The term ‘social’ has found its use case in several business models in India in the past few years. From social commerce to vernacular social media apps, new-age startups are tapping the power of communities and the already established trust among them to reach the masses.
Now, one of the newest power couples in the town is social finance. Taking the first mover’s advantage in this segment is Delhi-based fintech startup WeRize. Founded by former Lendingkart executives Vishal Chopra and Himanshu Gupta in 2019, WeRize is a socially distributed financial services platform, which offers customised credit, group insurance, and savings products to users residing in small towns in India.
The platform has built a network of local freelance financial consultants/agents who distribute products developed by the startup, both in-house and in partnership, in their social circles.
In two years, WeRize claims to have connected with over 5 lakh customers in nearly 1,000 towns. It now plans to reach 3,000 more towns in the next two years through its social distribution “social Shopify of finance” tech platform. The startup has a network of over 1,000 freelance financial consultants across India.
The ideation
Vishal, the first hire of Amazon’s international expansion team in India, understood the power of ‘freelance’ as he had played a key role in the planning, execution, and hiring for Amazon’s third-party seller marketplace country launch in 2010.
He later went to join Lendingkart as Chief Business Officer (CBO), where he realised two things. One, the banking sector was extremely underpenetrated, and second, financial products (loans, insurance, policies) were mostly restricted to top tier cities.
The founder combined his two crucial learnings and incorporated WeRize. He was joined by Himanshu, who worked as Vice President and Head of Data Science and Analytics at Lendingkart.
How WeRize works
The platform has built a network of freelancers along with on-ground support staff, who sell and distribute financial products, including insurances and large-ticket family loans.
The startup offers loans through its registered NBFC with an average ticket size of Rs 1 lakh with no upper limit. The majority of the loans are towards use cases like weddings and education, and are customised after careful evaluation of the family’s needs and payback capability.
The second product is insurance, which is sold via partnerships with organisations. The startup creates customised insurances in partnership with an undisclosed large provider besides other 4-5 companies. The interest rates also vary and depend on the risk model created by the proprietary tech. They may even go slightly above the range offered by the traditional banks and NBFCs.
“We customise our financial products as per the needs of people and families residing in smaller towns. We have insurance for vector-borne diseases like dengue, which is more prevalent in those areas. We saw a major pickup in health insurance during the post pandemic period,” says the founder. The startup will soon offer savings-based products.
The entire process, including the documentation and verification, has been digitised and is done via the app. The startup has developed a separate app for the agents to manage the operations. In terms of revenue model, the freelancers earn a commission for each conversation.
Target audience
Elaborating on the target market, Vishal says there are three major segments. First is the upper-middle-income individuals residing in the top 15-20 cities. Second, rural India where 50 percent of the population resides.
“We are targeting the third category — small towns. There are about 100 million families and 300 million individuals residing in 4,000+ small towns of India. Urban and rural segments are extensively targeted by banks and fintechs but there are no unique products for small towns,” he says, adding that the economics of these products as well as operating in small cities is not feasible for traditional companies due to their high-cost branch-based distribution model.
He continues, “Providing access to a broader set of products in this demography requires for a more differentiated and deeper risk management capability.”
Micro-entrepreneurship and trust-based community selling
Having a network of micro-entrepreneurs is the most unique selling point of the startup, which draws its genesis from social ecommerce platform Meesho that has built an army of freelancers (homemakers) to sell products to people in their social circle.
The founder argues that the majority of players in the Indian fintech ecosystem are building do-it-yourself (DIY) apps, concentrated in the same 15-20 cities, that help customers choose the right financial products for themselves. However, this approach doesn’t work for small-town families as there is a huge trust deficit about non-government financial products.
“Our freelancers are more like our social partners. These micro entrepreneurs can be your neighbour or someone known in the circle and can be trusted,” he says.
Business and competition
The platform witnessed a 10X month-on-month revenue growth in FY21. It claims to have achieved operational profitability and expects to become EBITDA positive by early 2022.
WeRize has raised a total of $10.3 million in funding over three rounds and is backed by marquee investors, including 3one4 Capital, Picus Capital, Kalaari Capital, and Orios Ventures.
In terms of competition, the startup is up against almost every bank, cooperation or fintech offering loan or insurance in smaller towns. However, in terms of business model, it is similar to Pune-based EarnWealth, which also creates micro-entrepreneurs, called Mahalakshmi, to distribute financial products.
The founders argue that the financial products offered by the fintechs are expensive with high-interest rates and lack trust among people. Besides LIC, the agent-based distribution network of individual insurance companies/banks is not strong enough.
What will work in WeRize’s favour is its distribution network based on social community, which no other player has been able to curate so far, along with its offering of an entire package of financial products.
“The full stack approach of owning both the product and the distribution gives us unique insights about our customer segment that becomes a competitive advantage,” says Vishal.
Future
The unique social distribution model has so far allowed WeRize to collect over one billion data points across 500,000 families in 1,000 cities.
The platform will continue to leverage these insights to create new products, including saving-based instruments in the near future.
“We plan to forge more partnerships and build a network of over 50,000 agents soon,” the founder signs off, sharing the ambition of gaining the small finance bank license in future.
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