Fintech Lender, Ftcash Plans To Introduce New Supply Chain Finance Product

Inception and journey so far.

A responsible lender to MSMEs by combining loans with digital payments. We enable them to increase their disposable income and provide them the ability to scale up. ftcash started in 2015 by enabling digital payment acceptance in less than five minutes anywhere in the country. We were able to make the process of digital payment acceptance ‘merchant centric’ and made it real easy. Our products enable the MSMEs to increase their business income while building their credit profile.

Since 2019, the AUM has grown by 22X despite Covid-19 and presently, the AUM is ~INR 360 crore, up from INR 175 crore over a year ago.

Can you tell us the growth of the start-up in terms of revenue, and what will be your revenue target for the coming year? How do you intend to reduce losses?

ftcash has consistently grown 2.5-3X per year since 2020. Our disbursals continue to increase 10-15% monthly and we anticipate a similar increase in revenue in FY 2023-24 as well. Over the past two years we have focussed significantly on productivity and profitability to reduce our losses. As per our current project, we should breakeven in the next three months (Q2 2023).

What were the challenges you faced while starting out ftcash and how did you overcome them?

Only 4% of micro-merchants have access to capital across the country and the lack of financial literacy, particularly in Tier 2 + towns, is one of the main causes of this. The estimated amount of the current addressable credit gap is $397 billion. Typically, small business owners borrow money from local moneylenders, which often traps them in a debt cycle. The difficulty in financing MSMEs can be largely attributed to risk aversion on the part of traditional lenders like banks, accessibility problems concerning documentation, linguistic barriers, and a lack of adequate support systems for last-mile borrowers.

Hence, the biggest challenge was to develop a business model that helps MSME fulfil their credit requirements in the most convenient, fast and risk-free manner while also scaling up the business. Since inception, ftcash has been focusing on building trust among MSMEs and help them to scale their business. The company is ensuring that the loans are provided to MSMEs as a win-win solution for both the borrower and the lender.

What are ftcash’s current offerings and outlook?

We provide working capital loans and digital payments to them. It helps them increase their disposable income and providing them an ability to scale up. A number of them are excellent entrepreneurs, but unfortunately have not been able to scale up due to lack of credit.

ftcash has had phenomenal growth since inception and grew more than 3X in 2021. Our 90+ delinquency rate is lowest in the market with 4%, which is much lower than the market standard in this target segment.

We have over 60,000 merchants in our network and so far, have disbursed INR 600 crore worth of loans. We expect disbursals to grow 3X by 2023. ftcash plans to maintain its portfolio quality and grow 3X each year to a book size of INR 8,000 crore in the next five years.

Please tell us about your service portfolio and clientele.

ftcash leverages technology to a large extent so that we can service the merchants efficiently while making it convenient for them. We have built a proprietary platform called “Daily Health" which measures the credit worthiness of the borrower every single day post disbursal of the loan and appropriate interventions are done if we find that the customer’s credit worthiness is going down. 70-80% of the merchants in our network take advantage of Daily Health option and pay instalments on a daily basis.

We have a customer facing app where they can see their transaction history, loan repayments, etc. All our data is stored in the cloud with appropriate security measures because customer privacy is crucial. Our field employees have an ftcash Agent App which is used to enter loan application data.

We cater to retailers, pharmacies, garment stores, automobile shops and mom-and-pop stores, with institutional finance. The company has partnerships with Northern Arc, Ugro and Ambit for providing credit offerings to their customers.  

Can you share some insights on the market you are currently present in?

NBFCs are now working towards strengthening presence in rural areas as consumers don’t have access to commercial banks and it often becomes difficult to get a loan from banks. As the loans are typically smaller ticket size loans, NBFCs with a digital stack can reduce the cost of servicing a loan and hence profitably lend to borrowers in rural India. Also NBFCs can leverage alternate data for credit assessment as these customers may not have a rich credit history. Credit demand in the MSME sector has already picked up and we expect that to continue into next year.

Will you be raising funds anytime soon?

We do not plan to raise funds currently, at least until the end of the year. So far, we have raised equity of $15M from FMO, Accion and IvyCap Ventures. In 2022, we raised $2M in debt from Northern Arc and Caspian.

What are your future plans?

We are currently lending in 18 cities in India. Our expansion is targeted towards west and south India within three categories: 1. Hardware and Electricals 2. Health and Wellness 3. Apparels. We believe we have an undue advantage in these segments with our experience and expertise. It has allowed us to keep our NPAs lowest in the market. Our next step is to expand our product portfolio with supply chain finance, which will be launched within a month's time. As a lending-first company, it will remain in our line of thinking by activating merchants with small ticket quick loans and use that pipeline for longer tenure loans.