Started as MoneyTap in 2016, India’s first App-based credit line Freo allows customers to borrow and pay off loans flexibly. From amounts as low as Rs. 3000 to as high as Rs. 5 lakh, customers can get access to credit instantly through Freo for anything and everything.
Present in 44+ cities now, Freo was founded in 2015 by Bala Parthasarathy, Kunal Verma and Anuj Kacker as MoneyTap. By 2022, Freo has transitioned itself into a credit-led neobank.
Freo provides a seamless lending experience to customers looking for funds for emergencies and other immediate unplanned expenses. These customers need credit fast and with minimal costs. Freo operates in India where the middle class is large and credit hungry.
For any lender, giving credit is the easy part, collecting it back is harder. Especially when you consider that a section of customers do not intend to pay back - fraudsters. These bad actors have many methods to defraud lenders. The most common method is to take a loan with someone else’s identity.
The best way to have a high collection rate is to prevent bad actors right at the start - don’t lend to them. To achieve this, Freo needed a strong KYC process - they needed to know their customer.
While collecting additional information about the customer, Freo had to keep in mind that any additional steps would cause friction in customer experience and a drop in the funnel.
Superior onboarding process
We chatted with Sujay Das, Chief Risk Officer, and Aditya Sarwate, Founding Member and Head of Operations at Freo to know more. We learnt that understanding a customer is fundamentally different in physical and digital lending. In a physical process, we can ask the customer more questions before approval. But this is not possible in digital lending.
Sujay pointed out that customers get to do a lot of ‘window shopping’ in digital lending because it is very convenient for the customer to download another app and see what loan he/she will get.
In essence what this means is that Freo needed a technology partner which could implement an onboarding process that would be fast and smooth for the customer.
Fraud detection and prevention
Freo offers a wide range of financial products which include Freo Pay, Freo Card, Freo Save, Fit.Credit and SuperSplit. The biggest issue across products is in detecting fraud.
Consider Freo Pay - a Buy Now Pay Later service where a customer can get a credit of Rs 500-6,500 immediately. Customers can pay the money back at 0% interest within 30 days. In products like Freo Pay, where the ticket size is small, there are hundreds of thousands of customers. The more the customers, the more the fraudsters.
Freo chose HyperVerge digital identity verification solution for their onboarding process. They started their engagement with HyperVerge digital KYC and slowly increased the scope. “HyperVerge technology helped us in knowing the customer digitally and understand whether they are fraud or not,” said Sujay Das, Chief Risk Officer, Freo.
What set HyperVerge apart was the (a) accuracy of its technology, (b) the ease of integration and (c) API response time. “HyperVerge team understands what Freo expects from them and based on that, they give the best solutions,” said Aditya Sarwate.
If the API takes five minutes to give you the response, you would not want such a system. With HyperVerge Tech, it gives us information in milliseconds.
With HyperVerge Tech, Freo’s performance improved significantly in three key areas. “One is we have done pretty good in our collections. Second, we have done pretty good in our risk management. And the third is we have done pretty good in our volumes as well,” Sujay Das said.
Das admits that Freo lost money due to fraud in the beginning. “Today, at this point of time, I can proudly tell you that the amount of money that I give out, 99% comes back. This month, it will cross 99% actually,” said Das.
To bring collection efficiency to 99%, a big chunk of contribution goes to HyperVerge.
Freo uses HyperVerge to prevent fraud and improve collections
More than 99% of money lent is collected back