India currently has a massive 609 million youngsters between the age of 18-24, yet only 11% of credit-active youths own credit cards in the country. To put this into comparison, the rate jumps to almost 90% in countries such as Canada and Hong Kong. In India, Millennial and GenZs, despite being pitted as the biggest customer of credit cards, make less than 20% of a bank’s total customers. Critically, local banks are still risk-averse, leaving the Indian youth with limited access to credit products and lower credit scores than their international peers.
Technology and user engagement sets fintech players like slice and CRED apart from banks. Their apps are interactive and have a high level of gamification, making financial products fun and aspiring for a 20-something-year-old. It comes as no surprise that slice, India’s first fintech company dedicated to building financial products for youngsters, has an NPS score of 70, higher than any bank in India today. Meanwhile CRED, a members-only app that offers exclusive rewards for paying your credit card bill, has amassed close to 3 million users within a year of its launch.
slice Founder Rajan Bajaj
Slice Founder Rajan Bajaj believes there is a need for innovation across the spectrum of payments and that keeping the young customer at the centre of it is becoming increasingly critical. He said:
We need to make financial products relatable and as easy as using Instagram for a youngster. The recent launch of India’s first numberless debit card exclusively for teens between 12-18 years by Neobank FamPay is a reflection of that. With the growing breed of fintech of startups focusing on teens and young adults, will traditional banking become a passé soon?
While there is a generational shift in attitudes towards credit, banks are not ready to embrace it yet leaving a huge white space for fintech players in India to disrupt the existing payment card industry for youngsters. A new-age card player like slice has been able to decode young adults’ needs, design financial products exclusively for them and has built unique risk under-writing that banks haven’t been able to crack for this under-served segment so far.
Take the case of 25-year-old Anoop, a game tester who lives with five roommates in Bangalore who was faced with a predicament in March. Three of his roommates were not drawing salaries owing to the lockdown. The burden of managing household expenses fell on Anoop and another roommate. Anoop was staring at a financial burden but was able to navigate through it only because of a product like slice. He used his slice card extensively for expenses like grocery and utility bills. Previously, Anoop had applied for a credit card from a bank but was unsuccessful. He is just one among many young professionals in their early twenties who are not typically catered by banks. Luckily for Anoop, his friend recommended slice, and he has been using the product for the last 18-months. He says a card like slice offers him a credit limit as low as 10,000, which fits his budget and repayment ability. He believes banks are unable to offer this kind of product customization to working professionals in his age category.
How did slice set about designing financial products for youngsters and how it will further customise them to suit the growing needs of its consumers?
For traditional financial institutions, the most important metric is risk. That is why when they see a young customer they see risk first. Whereas, at slice, we see the potential and ambition of this young customer and risk is a support function that’s important. All the platforms that youngsters’ use are fun and relatable like Instagram or Snapchat. These elements are missing when the same user is completing a financial transaction. When you are guided by risk and that is your major metric, you miss out on the real most important metric which is customer service. That is where we come in. slice sharply focusses on first-time job seekers and keeps its service exclusive to the creditworthy segment among this target group. The average age of slice’s customer is 22-23 which differentiates us from the rest. We understand the risk and demand profile of this young customer and operate with the utmost transparency. Our flagship product, slice card, comes with a credit line that supports all their financial needs. The idea is to empower the young adult with access to financial products and at the same time build financial discipline early on. Lack of financial history and poor credit history makes it hard for banks to approve young customers for credit. slice understands these challenges and educates its customers on a timely basis the importance of repayment and building good credit history. Over 200,000 youngsters in India today have been able to build good credit scores because of slice. We will look at building banking and payments options for our users and also continue partnering with more merchants who appeal to the young crowd. As customers grow in their life cycles, we will grow our product lines to support the need of this customer. That is our focus area.
What is the road map for the company look like in the next 6-12 months?
Our recent fund-raise from Japan-based Gunosy is a testament to our scalable model. In the last 4-months, we have built a good senior team. From a new CTO to a new Head of Design, we have hired multiple top executives across departments. This helps us to scale from where we are currently and drive the next phase of growth. In the next 6-12 months, we are looking to double our customers, transaction volumes and also expand to new geographies. There are 5-6 million first time credit card customers in India every year. We are looking for at least 1.5m of that in the immediate future. We will also launch new features in our app which will give more recommendations to our customers on how to spend and manage their expenses. UPI based payments are widely adopted in India and we are planning to have that feature on our platform as well. We want to be the Tesla of the Fintech Industry.
What are your views on the evolution of the payments landscape in India in the post-COVID era?
Digital payments have received a big boost in India with customers shunning cash. We have noticed a proportion of ATM transactions/ cash withdrawals going down while POS transactions using cards and UPI have increased. In card payments especially, we expect a surge in NFC payments as it’s contactless. Having said that it will take a quarter or two for complete economic normalcy to return, we had consumption going down by 70% on cards in April. In the last couple of months with the unlocking of the economy in a phased manner, consumption has bounced back by 150% from April but card transactions are still down by 25%. We expect card transactions take about 3-6 months to get back to normal and from there on there is no stopping us, we will witness a massive strong growth trajectory in digital and card payments in this country.