Thursday, 11 September, 2008
One is once again witnessing a proliferation of online offerings, with newer companies targeting niche verticals. Bank Bazaar claims to be the first neutral company worldwide to provide customized competing loan offers from leading banks and NBFCs.
Mr. Arjun Shetty, COO, Bank Bazaar, says, “We provide loan applicants with an easy platform to compare rates between different financial institutions and to apply for the loan online, all within 15 minutes and without needing to speak to anybody.”
Interestingly, Mr. Shetty says that the financial institutions will be able to offer loans on Bank Bazaar at a cost lower than they do at their own bank branches. He also believes that this online model will produce aggressive pricing from financial institutions and will drive them to provide a greater customer experience.
Bank Bazaar is aiming to disburse 2 lakh loans on its site over the next 12 months. In an interview with Business Line, Mr. Shetty talks about the challenges in this space, the value proposition to financial institutions and the growth drivers for his business. He is confident that this model will take off given the savings it offers (to customers) in terms of money and time.
Excerpts from the interview:
What is the idea behind your online offering in the loan space?
For the financial institutions, loan application and disbursement processing is an expensive process as they need to build branches, incur staff salary costs as well as pay the loan agents. For the loan-seekers, there is a need to understand all the terms of the loan, in addition to interest rate, and parameters such as fees and pre-payment terms. We believe we facilitate this process of choosing a loan.
On Bank Bazaar, loan-seekers can instantly get customized offers, including interest rate, all fees and customer service parameters, thereby dispelling fears relating to hidden fees. To make it easy to compare between different offers, customers are shown the ‘total cost’ of each eligible offer for the selected loan tenure and loan amount. We ensure that there are no hidden costs by even exposing secondary fees, normally not incorporated into the total cost of the loan as they aren’t applicable to all customers (for example, ‘bounced cheque’ fees). By using technology, we cut physical transaction costs. We believe we are among the cheapest distribution channels for financial institutions and our service enables them to offer loans on our site at a cost lower than they do at their own bank branches.
What have been the early challenges?
The biggest challenge is to convince the financial institutions (FIs) that the Indian market is ready for loan applications online. Given the trend that one is increasingly booking flight tickets online, paying electricity bills online and finding the life partner online, we are convinced that the benefits of instantly competing loan offers online will find acceptance among the Indian audience.
What is your value proposition for financial services companies?
Financial institutions find us attractive because we give their customers a great experience. This is especially relevant as the changes in the credit environment in India have made it necessary for financial institutions to cut costs.
What is your revenue model?
We charge FIs a small fee for every loan disbursed through us. This is amongst the lowest in the industry.
Using Bank Bazaar is completely free for customers today and will always remain so.
This being a new concept to India, how are you promoting the model?
Bank Bazaar is using online marketing strategies to build awareness of the site among the online population. We also believe in the power of word-of-mouth recommendations. Once the customers experience our offering, we are confident that they will find it attractive, especially as we make it easy for them by saving time and money.
Customer benefits that you expect in the loan space…
We believe that making available a comparison of different offerings in a one-stop neutral marketplace will produce aggressive pricing from financial institutions. Also, displaying unbiased ratings of financial institutions by real loan applicants will drive financial institutions to ensure they provide a great customer experience.
How many partners do you have currently?
We currently have tied-up with seven financial institutions across personal loans, home loans, auto loans, loans against property, educational loans and credit cards, and are in the process of launching all of them on Bank Bazaar. Deutsche Bank and ING are currently live on Bank Bazaar. AIG Consumer Finance and Kotak are in advanced stages of integration on our site and will be released over the next two weeks.
In September, I expect that we will launch four more banks/NBFCs on Bank Bazaar. We are targeting to partner with over a dozen financial institutions to get the best deals for loan seekers across the credit spectrum.
What are the key drivers for this business to take off in the first year?
The key driver will be to create consumer awareness about our product and the benefits that accrue to them. We expect that personal loans and home loans will be the first products to gain acceptance on Bank Bazaar. We are aiming to disburse 2 lakh loans in the next 12 months. Over time, we expect auto-loan seekers to also explore this format.
What is the potential of this market?
Some years ago, no one bought flight tickets online, but now a lot of the flight ticket sale in India is made through the online mode. This is so because it is more convenient and cheaper to buy online than going to a travel agent.
Once customers start using our site and get a firsthand feel of the cost savings that can be generated through this online model, we expect that there will be a huge migration of consumers from channels such as bank branches and agents to Bank Bazaar.
Source: http://www.thehindubusinessline.com/
