With a CIBIL score of 785, Finomena founder Abhishek Garg applied for a home loan and got rejected by four banks citing that he was too young and didn’t fit into their processes. This led him to question the state of lending in the country and he finally asked himself- what was the last innovation that happened in Banking? He then realised that this sector has a lot of scope where technology can not only reduce the cost of delivery of services but also enable the core of the business – i.e. risk assessment. With Stanford alumnus Riddhi Mittal he founded Finomena. We chat with them about their venture. An excerpt from the interview:
- What made you start your venture?
There are a few things which make us tick, and Finomena happened to be at the centre of them all:
- Solving a must-address problem instead of a nice-to-have problem – India is a credit-starved country. Credit growth is needed to enable people to be able to do more and be more in their lives, and enables a macro level GDP growth as well, which starts a virtuous positive cycle.
- Figuring out what is possible with “the long tail” of data. The long tail is wonderful – it makes you work harder, it makes you try and find the needles in the haystack, it makes choices possible.
- Solving a problem at massive scale – 125 crore people is a lot more than the population of the US, and hence we came back after spending years in Silicon Valley at some of the best companies
- Deconstructing problems from a first-principles based approach – what kind of people should be lent money to and why and how to incentivise them to pay it back. Realising that we could list at least 500 reasons why radically new tech-first approaches are needed in today’s world instead of decades old traditional ways of evaluating people, especially in a diverse country like India.
- Adopting win-win solutions instead of thinking of zero-sum games. Lending is always win-win or lose-lose only. You either get your money back as the lender and the borrower’s credit score remains great, or you don’t get your money back and the borrower’s credit score gets docked as well.
- Applying behavioural psychology to figure out why different people behave the way they do, and trying to solve the utmost data-science problem of predicting human behaviour for their good. People are unique, and not everybody can fit into a predetermined, inflexible, rigid process. People’s financial lives, what they need and why they need it are so unique that it’s important to be empathetic and user-first to a fanatical degree.
- Changing people’s lives – finance is not a luxury. It is at the very bottom of Maslow’s hierarchy of needs. Money runs people’s lives, and when they need it, it’s usually time sensitive, critical and in some way, life-altering. Being able to help people when they need it the most, while also putting them through a dignified, engaging and fun experience brings a smile to our faces everyday.
- Finomena is doing all of the above. Each loan is a responsibility we have, towards the person whose life will change for the better once we’re able to serve them in a hassle free and fun way, and towards the lender whose money is being allocated.
- What has been the key to your business’s success?
Customer delight is the key to our business’s success. Finomena is trying to solving a problem that is a necessity and is something connected to everybody’s daily lives :). Giving customer something that the really need in life is what makes Finomena successful!
- What are the major challenges in your line of business and how did/do you overcome
them? Micro-Loans space has always been there, just through informal channels. People would borrow little sums of money from their Friends & Family network when needed and now we are bringing them into the formal fold. This space has never been served in the past by formal systems because cost of operationally serving them through branch led model is just unprofitable and doesn’t make any business sense. But now using technology as the only channel, these micro loans become profitable. Creating awareness among people about the product and about credit scores is one of the only challenges I think we had to face.
- Do you have a mentor who guides/advices you on matters of the business?
We believe Finance to be one of those sectors where having domain knowledge is very critical. We also believe in taking people along in this journey and have about 10 mentors from widely varying expertise such as Co-founders of successful Adtech companies, co-founder of an Investment Bank, MD of a Hedge Fund, and successful entrepreneurs.
- Have you benefited from the use of any specific technology for your regular operations?
Well using Aadhaar card for our application verification process is one for sure. Aadhaar is something that happened to a billion lives after Facebook and Whatsapp. We soon realized the reach of Aadhaar in the country and were quick to leverage this fact to make our application process simple and paperless.
- What strategy do you follow for Customer Satisfaction & Expansion?
A lot of people who apply for a loan through our app aspire to be in tune with the latest technology and hate the age old loan process banks still follow. We try and reduce the response time and have made the application process simple and easy to understand. We’ve come across many happy customers within a short span of time. One of our customers was so happy with our process that he wrote a blog for us on his college website. Another designed a poster ad for our social media page and there are a couple of others who have showed interest in joining our team!
- What, according to you, are the top 3 skills needed to be a successful entrepreneur?