Launch date: June 2015
Founding team: Sandeep Srinivas, Kartik Venkataraman & Abhay Tamaria
Funding raised in 2017: $2.5 million
Overall funding raised since starting up: $2.5 million
Jobs added since starting up/Strength of the company: Nearly 50
Industry it operates in: FintechGarvish Sharma, a first-year student at Hansraj college, Delhi University wanted a prime membership at a local gym, but had to exercise restraint because of the slim state of his wallet. Another DU student Shikha Barnwal also had to trim her hopes of travelling back home to surprise her parents due to month-end woes.
While most of our college life was spent pinching pennies, students like Sharma and Barnwal fortunately do not have to wait for their first pay checks before buying what they want. A startup in Gurgaon has enabled students – even those without a bank account – to purchase what they like with the guarantee of getting paid back in small installments later.
Launched two years ago by a trio of IIT and IIM graduates, RedCarpet, claims to be the next-Gen fintech startup that helps college students pay for their online purchases, including travel tickets and restaurant bills. Leveraging data science, AI and machine learning techniques to assess the creditworthiness of its target group, it provides instant credit through partnerships with traditional banks and other financial institutions.
Students can start off instantly by downloading the app and uploading the required verification documents including photo and college ID. Using the chat feature on the app, they can either paste the link to the order or simply post a screenshot of the same. RedCarpet will pay for the product, which users’ can repay in interest-free installments if paid off within a month.
In addition to using a debit card or netbanking, students without a bank account can also avail the service by keeping cash ready, which the startup will pickup right from their doorstep.
By skipping traditional lending procedures, including registration and processing fees, it creates an ideal platform for college students to participate in the burgeoning alternative lending sector. But, students neither have credit history nor any steady stream of income, corresponding to potentially higher default rates. Then why has the startup chosen them as its target group?
According to Abhay Tamaria, who founded RedCarpet with Sandeep Srinivas and Kartik Venkataraman in 2015, there are 30 million college students in India today and this number is expected to grow to 65 million by 2020. “They are tech-savvy and know the e-commerce ecosystem well,” he has been quoted as saying. “Hence, they are the right people for the services we offer,” he added.
To connect with this group, RedCarpet has launched an ambassador programme called ‘Campus Leaders’. Packaged as a stepping stone for college-goers to get first-hand experience of working at a startup, it enables them to work as freelancers to promote the startup and help conduct marketing campaigns in colleges.
New spin to alternative lending
RedCarpet has partnered with a number of e-commerce and internet-based companies including Amazon, Flipkart, Paytm, Snapdeal, Book My Show, IRCTC, Make My Trip and Zomato. Currently available only on Android, it will soon be rolled out on iOS.
Although companies offering similar services are already cluttering the marketplace – read SlicePay, KrazyBee and Quiklo, among others – RedCarpet’s vast cache of data – including mobile phone inputs and other variables – sets them apart from others in the student-lending space. In fact, according to this data-driven microfinance startup, credit companies in India are servicing less than 3% of the total customer base at present precisely because of inadequate data – a gap which it intends to fill.
Little wonder then that big names in Silicon Valley are placing early bets on RedCarpet.
Earlier backed by Y Combinator, the startup recently raised pre-series A funding of $2.5 million from Lightspeed Venture Partners. Although RedCarpet declined to comment on the fundraise, an earlier ET report suggests that the funds will be used to improve the technology behind risk evaluation, introduce new student-lending features and deepen market penetration.
RedCarpet was also among the 10 fintech startups that graduated from Yes BankBSE 1.34 %‘s business accelerator programme ‘YES FINTECH’ last month. Launched in March this year, the 15-week programme provides a platform for startups to work with incubators and VC firms including T-Hub and Anthill.
Banking on a promising future
According to Tamaria, there is a huge demand for consumer loans in India. Coupled with high adoption of technology and greater penetration of internet buoyed by the government’s digital economy push, there are opportunities aplenty for fintech companies in India to thrive and grow. Furthermore, with traditional lenders becoming more conservative on the back of bad loans, the space for alternative means of lending has opened up on a large scale.
“The fintech market in India is estimated to double to $2.4 billion by 2020 from around $1.2 billion at present,” Tamaria has been quoted as saying. “There is an increasing push for financial inclusion for 145 million households in the country who currently do not have access to banking services. In fact, India is already emerging as the third largest alternative lending sector in the world,” he added.
The startup’s mission has been to build better lending infrastructure and enable access to credit for the next billion users using the power of AI and mobile technology. Although still early days for the startup, it is slowly looking to expand beyond its home turf in Delhi-NCR.