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A host of online personal finance startups are changing the way consumers and financial institutions transact, says Sudhir Syal
LIKEmost people applying for a loan, Adhil Shetty, a graduate from the Columbia University and former consultant with Deloitte went through his share of intensive search and confusion. "On one of my trips back home, I tried applying for a home loan for my parents and realised that a major pain point existed in the space. There was no clarity in terms of eligibility for a loan and consumers were often left running from one bank to the next," he recalls. Shetty teamed up with his brother Arjun who had experience in setting up an online finance marketplace for Amazon.com. With seed funding from Chennaibased AVT Group, the brothers launched Bankbazaar.com, a unique web platform that works in line with the financial product approval system in banks. So a user can enter his details, find out which financial products he is eligible for and apply for all of them within 2-3 minutes.While Bankbazaar's model is recent and regulatory issues regarding online applications are yet to be sorted out, scores of similar online plays such as Apnapaisa, Rupeetalk and Ratekhoj are making their presence felt in the personal finance market. The early players in this space have been web portals such as Web 18's MoneyControl, Sify's Walletwatch and Rediff's MoneyWiz, which have served as an information resource for users. Those looking for specific financial products usually go through search engines like Google and are directed to platforms such as Deal4loans, Loanraja and Loanshop, which form the category of 'lead aggregators'. Here essentially, the user expresses his desire to purchase a loan and provides his contact information, this information is sent to financial companies which then compete with one another by calling the user and providing him with their best offer.
Another category is that of financial comparison engines that go one step further by providing customers with an opportunity to compare multiple financial products in the market and then apply for the one they believe best suits them. The leader of this category in terms of traffic is Apnapaisa.com, started by ex-ICICI banker Harsh Roongta, "The biggest challenge in this format is in updating product information from the vast array of financial products in the market. We have a team of 60 people dedicated only to this. Our value proposition thus is in giving consumers the most neutral selection of products, empowering them to make a decision." Apnapaisa has gone through a complete cycle, starting first as a DSA (direct sales agent) for banks, then moving to lead aggregator and finally finding its current format. True to its proposition, Apnapaisa deals with investments, insurance and loans and lists information both on products of its advertisers as well as on other products. Roongta claims his website attracts approximately 500,000 unique users per month with a conversion of 12%.
Buoyed by the success of Apnapaisa, startups such as Rupeetalk and Ratekhoj have followed suit with all of them offering similar comparison engines on their site. Founded by IIM Lucknow graduate Satkam Divya, RupeeTalk has been built on the basis of the founder's learnings while working with financial institutions such as Times Financial Services and ICICI. "I helped set up the credit card sales module of ICICI Bank's website and within just six months, I noticed the number of credit card applications go up from 1,500 to almost 35,000 a day. I thought, if this can work with credit cards why not with every other financial product," he says. So with early stage investment from Seed Fund he launched RupeeTalk, which covers the entire gamut of credit, investment and insurance products. The site has seen a revenue run rate of Rs 10-12 lakh a month with approximately 10,000 leads being generated every month.
Another startup that uses the comparison model is Policybazaar, which is an insurance comparison engine from the Naukri.com group.
Unlike startups in the West, KYC norms of the IRDA and the RBI in India require at least one face to face meeting before a customer avails a financial product. This means that there is always a possible lag between the Web platform and the financial service provider as the entire transaction can never be completed on the Web. It also means that such startups lose out on more attractive cost-per-transaction revenues while the cost of sourcing from search engines goes up with increasing competition.
Delhi-based Itrust.in has adopted a balanced strategy to counter this problem. Karthik Verma and his partner Dhruv Agarwala were classmates from the Harvard Business School class of 2002. Dhruv went on to head institutional sales for GE while Karthik worked for TCI Fund Management, one of Europe's leading hedge funds. With both experiencing the entrepreneurial urge they evaluated multiple industries such as healthcare, education and financial services, finally settling on financial services. "We evaluated 10 success stories from across the world and realised that the common thread amongst all of them was an integrated online/offline model. More so in India where Internet penetration is still low, we realised that in order to build trust in the Indian consumer an offline model would be necessary," says Karthik. A team of trained financial consultants from the company personally meets with those posting enquiries on the website, finds out their requirement and revert on behalf of the banks with an application form for the relevant product. "With this process we hold onto the customer for all his banking needs thus reducing our cost-per-acquisition," he explains.
Apart from sales-driven financial plays, there are other startups in segments such as stock broking and personal financial advisory. Two startups that stand out are MarketHero.in, launched by Abhimanyu Chirimar, which is a stock simulation platform with applications in the education and stock broking space. Another platform is InvestmentYogi which provides financial planning and tax planning advice online for a fee, thus working like an online financial advisor.
With transaction volumes yet to reach critical mass, these startups depend largely on financial service companies for advertising. The 2007-2008 report on banner advertising by the Internet and Mobile Advertising Association of India (IAMAI) showed that at Rs 58.3 crore, online advertising from the BFSI sector contributes 25% of the total online advertising revenues in the country (Rs 235 crore). The report also projects a growth of 50% in BFSI online advertising spends in 2008-09. This rate of growth has also been catalysed with many financial companies moving from their existing arrangements with DSA channels to looking at web platforms as a more economic alternative to source leads. Subrat Pani, head of credit cards India at Kotak Bank and one of Rupeetalk.com's clients says, "We source leads from a number of online finance platforms, and so far our experience has been good. Most importantly we have also seen that customers sourced from the online partner sites behave much better with respect to credit card activation and usage." Pani says Kotak generates approximately 2,000 online leads every week for its credit card division.
In October 2007, Sequoia Capital made an investment of $2.2 million (Rs 11 crore) in Apnapaisa, while as recently as last year Seed Fund made an investment of $1 million in Rupeetalk. "The online finance market is still an early market with attractive long-term potential to build a consumer brand as financial services companies are large advertisers. Over the long term, the market will see 2-3 winners," says KP Balraj, managing partner, Sequoia Capital. Mahesh Murthy, managing partner at Seed Fund believes that a downturn might actually benefit such sites, "In an economic downturn, consumers don't stop buying financial products; they only become more careful. In such an environment, online comparison sites serve both the requirement of the user and the advertiser who gets an economical advertising option."
sudhir.syal@timesgroup.com
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