This Fintech Company Has Made Profit Each Day Since its Inception
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For Raj Khosla, scaling up a business means only one thing—making the enterprise profitable. “Scaling up just on papers by throwing away the investors money down the drain is not really scaling up. Anybody can do that,” says the founder and managing director of MyMoneyMantra (MMM), an omnichannel financial services marketplace.
It is perhaps the result of this steady focus on building a profitable enterprise that the ‘phygital’ (physical and digital) loan marketplace has made money every single year since its inception in 1989. This, despite being in the financial services sector which has wafer-thin margins.
In fact, most of its fintech counterparts in the market are plush with venture capital but have not managed to break even in their over 10 years of existence.
Khosla started his loan distribution business in 1989 in collaboration with Citibank. This was the time when retail-banking franchise was non-existent in India as banks were still nationalized.
On being asked whether he saw this as an opportunity to venture into retail lending, he denies and adds that it truly was a shot in the dark. “At best the thing to say is that I knew that it was going to take off at some point in the future, but when, nobody knew,” he laughs.
Khosla gives full credit to Citibank. “In the 80s, when the economy had not even opened up, they had the vision to launch a credit program in India. We just got involved and started building with them.”
When he decided to set up his business, Khosla was still a practicing chartered accountant. Retail banking was an uncharted territory and he didn’t want to put all his eggs in one basket.
Retail banking took off over the next two years after the economy opened up post liberalization, following which he decided to return his CA certificate of practice to officially register his company in 1992.
What started with two employees based out of a princely 400 sq ft office in Karol Bagh (Delhi) selling only two products across Delhi has today grown into a full-blown financial services marketplace offering whole gamut of retail and business loans, employee count gone over 3,000 in 120 offices spread across 60 cities and customers in the millions.
The Risk-averse Entrepreneur
In his over 30 years of building MMM into one of the largest and profitable loan marketplaces, Khosla has sworn by one principle—don’t take unnecessary risks.
For this reason, until 2008 he continued to work with just one bank to gauge how retail banking would shape up in the country. “First 10 years of something that no one knows anything about is always learning process. Back in the day (1989), retail banking was a completely unchartered territory, so I wanted to gauge how it would shape up,” he says.
“Had I been taking all the bets myself, thinking whether this or that might work I would have lost a lot of money.”
Khosla attributes his diligence to his erstwhile career in chartered accountancy. “I always like to be ‘almost’ sure of what I’m doing,” he laughs. “If it's not making sense, you should be able to quickly backtrack and then move forward again.”
After building the right architecture for about 20 years, he decided to fan out to other banks in 2008. However, Khosla points out that with Citi they were selling the complete spectrum of the retail banking portfolio. In fact, MMM had grown so huge by then that no one bank had the appetite to utilize the company’s full capacity, he says.
“This was also the time when the banking system had imploded due to the global recession. Citi didn’t have the appetite to grow due to the financial crisis so we had to branch out.”
Around the same time, the financial services industry had its first brush with technology with the launch of first ever digital-only loan marketplace, BankBazaar. Most big banks soon adopted, but Khosla did not immediately jump the wagon.
“Being the conservative guy that I am, I decided to watch this space as to how will this horse get born,” says Khosla. “Tech for tech’s sake is not useful. What works in, say the US may not work in India. If a bank insists on seeing the papers before lending, no matter how much technology I have it’s of no use. So, I wanted to see how it will pan out in the country.”
Once the horses started running and figured out a path to run, as Khosla puts it, he was clear how much technology customers and other stakeholders will be able to digest and made tech enablement of MMM his core focus.
The ‘Phygital’ Player
To develop the technology required to scale the company further, MMM has over the years set up a team of senior people from data analytics to build in-house tech.
That said, Khosla still strongly believes in blending technology with traditional distribution strategies to fulfill the demand for loans.
“We have no plans to completely go digital until the marketplace wants it.” MMM has 63 Application Programming Interfaces (APIs) with banks.
MMM works on a fully digital model only in those pockets with huge demand. Even Covid-19 led disruption has not budged Khosla from his ‘phygital’ strategy. “We continue to aggressively pursue our original strategy. In the wake of Covid-19, digital and data analytics has definitely gained primacy in the execution of our phygital strategy,” he says.
The Delhi-headquartered company originated USD 1 billion of credit in partnership with 100 partners in FY 2019-20. It currently serves about seven million customers from over 60 cities.
To ramp up its digital journey, MMM raised INR 104 crore (USD15 million) funding from Netherlands-based IFSD BV and Vaalon Capital in July 2019 in return of 15 per cent stake in his company—its first fundraise ever, nearly 30 years after the company started.
“I was always sure that whatever money I take from an investor will not be wasted in experimentation,” says Khosla. “Call me an old foggy but I can’t work on the ongoing trend of wasting someone else’s money in figuring out what might work the best for my company.”
In fact, Khosla says in all honesty he did not even need this funding. “We have strong internal cashflow.” So, why raise capital? “In keeping up with the current trend, with the fundraise the marketplace recognizes what you’re capable of.”