By Anishaa Kumar
In this week’s edition of Just Started, we have two Bengaluru-based fintech start-ups with youth at the heart of both of them. While FamPay aims to bring financial independence to teenagers, Leap is setting up a launch pad for youngsters aspiring to study abroad by sanctioning loans within minutes.
Teens often disagree with their parents, but FamPay brings them on the same page
Cue music. “If you invest your tuppence, wisely in the bank...Soon that tuppence, safely invested in the bank, will compound,” sings George Banks to his children, Jane and Michael, in the 1964 Disney musical Mary Poppins. He is joined by his colleagues in a grand musical Fidelity Fiduciary Bank to impress upon the youngsters about the importance of investing and savings. That was the ‘60s. Five decades later, parents are still faced with the challenge of inculcating financial literacy in their children. It is here that Bengaluru-based start-up FamPay hopes to make a mark.
FamPay founders Sambhav Jain and Kush Taneja
“During the placements season in colleges, one commonly hears — ‘If I get this job, my life is settled’. This goes to show that most students cannot differentiate between money and wealth,” explains Sambhav Jain, one of the co-founders of FamPay, adding that over 250 million minors (aged 13-18 years) cannot transact digitally, despite having smartphones with working internet connection and being tech-savvy. To address this, FamPay, founded in March 2019, has created a card and an app that allows teenagers to secure UPI, make peer-to-peer (P2P) and card payments, without setting up a bank account.
Along with Kush Taneja, a batchmate from IIT Roorkee, Jain stumbled upon the start-up’s idea when the duo interacted with families at malls and shopping centres, and asked parents about how they provided money to their children. “We realised that 80-90% were giving cash to their children, and thought this would be an interesting problem to solve,” says Taneja.
So, how does it work? Once a parent signs up on FamPay’s app, they can complete the KYC process and then invite their teenager onto the platform. As soon as the children sign up, parents can transfer money through the app which can then be used for making purchases and payments. Conversely, the account can also be set up by the teen, but that process will require parental consent. Once the child starts using the app, parents can monitor their transactions and can also get them to save.
“Apart from the digital card available on the app, a physical card can also be requested. With an Aadhaar-based KYC process, the usage limit on the card is Rs.100,000 annually”, inform the co-founders. Launched in partnership with IDFC First Bank, FamPay can be used across RuPay payment network of merchants.
Understanding concerns on security, the team designed the FamCard with no numbers on it. “The card number and other details such as expiry date and CVV are stored securely within the FamPay app. So, there’s no fear of information loss,” says Taneja. Putting a double layer of security, the card details within the app can be only accessed with device lock systems like finger print, face ID, pattern lock or PIN.
Till date, the start-up has issued over 50,000 cards. The app and all transactions on it are free of cost. For the physical card, if requested, users have to pay Rs.500 as a one-time charge. The company also earns through the interchange fee on every card transaction. “To explore further revenue streams, we are focusing on building partnerships with brands that are relevant and attractive for teens, with an aim to creating a marketplace for families,” explains Jain.
Having raised $4.7 million in seed funding from Y Combinator, Venture Highway, Sequoia India and others, the founders hope to make FamPay, a teen’s best friend. But, it is no child’s play.
Leap Finance gives wings to students wanting to study abroad
Math whizz Anand Kumar, best known for his Super 30 programme that coaches economically underprivileged kids for JEE exam, could have had a very different story. In the '90s, he had received an admission letter from the University of Cambridge but couldn’t make it due to poor financial condition. Despite seeking sponsors, he was left high and dry. While Kumar eventually managed to turn his luck around in India, the story does not unfold the same way for everyone. If a foreign university is knocking at the door, the call must be attended to. And, finances should not come in the way.
Leap Finance founders Vaibhav Singh and Arnav Kumar.
Meet Leap Finance. Co-founded in mid-2019 by Vaibhav Singh and Arnav Kumar, two IIT Kharagpur graduates, the Bengaluru-based start-up is a one-stop destination for Indian students to fund their overseas education. Prior to its founding, Kumar was the associate vice president at SAIF Partners where he was involved in Unacademy’s Series B funding round. Meanwhile, Singh had a two-year stint with InCred Financial Services and was involved in the disbursement of loans worth Rs 8 billion which helped over 3,000 students move abroad. “Over a million students from India are trying to go abroad every year but, due to financial problems, less than half that number makes it out of the country,” says Singh. With experience in the education and lending sector, the duo set out to build products for this “deeply underserved” category.
They identified two product gaps: First, interest rates offered by traditional financial institutions in India were very high ranging between 12-15%. Second, students were borrowing in Indian rupees instead of the destination market currency, which adds 2-3 percentage points to the overall loan value due to foreign exchange rates. These pain points helped zero in on Leap Finance’s core product, which was sanctioning student loans for graduate education in destination market currency at interest rates of 8-10% only. All this, without providing any collateral as the founders believe “merit and means do not go hand in hand”.
The process is simple – a student who has bagged an admission letter from a foreign university needs to create an account on the platform, provide 10-15 data points that include educational background, certificates, marksheets and voila! A loan offer is made to him/her in real-time. If the student accepts, within 48 hours, the loan sanction letter, which is accepted by global consulates, lands in the student’s mailbox and can be used to get the VISA.
“Our API goes through public data sources and determines outcomes on what kind of jobs and future income the student can bag after the education is complete. This is the underwriting model we use to manage risks,” explains Singh. Currently operating largely in the US market, Leap Finance also opens a US bank account for the student, which ensures that he/she is integrated into the country’s financial ecosystem while still in India. Along with that, students are given a credit card that they can start swiping the moment they land in the US and build a credit history. “After their course is over, they can get favourable terms while applying for insurance, etc. because they can show the credit history that they have built over the past few years,” says Singh.
Coming to the business model, the start-up earns from the interest income and a processing fee of 1-2% on the loan amount. Having raised funding of over Rs.400 million, led by Sequoia Capital, the start-up plans to expand its advisory vertical Leap Scholar — a platform that connects students with India’s top counsellors to help them with choosing the right course in the right university and getting the application process started.
As for Leap Finance, the team plans to expand its operations to the UK, Germany, Australia and Canada by the next academic session. But, tying up with the right banking partners, building a robust tech infrastructure and getting the regulatory compliances in place is a lot of plumbing work. However, Kumar and Singh are up for the challenge. “No Satya Nadellas or Sundar Pichais should be left behind,” they say.
