Building Financing at UrbanClap

By – Shivam Munshi & Sachin Gupta (Product, Finance Ecosystem)

Photo by rupixen on Unsplash

At UrbanClap, we are building the country’s biggest home services marketplace. Think of all services that pertain to

1. Wellness of the home e.g. plumbing, electrician, carpenter, cleaning, appliance repair, painting, & so on…
2. Wellness of people inside the home e.g. salon, spa, men’s grooming, fitness and health, tuition, & so on..

For these services & more, we want UrbanClap to be de-facto option for you. A large part of our delivery promise is premised on skill & serviceability of our professionals (PROs).

They bring to life our brand promise. Success of our platform is closely coupled with the success of our PROs. Natural to ask, what does success for our PROs mean?

1. Higher & stable earnings
2. More flexibility
3. Better lifestyle — quality customers, work-environment
4. Respect & Community

Currently, ~20k PROs gain meaningful employment from the platform as micro-entreprenuers. UC is helping them scale to a higher earning orbit, enhance their trade craft and be able to live a better life.

UC’s stated mission is to empower 1Mn+ PROs by 2024 — it is an audacious goal. There are countless operational & technical challenges, none bigger than

1. Access to credit
2. Access to skilling
3. Access to inventory
4. Access to market/ customers

Skilling, inventory and market access would require blogposts of their own; this blog would devote its sole attention here forth to “Financing”.

Why so much credit to “credit”?

Multiple studies across the globe have concluded the need for micro-credit, quoting Stanford study,

“there are many theories dedicated to poverty alleviation, the common element that many of them have is the need for access to credit. If the talented poor are allowed credit access they can invest in capital that will increase their income”

Could not have been truer, similar insights gleaned in from our PRO research. Common problems faced by PROs

1. Capital for starting kit — tools, accessories and inventory
2. Working capital for product supplies
3. Capital for personal productivity i.e. 2-wheeler, washing machines, etc.
4. Personal loans for self and family

Majority of our professionals fall outside the aegis of conventional credit systems. They lack past banking data, have no credit history (CIBIL), and the migratory nature of their job means they are stuck with inadequate documentation. In summary, for conventional banking, their credit-worthiness is low.

The other side of the problem

The above problem i.e. “lack of creditworthiness” formed the genesis of our solution. It was clear # objective for our financing platform was making loan applications palatable to NBFCs. Let us take a quick detour to understand how NBFCs work.

NBFC aka the lender typically makes money through interest rate spread between its own cost of capital and the interest charged on his loan-book adjusted for delinquencies. Financier also has to cover for additional overheads namely — disbursal charges, cost of operations, and recovery commission. The rate of interest charged to you is thus inversely proportional to perceived delinquencies i.e. the riskiness.

Thus the pre-dominant objectives as we set out to solve the problem were as follows:

1. Lender aka NBFCs: Lower risk/ delinquencies
2. Provider: Access to capital
3. UrbanClap: Lower loan prices

The how

Our current loan partnerships were manual in nature i.e. the entire loan journey from application to disbursal to loan repayments & closure existed over google sheets. Now, we all adore G-sheets, alongside Whatsapp, it is the single largest entry barrier for a bunch of SaaS companies.

However, in our case, using G-sheets was no longer sustainable. With ~1500+ applications, it was maniacal to keep track of each loan application. To add further complexity, at any point at least 5 different teams across UC and our financing partner were working on the loans masterfile further sacrificing our data sanctity. PROs did not have real-time visibility into their repayment status and often choked our helplines with enquiries.

In sum, the existing loans process was broken. It required heavy ops bandwidth, provided limited transparency for the PROs and was as a source of anxiety for UC and the financing founder.

As we set out solving, we looked under the hood for ready inspirations from how other gig behemoths from food, rides, and delivery were addressing this. Unfortunately, additional help was scarce. Across the board, all big players in provide offline, low-touch financing support to their supply fleet. It was clear, that UC has to lead the way here.

When we set out to solve the problem — common themes that reverberate across the product, ops and finance teams were

1. Turn around time (TATs) from application to disbursal
2. Visibility to PROs
3. Business viability for financing partner
4. Complete automation

We set off with aggressive targets

Coming from one of India’s largest payment gateways, we drew inspiration from how PGs work with banks. We decided on building a platform would be the best way forward to build a longer platform

The final solution

The final solution we decided to proceed with creating a loan aggregation layer. Essentially, we have built a loans marketplace with PROs on one side and financiers on the other.

We first created a panel through which loan applications for PROs could be submitted to the loan partner, and its various loan states could be tracked.

This was rolled out gradually across loan partners and cities, and ensured data for all loans, including their repayments, was captured in our Loans Database. This has significantly improved our tracking of loans and made life much easier for our ops teams. Improvements:

• Better tracking of loans & TATs
• Automated repayment collection
• Alerting on TATs, delinquencies and system failures
• Status sync of loan application between UC and loan partner

To solve for the PRO visibility issue on priority, we scheduled weekly notifications to our PROs with information about their repayments and outstanding amount.

We then worked on a feature on PRO app to show all the loan related information real-time. (Screens below)

Our loan management system has been designed in a manner that all future use cases like multiple loans, personal loans etc can be fulfilled, and information can be reused for the pro.

Next in pipeline:

• Personal loans: Vehicle & cash loans for our pros
• In app repayments
• Other financial services: health insurance, savings program

Impact

Median TAT: 15d to 7d

Manual bandwidth: From 200 man-hrs-per-month to ~50 man-hrs-per-month

PRO NPS: +10pp improvement.

About the authors:
Shivam Munshi is a Product manager, and Sachin Gupta heads the “Finance Ecosystem” Product Team at UrbanClap. This team works on the Monetisation & Financial ecosystem that helps build financial control structures, monetisation strategies and enable access to financing for partners.

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https://medium.com/urbanclap-design
https://medium.com/urbanclap-engineering

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