfolio includes brands,
across men’s wear and women’s wear, like Wrogn, Imara, Ms.Taken, Single, and Wrogn Active.
The company was founded in 2012 and is headquartered in Bangalore, Karnataka.

Universal Sportsbiz Private Limited is a Private incorporated on 23 April 2012. It is classified as

Non-govt company and is registered at Registrar of Companies, Bangalore. Its authorized share
capital is Rs. 100,000,000 and its paid up capital is Rs. 90,293,592. It is inolved in Sporting.

Universal Sportsbiz Private Limited's Annual General Meeting (AGM) was last held on 31
October 2019 and as per records from Ministry of Corporate Affairs (MCA), its balance sheet
was last filed on 31 March 2019.

C. Rationale behind the startup:

USPL’s unique brands, backed by celebrity endorsements, have a strong appeal for the young
fashion-driven Indian consumer.
D. Key Founders/ Members:

 Anjana Reddy - Founder and CEO

E. Growth story

USPL launched men’s line Wrogn in November 2014 and Imara the next year, with current
Indian cricket captain Virat Kohli and actor Shraddha Kapoor, respectively, as brand
ambassadors; in September 2016, the company launched Ms. Taken with actor Kriti Sanon as its
face. Says Tendulkar, “USPL operates an interesting business model that brings together
celebrities, fans and fashion in a distinct manner.”

While the Indian fashion brands space is dominated by well-entrenched home-grown retailers
like Arvind, the Aditya Birla Group, Reliance Retail, Future Lifestyle Fashions, among others,
USPL has been able to clock an impressive CAGR in revenue, of 124 percent between FY14 and
FY17. Reddy says the company’s FY17 revenue stood at ₹105 crore, and despite data showing
losses mounting to ₹22 crore in FY16, she expects to break even at the end of the current fiscal
with her volume of sales. A benchmark would be the growth curve of Roadster, Myntra’s outdoor
lifestyle brand launched in 2012, which is estimated to have surpassed a topline of ₹500 crore
and is expected to achieve a run rate of ₹1,000 crore by FY19.

F. No and Types of Digital and Funding Patterns of the startup in Last 3

years:
6. Potential Impact of Digital Lending on the 2 Startup chosen by students

Kobster

Kobster partnered with Indifi Technologies in November 2018. The e-commerce firm leveraged
Indifi’s invoice discounting offering to address its working capital challenge. By providing
money upfront against unpaid invoices on convenient and flexible repayment terms, Indifi has
enabled Kobster to pay its vendors by the due date on their end. This has further helped the firm
to manage its credit cycle better. Through such a value proposition, Indifi’s invoice discounting
has emerged as an effective solution for Kobster to manage its working capital, thereby ridding
the firm of the stress of arranging funds or utilizing its equity capital for managing credit cycle
gap.

After availing the same, Kobster did not have to worry about the working capital anymore. This
has further enabled the firm to invest its credit, time, and efforts and reaching out to new
customers with attractive credit period options. Even in terms of scalability, the partnership
with Indifi has worked significantly in Kobster’s favor. The firm is witnessing increased
opportunities in gaining an edge over its contemporaries and acquiring a better share in the
market through enhanced customer experience. Indifi took a proactive approach in
understanding the business model of Kobster and providing support accordingly.

USPL

USPL has partnered with Indifi – a leading SME lending portal in India – to provide apt
working capital solutions for suppliers delivering goods to the company. These suppliers can
avail access to Indifi’s credit line to ensure smooth operations and in-time production without
stressing about expense payments.

This happens in the following way:

Typically, USPL has a payment cycle of 45-60 days for its vendors. While raising a purchase
order, the company checks with its vendor if any upfront payment is required. If yes, the
supplier is connected with Indifi for setting up a credit line against the invoice. The vendor can
get credit against 70-80 percent of the invoice value. Usually, this amount is disbursed within
24 hours and in a completely digital way.

The result is that the supplier is not left cash-strapped for a seemingly long period of time and
can continue supplying quality products to USPL without bothering about ready cash
availability. The amount received upfront from Indifi can be invested into the business for
taking care of the timely procurement of raw materials, payment of salaries /other recurring
expenses, daily cash payments, etc. This essentially means that the supplier does not face
further cash crunch and can carry on with his or her business with relative ease.

Invoice Discounting
Invoice discounting offers a win-win scenario for everyone involved in the supply chain. The
vendors are happy as their routine work carries on undisturbed. Alongside, USPL is satisfied as
it gets products of acceptable quality and in good time. As the company does not have to worry
about suppliers' stability, it can optimize its own working capital cycles accordingly.

Tarun Saraf, the CEO of USPL, is very optimistic about the helpful role of invoice discounting
in facilitating smooth business operations. He visualizes the role of CFOs as value creators. In
the words of Saraf, “I have seen this role change - from being enablers to being active strategic
tools for a company's growth. CFOs are no longer just treasurers - they now drive strong value
creation for their organization, they can now play an active role in managing a corporate supply
chain.”

7. The Way Forward and Future Prospects.

Kobster

Through invoice discounting, Indifi has provided a great alternative to traditional business
loans for B2Bs, emerging as one of the most effective debt-financing based working capital
solutions. The success story of Kobster stands as a prime example of the same. Indifi’s
partnership with Kobster is a significant step taken towards facilitating fund procurement for
the B2B industry. Invoice discounting is not only a good financial tool for businesses to
improve their cash flow, but is also a valid way for funding growth.

This also signifies how digital lending platforms like Indifi have become an effective
alternative for small businesses to secure capital. Through its innovations-driven approach,
Indifi tapped into the potential of invoices as an asset and emerged with this convenient and
time-efficient solution of invoice discounting. With solutions like this, Indifi aims at
dedicatedly solving the credit issues faced by small businesses across different segments and
verticals in India.
USPL

More often than not, big businesses are dependent on the timely support of small vendors to
keep their supply lines in order. Given this scenario, well-established organizations have their
own duties to perform when it comes to keeping their suppliers happy.

They should understand the obligations and constraints faced by their vendors. From making
payments to raw material suppliers/other vendors to settling miscellaneous bills and releasing
staff salaries in time, small businesses have a lot on their cards. They should not be harassed by
their buyers (factory owners) in the name of payment terms and non- availability of authorized
personnel to sign their due checks.

By enabling invoice discounting through Indifi, USPL has introduced helpful solutions to make
small vendors happy and eager to associate with its operations in future.