About the entrepreneur and how the company was found
Ekmeet Singh hailed from New Delhi, and after having completed his graduation in computer science, he worked as a consultant in Accenture. During this tenure of about 3 years, Ekmeet mainly dealt with supply chain management problems of various clients and gained international experience.
After this, he co-founded his own consultancy firm ACS to provide software solutions such as ERP Solutions, Product Development, Custom Application Development, providing enhancements and maintenance to running applications, Developing Mobile and Wireless applications, Social Media Intelligence & Analysis Solution, Search Engine or Social Media Optimization services to International Clients. ACS later ventured into developing its own products and delivering services such as online strategies on a consulting basis.
Simultaneously, he also served as the director of investments and strategy of Ashton International, which functioned in real estate investments, development and asset management. While working here, he also carried out several general management roles within the firm such as ACS later ventured into developing its own products and delivering services such as online strategies on a consulting basis.
In 2013, Ekmeet completed his MBA degree from Instituto de Empresa in Spain with stellar performances in Finance, Management Accounting, General Management, Strategy and Operations.
He came back to his hometown following his MBA, and took up the role of advising and mentoring companies of early stage VC fund in the US. Since March 2015, he started serving as the board observer along with his role as advisor for various start-ups.
After majoring in Entrepreneurship during his MBA and spending time in the Venture Investments and Venture Development side of the startup ecosystem, Ekmeet decided to be on the other side of the table and be an Entrepreneur again by co-founding LENDBOX along with his B-school roommate Bhuvan Rustagi and current CTO Jatin Malwal.
Jatin was earlier a part of the product team at Snapdeal, looking at the seller part of the business. He quit and started Playselfie, an app like Instagram for selfies. The company was incubated with GSF Accelerator. Ekmeet, who was then a part of the venture development team at GSF, met Jatin. After shutting down Playselfie, Jatin was invited by Ekmeet to lead technology at Lendbox.
About peer to peer lending
Peer-to-peer lending stands for a type of debt financing, in which as the name suggests, individuals can lend and borrow money without the use of an official financial institution. In other words, it removes the middleman from the process, but this could make the transaction riskier than traditional methods.
In the traditional lending process, small businesses or even individuals apply for loan in a bank. Following this, the bank runs extensive financial checks on the person (based on past transactions and loans) also called credit history. If the person qualifies above a certain minimum criterion, the loan is approved or rejected. Based on the financial background of the person, the bank decides the riskiness of the transaction and based on that comes up with an interest rate.
The main target customers for peer-to-peer lending platform includes both the borrowers who do not want to go through the elaborate process followed by banks and lenders who are willing to lend their own money for an agreed interest rate. Usually the lenders have information of the borrowers and have the option to choose if they want to lend money to the lender or not. A borrower on the other hand may receive his fund requirements from one lender or multiple lender.
In this sector, there are certain for-profit organizations which provide a platform for pairing of lenders and borrowers.
Market opportunity of peer to peer lending in India
The product and the target i.e the business model
Lendbox is a democratic P2P platform that connects borrowers with investors.
Basing only 20 percent of its risk assessment engine on the CIBIL score, the platform assesses a borrower’s credit-worthiness based on their social, professional, behavioural analysis, including their salary expenditure trends and limits on credit card. The founders claim that the platform takes close to 200 data points into consideration before deciding on a suitable interest rate.
The borrowers are then classified between A1 (A2 and A3) and B3, with the rate of interest ranging from 12 to 36 percent. About 85 percent of loan requests are denied by the platform, and only 20 percent of their total users are from Tier II towns and cities.
The platform allows both borrowers and lenders to send proposals and expectations of the loan amount and the interest. Both the parties can ratify and accept these conditions. The integrated recommendation engine then finds (recommends) the right match for the borrower and lender. On an average, investors on the platform put not more than Rs 20,000 in a loan. Further, to hedge the risk of investment, a borrower’s loan amount is filled by smaller amounts from multiple lenders on the platform.
According to the new guidelines for P2P lending by RBI, the exposure of a single lender to the same borrower, across all P2Ps, should not exceed Rs 50,000 on the platform.
The founders state that the average rate of return for investors is close to 18 percent.
Unlike banks, Lendbox promotes pre-closure of loans and doesn’t have any lock-ins for its users.
The company also has developed an automated cash management system on top of YES Bank’s, which collects the EMIs or disburses the loans from borrowers to investors and vice versa without any manual intervention.
Three percent of the company’s total loan book is written off as NPAs.
The company also has EMI protection insurance plans on its platform, where the insurance company pays the EMI on behalf of the customer in the case of a medical emergency or loss of job. This is covered for a maximum repayment of only four to five EMIs.
Revenue Streams: The platform charges a processing fees of two to six percent from the borrower, depending on the rate of interest.