Disrupting the digital lending space: Interview with Bhavin Patel, Founder and CEO of LenDenClub

By Puja Sharma

Bhavin Patel, founder, and CEO of LenDenClub manages the company’s mission, operations, and business performance. He completed his PGDM in Marketing & Finance from Kirloskar Institute of Advanced Management Studies. With a decade-long experience in financial services across lending, operations, ERP solutions, fundraising, and credit automation, Bhavin is the face of this rapidly growing organization.

IBS Intelligence interviewed Patel to discuss how LenDenClub is disrupting the digital lending and investments space.

Please Bhavin, can you tell us a little bit more about the LenDenClub?

LenDenClub is the largest Peer-to-Peer Lending platform in India. It provides an alternate investment opportunity to investors or lenders looking for high returns with creditworthy borrowers looking for short-term personal loans. With more than 1.5 million investors on board, the firm has become the most preferred platform to earn returns in the range of 10%-12%. It offers investors a convenient medium to browse thousands of borrower profiles to achieve better returns than traditional asset classes. Moreover, it is safeguarded by market volatility and inflation. The company provides a great way to diversify your investment portfolio.

Additionally, with more than 2.5 million+ borrowers, InstaMoney, its borrowing platform has disbursed over Rs. 2,000 crores of loans to date. It offers instant personal loans to salaried individuals with flexible loan tenure. InstaMoney also provides small merchant loans of up to Rs. 1,50,000 to borrowers who are into SME business. Through InstaMoney’s partnership with merchants, Instamoney also extends the popular service of Buy Now Pay Later to the end consumers or shoppers.

What are your loan book growth plans?

The company is investing heavily in innovating and upgrading its proprietary tech-stack platform to aid and upkeep its growing customer base while supporting all kinds of banking operations conducted on its platform.

It aims to scale up substantially, eyeing a 5X growth in disbursals in the next 15 months. It has already disbursed more than 1200 crore worth of loans in this fiscal alone. The aggressive expansion plans will take the loan book growth to $1 billion and will upscale the user-base to 10 million from the current 2.5 million by end of FY 2022-23

 What are the challenges that you have been facing in the lending space? 

The platform has outdone itself every single time a challenge has come its way and it will be no different going forward. One of the challenges that come with exponential growth in an organization is people and culture management. It is a people’s organization and the employees always come first.

We aim to enhance the company’s leadership strength and are eyeing strategic C-suite appointments in pursuit of our expansion goals, besides increasing the operational team size by the end of the next fiscal. We are eyeing fresh recruits for the role of tech, product, marketing, and customer service who will aid in the growth plans of upscaling its presence across the country. The focus will be on hiring skilled individuals and aligning them with the company’s culture and value system.

 What is the future of P2P lending in India?

The growth in digital lending has been substantial in the past few years. As per estimates, the P2P lending market will be worth $10b by 2025-26 and that’s visible from the growth of P2P lending over the last couple of years. It has already established itself as an enabler of inclusion. With the government and RBI taking interest in P2P lending along with other enabling factors and supporting infrastructure it will become a large component of FinTech in India.

P2P lending is rapidly becoming the most popular alternative investment class and will lead to financial inclusion in the country. The government is emphasizing digitization and the creation of new FinTech departments.

It has irreversibly altered the Indian fintech landscape forever. Through various product innovations, P2P lenders are giving loans to the segment of borrowers, which banks were unable to assess. With every Indian being offered easy access to instant credit, and thus rapidly building India into a credit-inclusive society, P2Pcan be a real enabler to India’s financial inclusion story. In that sense, P2P lending is by far the most creative of all the recent fintech disruptors and is destined for explosive growth.

With lending and borrowing getting easier, how can one avoid fraud? 

P2P platforms are technologically very robust. Credit assessment of borrowers is done to understand the risk of default. The company has a robust borrower screening mechanism to ensure that the lenders can invest in creditworthy profiles listed on the platform. The underwriting algorithm ensures a comprehensive credit assessment and verification process to enable maximum returns to the lender.

Please shed some light on the company having one of the lowest NPA in the unsecured digital lending space 

As mentioned above, the firm has a robust platform with a borrower screening mechanism that has more than 200 checkpoints that approve borrowers after multiple checks to ensure good repayment behaviour. LenDenClub offers a minimum investment amount that allows the lender to divide their funds between multiple borrowers, which further mitigates the risk while strengthening their portfolios.

Artificial Intelligence and Machine Learning have been extensively integrated into the platform. We use AI for mapping the risk prophecy, identifying profitable investment patterns, investor and borrower profiling. Other licensed P2P players who cannot use AI are either due to lack of customer data or lack access to the skill set required for such processes. To build an AI-based model, one needs millions of data points that are not available with other players as they are very new to the Fintech space. This gives us a competitive advantage and makes our platform far more efficient and secure than any other P2P lending platform in India.

Integrating Machine learning (ML) means getting more loans approved at a lower risk as it helps detect fraudulent transactions, which often cannot be detected by manually defined rules.

The robust credit collections team and the system expedite recovery by quickly identifying non-performing advances and minimizing their levels ensuring minimal impingement on default rates. Integration of omnichannel bots along with other initiatives has helped automate a plethora of internal processes and brought the default rates further down. This has immensely helped the platform serve a more extensive user base throughout the pandemic when the number of borrowers exponentially increased while maintaining the NPA level well under the risk appetite.

What is the next big step in the digital banking system?

Going forward data will be at the heart of how banks deliver new forms of value to the customers. The digital banking system will embed in everyday needs, lifestyles, and life stages and will provide and create financial services to meet their needs.

With the acceptance of FinTech also comes the trust that people have which needs to be well protected. Hence there will be more focus on the practices conducted by the digital banking platforms and regulators will need to adapt and adopt more automation in the system.