With Low Delinquency Rate, This Startup Provides Quick Loans To Working Professionals EarlySalary recently raised $10 million in Series C round from Chiratae Ventures and Eight Roads Ventures

At a time when inflation is rising, it gets onerous for a young working professional to meet month-end expenses on a salary that is credited on the first day of a month. "Budget thoda tight hain. Salary ane de pahele" (I am broke. Let my salary get credited) is a phrase that one might have heard from friends or colleagues. It's not just inflation, but a desire to buy the latest smartphone or laptop, letting alone planning a trip, results in a cash crunch. At this point, getting additional cash as a loan with attractive interest rates can cushion month-end needs.
To address the huge credit requirement for this underserved population and allowing them to live worry-free, Akshay Mehrotra founded EarlySalary. In an interaction with Entrepreneur India, Mehrotra discusses how the startup has helped people and allayed the fear or skepticism against startups providing quick cash.

EarlySalary: Quick Savior For Office Goers?

Founded in 2015 by Mehrotra and Ashish Goyal, the Pune-based startup is a consumer lending platform that helps young working professionals to avail easy salary advances or instant cash loans. The startup claims to offer upto INR 5 lakh of flexible loan amount with attractive interest rates. EarlySalary helps young professionals with an easy line of credit, instant cash loans, salary advances, long-term loans, education loans, interest-free EMIs for shopping, and travel expenses. In order to expand its customer base, the startup has also integrated into many company's HR systems to help the entry-level and blue-collar employees borrow instantly.

"We at EarlySalary aim to provide a one-stop credit solution that helps its customers to achieve financial support during emergencies and upgrade their lifestyle," Mehrotra claimed.

The startup has till date disbursed over 1.7 million loans worth INR 3,500 crore.

The Problem

After his long stint, working with larger conglomerates across the sector such as retail, consumer services, banking, e-commerce and Insurance, Mehrotra decided to have something of his own. Mehrotra along with Goyal after interacting with several professionals across various spaces realized that one common problem that existed was the cash crunch. This realization helps them to decide on founding an online lending platform.

"We realised that there is a large credit underserved population in India. Easily accessible financial assistance was non-existent for young professionals in the country," said Mehrotra.

He now claims that in the last five years, the startup has helped first jobbers settle into a new city, purchase big LED TV for parents back in their hometown, plan holidays and even provide finance ahead of expenses.

One of the major pain points that Mehrotra noticed and wanted to address in his platform was the availability of loans in minutes instead of days. This required minimum human interference and maximum automation. This made Mehrotra and his team invest heavily in artificial intelligence and machine learning.

Five years down the line, the startup has till date raised $35 million from marquee investors such as Eight Roads Ventures (Fidelity), Chiratae Ventures (IDG) and raised nearly $85 million in debt to build its lending business. It raised $10 million in a Series C round in October last year.

Breaking The Skepticism

Though after building a strong backend team and relying on the cutting-edge team, the company needs to convince customers to onboard. Indians are skeptical when it comes to something unorthodox, especially when it involves money. For instance, credit facilities have been in the system for a long period of time, but people still continue to go to banks and wait for days to get loans approved.

However, Mehrotra believes the current generation has a different take on life which is helping new lending businesses thrive and be more accepted in the country. According to him, millennial and Gen-Z who are gradually taking over the workforce have a different perception towards lending.

"It is not about borrowing anymore, but is about affordability. I can buy an iPhone because I can afford it with EMI, I can do a skill upgradation course of INR 90,000 in python ML because I want to improve my job prospects and it's powered by a monthly mode with lenders like EarlySalary."

He said that people want quick cash like INR 25,000 for three week, instead of a loan worth INR 5 lakh, which will only tie up the loanee for next three years paying interest.The startup is currently competing against Slice, LoanTap, ZestMoney, MoneyTap among others.

Low Delinquency

With easy access to loans, it becomes easy for a delinquent to default on a loan. However, Mehrotra claims that EarlySalary leverages AI, ML and automation to power the platform's risk engine and control delinquency.

Explaining that in the volatile market, lending business need to be extremely agile, Mehrotra said that EarlySalary follows the agenda of a two-week scorecard which allows the company to re-adjust for risk and build and update scorecard used in credit disbursement decisions. EarlySalary boasts of having a low default rate in comparison to traditional banks and other online lenders. The startup claims due to its behaviour scorecard, it has been able to retain and give 500 per cent more money to existing customers at one-third of delinquency.

Due to its strong technology infrastructure, the company was able to turn around the risk model and get 100 per cent work from home systems up when the contagious virus outbreak first hit the country in March, 2020. It took almost nine days for the startup to restart its risk decisioning system within night days and was able to not only continue lending in COVID-19 times but offer moratorium, financial assistance and relief to customers.

Future Plans

EarlySalary is currently enjoying over 0.5 million, helps in credit decision to almost 80,000 users, thus disbursing almost 75,000 loans. Apart from this, the startup also manages EMI payments of a few lakh customers each month worth INR 150 crore every month.

"Our current growth focus is based on three pillars: have all products to help us grow with the customer from cash to credit to cards, increase our customer acquisition by 500 per cent and double our size every six months. We want to make sure EarlySalary is a loved brand, a product offering which everyone can access," he added.