FinTales Interview Series: The Handbook for New Small Business Focused Banks – FinTech
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As part of the FinTales interview series, we speak with a fintech entrepreneur or executive each month. For the April 2022 edition of FinTales, we spoke with Vipul Sharma, the founder and CEO of Chqbook, a neo-bank aimed at small businesses.
We recently spoke to Vipul Sharma, the founder and CEO of Chqbook, about a new target segment that some fintechs are starting to bet on: small businesses. As these B2B fintechs do not always follow the same playbook as their B2C counterparts. You can watch the full interview here. And read on for highlights of our conversation.
The Kirana Economy
The small business segment is difficult to define, admits Vipul. It covers all the local businesses that we come across in our daily lives. Like our local grocer and chemist. It is a fast growing segment with 8 million customers and 17% growth year over year. But despite its size and potential, it is an underserved segment. He calls it the “missing link” with employees and companies on one side. And the working class poor on the other. According to him, white-collar workers and large corporations are already well served by traditional banks. On the other hand, farmers and blue-collar workers receive government support through programs such as Jan Dhan and direct benefit transfers. But independent small business owners have nowhere to go for their financial needs. This is the gap in the fintech market that Vipul wants to reach.
Having worked in banking, Vipul believes banks can lend to small businesses. But they lack the motivation to do so. He explains that banks can make profits and grow by focusing only on employees and businesses. And granting loans to small businesses is cumbersome for banks. Because many times these companies don’t have formal financial records. If small business owners can’t get loans from banks, they don’t even have an incentive to keep their money with banks. This is where Vipul believes fintechs can create a win-win situation. Fintechs can reduce financing costs for small businesses and generate revenue by bringing them into the formal credit system.
“Small business owners can repay their loans. They also have a strong desire to make their business a success. It’s not like they have a job that they can quit if they don’t like the job. work or if they weren’t performing. They don’t “I don’t have that luxury. So they work very hard. When we offer them loans at 24% interest per year, they are happy because it allows them to be more profitable and to grow faster”, he adds – rooting for his entrepreneur clients.
The secret sauce
But how do you build a fintech product for such a large and diverse segment? Vipul believes in starting with understanding your customers and their needs. “Our app is available in 7 languages. It makes a difference in how people perceive your product and if they see you as someone who listens to them. We cater to a community that is largely not on social media like LinkedIn or Twitter. But they help and feed people on LinkedIn and Twitter“. But it’s not just about deploying a product feature. The devil is in how the feature is implemented. Let’s take the example of language translation for fintech apps. Vipul goes on to explain that Chqbook doesn’t does not use artificial intelligence (AI) for translations.
“We don’t use AI for translations. We use hard-coded language packs that we make ourselves. Because AI hasn’t deciphered language changes in financial services. If you ask an account statement, what is it called in Hindi, Telugu, Marathi or Gujarati?The AI may not give you the right results, so we do the intensive exercise of translating the content and verifying it. We spend more time on the product than on the UI/UX”, he elaborates.
The big picture
Vipul is optimistic about the future of Indian fintech. With rising per capita income, he hopes Indian fintechs will experience a golden age. “It’s the fintech ecosystem when per capita income is so lower. As soon as it goes to $4,000 (in 2 years) and then $6,000, you’ll have an inflection point. People won’t hesitate then not to pay 10 rupees for convenience. ecosystem will be bigger than any other country on the planet”, he predicts. For now, Vipul advises that fintechs should be more revenue-driven. He first cites the example of the deployment of loans and insurance at Chqbook, as these are revenue-generating products. “Indians love free stuff. People will use your free product, but if you start charging for it, they will delete the app. So if customers are willing to pay you, that’s validation that you’ve built something useful thing”, he concludes.
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