What’s keeping you from buying that smartphone you had set your eyes on for ages? If you’re a student or a young professional, chances are that you simply don’t have enough to spare for the buy . While the former does not have regular channels of income, the latter may struggle to save enough after paying the bills. A convenient solution is to pay it off in EMIs. However, this is easier said than done, since bank loans come with their own set of conditions and in-store EMI schemes require credit cards and offer only limited options in terms of inventory .
Finomena, a startup with a unique system of verification and loan approval, offers an alternative. It is a customer-experience driven fintech platform that enables inclusion by offering easy access to credit for people who have never taken a loan before, and hence do not have a credit score.Moreover, it allows you to register online and simply browse ecommerce sites and choose the gadget you want.After that you can choose from the financing and EMI options and apply with a single click.
Banked but not eligible
The phrase ‘financial inclusion’ evokes the idea of a section of people without access to basic banking services. This is why one of the government’s primary initiatives in facilitating financial inclusion has been to open bank accounts through the Jan Dhan Yojana. However, a bank account alone does not ensure access to credit. A section that gets largely left out in terms of access to loans and credit cards, despite holding bank accounts, includes students, young professionals and the self-employed.More than 75% of Indians do not have a traditional credit bureau score.
“We cannot rely too much on traditional models to gauge the credit score of a potential client as traditional data for these people doesn’t exist.They might not have traditional income proof but with the power of a smartphone, they are leaving a massive digital footprint,” says Abhishek Garg, cofounder, Finomena. The platform uses this big data to create machine learning-based risk and credit scoring systems that take into account over 20,000 data points to assess the credit worthiness of a borrower.
Shashank Singh, 26, may be a lawyer at the Delhi High Court, but securing a loan from a bank was nearly impossible. “As an advocate, my income fluctuates month to month , which is why banks are reluctant to issue credit cards to me or approve my loan applications,” he says. When he wanted to purchase an iPhone 6S, Singh approached several banks for a loan, but was turned down each time. He started looking for alternatives and chanced upon Finomena. “They had a one-on-one conversation with me about their processes, and sent someone to pick up the documents from my home. My loan was approved within a day,” says Singh.
What’s in a credit score?
A credit score is a three digit numeric summary of your entire credit history. It is prepared based on the information provided in your Credit Information Report. The credit score normally ranges between 300 and 900.Most banks and financial institutions rely on this figure to determine the credit worthiness of potential bor rowers. In fact, 79% of the loans approved are for individuals with a score over 750.
However, this is a setback for the young unbanked population since they may not have a credit score at all, resulting in a vicious cycle.Finomena’s founders, Riddhi Mittal and Abhishek Garg, did extensive research about loan disbursal mechanisms and the demographic of borrowers, which revealed that most banks and NBFCs steer clear of the students and young professionals because traditional modes of KYC data collection don’t work for them. “Most of our customers are in their first jobs, or self-employed with no traditional proof,” says Mittal.
d, convenience and flexibility
While there are a few options available to customers for buying high-end gadgets on an EMI basis, they often have hidden clauses. In-store EMI programmes require the customer to have a credit card. However, less than 2% Indians are credit card holders.These schemes also have set tenures and EMI amounts payable by the customer. Finomena has taken it one step further by introducing FMIs or flexible monthly installments.
Viren Makwana, an IT student who also has a part-time job, was pleasantly surprised to learn that he could choose the down-payment amount, as well as how much he wanted to pay each month for buying a laptop.
The 21-year-old settled for a monthly payment of Rs 2,000 to pay off the loan over a 12-month period.
“Initially I didn’t believe that online EMIs were possible, but once I spoke to a Finomena representative, I was reassured that the process would work,” he says.