How this fintech start-up provides Indian blue-collar workers with access to credit
India has over 300 million blue-collar workers, and that number is growing as new graduates join the workforce every year and agricultural employment declines.
Logistics / delivery, manufacturing and retail employ the largest number of blue collar workers in India, all of whom have been affected by the COVID-19 blockade. The fact that they do not have access to credit – banks do not contact them due to lack of credit scores – has made survival even more difficult.
But the fintech startup based in Gurgaonaims to change that.
Backed by a San Francisco-based company Combiner Y and based in Mumbai 100X.VC, the startup is a credit platform for blue collar workers. Launched by Sandeep Arora and Saurav Gandhi in Gurgaon, Bueno Finance aims to connect blue collar workers workers in the traditional financial world.
“Bueno Finance aims to improve the financial health of the blue collar segment and works on building the credit history of these clients,” says Saurav Gandhi, co-founder of Bueno Finance.
A recent CIBIL study indicates that there are around 120 million households (45 percent of total Indian households) with an annual income between Rs 2 lakh and Rs 5 lakh.
“Most of these households are still not part of the formal lending economy because they do not have a credit score, or they are new to lending. Bueno Finance serves as a bridge between clients and the big banks / NBFC, and aims to provide access to formal credit for the next billion, ”says Saurav.
How it started
Saurav holds an MBA in Finance from MDI Gurgaon (lot 2011) while Sandeep Arora is a BTech graduate from IIT Delhi (lot 2008). The founders have over 10 years of experience in companies such as American Express, Citi Bank, Capital One, PayU, and Swiggy.
When the duo met in 2014, they were leading parallel teams within Citibank. They agreed that there was a huge gap in funding for blue collar workers. Many workers received money directly from banks, wages increased, but credit had not accelerated for this segment.
Sandeep had seen this problem firsthand while interacting with Swiggy’s delivery managers during his time at Swiggy. The co-founders also saw how very powerful small credit was – it played a role in improving customer creditworthiness and could be very effective in acquiring customers.
This led to the launch of Bueno Finance in 2019, the founders invested Rs 10 lakh in the company and are working with their partners NBFC, Stashfin and Liquiloans, to disburse the loans.
Bueno Finance has a hybrid approach. A customer can apply for an instant personal loan / line of credit which also helps in building a credit history and securing higher note loans at lower rates. Customers can avail this loan in their bank account, directly with NBFCs registered by RBI. It focuses on New Customers on Credit (NTC) where it offers small credit to help people build their credit history.
It also connects with B2B employers who employ construction workers and blue collar workers, such as Swiggy. This helps prevent fraud and helps deliver better products.
“In our sector, few players do B2B and B2C. Fintech players and small NBFCs have started targeting this segment, but they are charging exorbitant interest rates to compensate for the higher “risk” associated with this segment. Bueno Finance wants to change this situation and bring this segment to generalize financial ready. Preferred clients of Bueno Finance can get a loan of 2-5 lakh rupees at an interest rate of 15-18%, ”Saurav says.
Their product “Scan Now Pay Later” is a digital credit card on UPI. It is a multifunctional product; the customer can use it as a credit card or request money from their account as a cash loan. They can transact using UPI in online and offline world.
Bueno provides a UPI ID, which is backed by a line of credit approved by Bueno Finance; this can be used to transact at any online merchant. Through the app, customers can also use this credit line to transact in the offline world through QR codes available at each merchant.
This small credit and repayment history help customers improve their creditworthiness and get larger loans in the future at lower rates. The product gives the startup a higher share of the customer portfolio as well as spending data, to get a 360-degree view of customers.
The company carried out its first pilot project with Swiggy to offer the microcredit product to its delivery managers in the Gurgaon region.
“We have more than 70,000 customers on our platform with more than 60,000 downloads of the Bueno Finance application. There is a huge demand for credit in India and most of the traffic is organic in nature. It’s really impressive because our Customer Acquisition Cost (CAC) is really low, ”says Saurav.
The fintech startup makes money from processing fees and interest commission income.
“Customer education” was “essential” as building trust and branding are key elements in running this business. “One of the key issues is financial education. Almost 75% of the Indian population does not understand basic financial concepts and there is a huge opportunity to educate customers, especially in this segment. Bueno Finance is India’s premier worker credit platform, ”says Saurav.
Projects for the future
Bueno Finance aims to acquire more clients inexpensively and efficiently, using short-term line of credit products that will help solve immediate financial needs.
It plans to offer a range of financial services to this segment with personal loans, credit cards, auto loans and insurance. The startup plans to make money as a percentage of the amount disbursed through its platform by helping banks acquire new customers.
“We want to acquire customers and grow approximately 20 times over the next 18 months. We also want to create a cross-selling engine capable of delivering a suite of financial services to our clients, ”says Saurav.
The current addressable market for his product is $ 450 million, and Bueno competes with startups like SuperMoney, Kosh, and Niyo. The market will exceed $ 1 billion in a few years.
Founders of Bueno Finance
The founders raised a $ 300,000 round, a $ 125,000 pre-seed round from Y Combinator and a $ 275,000 seed round. One of their investors is the founder of Cred, Kunal Shah.
It is also funded by Dheeraj Jain of RedCliffee Capital.
“We’re in the very early stage and don’t want to disclose any income,” Saurav says.