We are publishing an interview of Mr. Manish Khera, Co-founder and CEO, HAPPY.
Please tell us about the founders
Happy was co-founded by Gautam Ivantury (Head, Product), Shweta Aprameya, and myself. All of us share the vision of bringing greater financial inclusion within our country and across all walks of life.
Gautam holds a master’s degree in International Economics from John Hopkins University and has been associated with multiple prestigious societies including Phi Beta Kappa, Alpha Phi Omega, and Omicron Delta Kappa. He is an industry veteran with around two decades of experience in banking and microfinance. His prior associations include IFC (International Finance Corporation) where he was Investment Analyst, SKS Microfinance (Vice-President), and the international grouping CGAP (Consultative Group to Assist the Poor) as its Strategic Advisor and Manager of CGAP Technology program.
Shweta’s alma maters include Fergusson College, University of Strathclyde, and MIT Sloan School of Management. She has earlier donned multiple hats including VP and Business Head of ICICI’s Fino Payment Bank, COO and Senior Vice President of Airtel Payments Bank, and South Asia’s Digital Finance Advisor for World Bank. She is also the Founder and Director of ArthUdgam Welfare Foundation, which works towards the upliftment of women belonging to the economically marginalized sections of the society.
I myself have been associated with the banking sector since more than two decades. I feel grateful that my career started around liberalization of the economy. It taught me the fundamentals of transactional banking and later, provided deeper vision into the base of the customer pyramid. I later co-founded Yatra Tatra Sarvatra with Shweta, which was later acquired and is now known as Airtel Payments Bank. Later I co-founded Happy (ArthImpact Finserve Pvt. Ltd), an end-to-end digital lending platform to meet the financial needs of smaller businesses, with Shweta and Gautam in 2016.
Give us a brief background of what founders were doing before starting the venture.
Gautam began his entrepreneurial journey back in 2009 and since 2011 had been serving as the Co-founder and Chairman of MeraDoctor, a pioneering healthcare startup that provides digital consultations. Shweta was COO and Senior Vice President at Airtel Payments Bank and I served as the CEO.
List all the names of the core team members, along with their skill-sets, specific domain expertise & designated roles. How do you see them evolving over time?
The core team members include Saurabh Soni, Business Head, HAPPY and Rajesh Adhikary who heads the department of Finance, Risk, and Growth. Saurabh has an industry experience of more than 16 years during which, he has worked with GE Money, Idea Cellular, Tata Teleservices, Essel Finance, and more under various designations. He has outstanding credentials in launching new projects, channel sales, product management, and telesales.
Rajesh Adhikary, on the other hand, holds expertise in investment, due diligence, revenue and profit, growth, M&A, and fundraising. He has earlier served as VP/Director at Fitch Ratings India and as GM of Brand Capital, the proprietary fund of Bennett Coleman and Company Limited.
What is the problem you are trying to solve? Can you share with us any insights that led you to believe that this is a big enough problem?
The problem Happy solves is the credit gap within the retail MSME segment in India. Collectively, the MSME industry faces a credit shortage of more than $640 billion. The relatively larger enterprises, however, are able to avail formal credit, something which is not possible for micro-merchants given their smaller ticket sizes. Even in the cases that they are, it comes with excessive documentation, red-tapism, and usurious interest rates. There is also a lack of standardization in terms and conditions of such loans and lenders can also be seen using coercive collection tactics. This lack of access to competitively-priced and standardized credit constrains the economic growth of our country.
According to MasterCard’s ‘Micro Merchant Market Sizing and Profiling Report’, the sector’s GDP contribution is three times that of Corporate India. It also employs more than 46 crore people in India. So, the financial needs of our micro-entrepreneurs directly impacts the national growth of our country and limited access to credit puts them at a disadvantageous position. With HAPPY, we have envisioned to change the status quo and familiarize Indian microenterprises with the merits of digital technology. HAPPY provides working capital loans to them having ticket sizes around $500 and tenures ranging from 3 to 6 months. These business loans use the transactional data of applicants, such as mobile wallet and POS-based transactions, and are disbursed roughly within a few hours of loan application. These short-tenured working capital loans, moreover, have a competitive interest rate of 2% per month, which is substantially less for the segment. We have also tied repayments to daily electronic transaction value, making the entire process very seamless for our customers.
What challenges did you face when you were starting out?
When we started, India announced demonetisation and it affected the financial stability of the market dramatically. Until the effects settled, consumers were quite cautious in taking any financial decisions.
How did you get the initial capital? What returns does it have? Tell us about the investors (if any)
The company is self-funded by our founders.
Please tell us about the Product / Solution. Explain how you went about the Product-Market Fit Process.
We customized the product to the availability of alternate data for credit assessment & plugged it with a value chain benefit for the consumer. For instance, we partnered with merchant aggregators who have a record of electronic transactions of their merchants done through open loop payment systems, mobile wallets, remittance mechanisms, and so on. Merchant aggregators are also the channel through which merchants receive their dues through daily settlement.
A commercial tie-up and API integration with such aggregators gives HAPPY access to electronic transaction data used for credit underwriting.
A minimum 6 months data of electronic transactions at the merchant outlet is analyzed by HAPPY’s AI-based credit engine in order to underwrite loans. The aggregator also enables the repayment of loans disbursed through a daily split settlement of electronic transactions at a merchant outlet.
The entire value chain of prospect acquisition, credit underwriting, loan disbursement, and repayment has been kept entirely digital.
What were your assumptions when you entered the market, learning that you have?
Our only assumption was the availability of data at the consumer’s end. As long as the consumer has data, he can access credit in any part of the country.
What is the insight that you have about this market, which no one else has? Uniqueness about your Startup.
The legacy of experience within this segment: we collectively have more than 25 man-years of experience in founding, leading & innovating tech solutions for the mass market.
Other players typically target the data building and credit-assessment models of a conventional bank. The only difference here is that these models are now digitally driven. However, such models are not viable for the market segment that we deal with. So, HAPPY’s pioneering approach has enabled it to identify over 1,000 variable that is applicable to this market segment.
What is the strength of the startup and the scale of operations? Who do You Perceive as Your Competition?
HAPPY has access to over 2 million consumers already through its partner network. The beauty of this model is that we plug into any merchant aggregator’s tech system & any consumer on that platform can have access to the credit. We do not have direct competition in this segment.
What is the revenue model? What is the logic behind it? What is the model you are following – Free / Freemium / Premium etc. ? Explain your thought process.
Premium. We charge monthly interests for the duration of loan (2% per month). This is charged on monthly reducing balance that is as per the daily repayment a consumer makes. The customers only have to pay for the amount that they consume.
Who are the consumers that you are targeting? How is this going to affect them?
There are around 80 sub-categories viz. grocers, apparel stores, restaurants, stationeries, etc. Our typical target audience is small outlets owned and operated by an individual (sole proprietorship). The current spread is across over 400 locations in India. If they are associated with our channel partners, i.e. the remittance players, they can easily avail credit from as low as Rs. 2000 to as much as Rs. 100000 in one minute.
How did you get your first customer?
One of our partners, M-Swipe, which offers credit to its customers, integrated the HAPPY credit offer in its app. This led to our first customer.
What is the big picture of your startup? Is this Product leading to something bigger? If so, how?
We plan to extend credit to a variety of industries that engage with micro-enterprises. POS, BC, Travel, Logistics, Ecommerce, Assisted ecommerce, beauty and much more to reach 50 million credit-starved micro-entrepreneurs of our country. By simply extending the financial services to bottom of the pyramid, what we are doing is enabling our customers, i.e. microenterprises, to meet their own customer’s demands. This directly increases their viability as well as profits. When we look at this value addition on a broader scale, it offers us a picture of its incremental effect on the market and how it increases business prospects of varying scale and sizes and intensifies the financial circulation within the country. As you might know, this has a very positive effect on the entire value chain.
Since inception, give us a sense of the value of business done by your venture? What is the current turnover? (From Launching till date total no. of visitors on website/persons registered/enquiries and enrollment). Please explain in details: We have disbursed more than 30,000 loans in the past 20 months. This pace makes us the fastest growing digital lender in India in terms of volume.
What would be your goal to accomplish in the next six months?
We focus on the speed of growth and the credit underwriting learning we gather. We want to partner with 50 merchant aggregators that will further increase our reach to over 5 million people.
What message do you want to convey to fellow entrepreneurs? Innovation is a gradual process, the more you know your customer, the better the innovation you will bring. Try to innovate every day so you see a big impact over the years!