After spending 10 years in the US working on Wall Street when I moved back to India, my bank rejected my credit card application; and for the simple reason that I did not already have a credit card. When I looked around, I realized that most people in India just did not have or use a credit card. Even to this day, approximately, only 29M consumers have a credit card compared to 500M consumers with a smartphone and 850M consumers with a bank a/c & debit card.
During the same time, my local merchants began offering me credit that the banks would not – this was in the form of Khata/Tab/HouseAccount that is so common in the daily lives of most consumers in India.
That was my Aha! moment where I asked, “What if we use today’s technology; mobile + internet, unlimited computing power on the cloud and artificial intelligence to reimagine a Khata for the internet and put it on a mobile phone?”
I started Simpl with the plan to rebuild a credit card from the ground up, using the best of modern technology to benefit consumers and merchants, putting their relationships at the forefront of the commerce experience.
What problem are you trying to solve and for whom?
For Simpl, the superior user experience addresses the deficiencies in India’s payments stack through our deep integration with merchants, which is as important as the pay-later feature. We don’t view Simpl as an affordability or credit product but rather as a convenience and trust-building feature that merchants offer to their best customers. This builds loyalty and trust along the way, just like a tab or house-account in offline commerce in India, functioning as a powerful tool for building a relationship between the buyer and the seller.
Simpl is a B2B2C platform that acquires users directly from its merchant network at the point of sale, which is why it is extremely efficient in its Customer Acquisition Cost (CAC). The ‘Pay with Simpl’ button becomes visible to those consumers who are pre-approved for credit on the network. The platform functions as a powerful tool for building a reliable relationship between merchants and consumers through seamless
registration without the need for KYC, offering one-tap checkout for multiple purchases, instant refunds, zero interest, 99% successful transaction rate, a digital vault, and 24*7 customer support.
With Simpl, our merchants are able to achieve:
- Reduced Cart Abandonment
- Increased Basket Size and Frequency
- Loyalty & Retention
What is your magic sauce?
Where other products address a particular use case, we believe that at scale, due to habit formation and trust, Simpl can offer consumers convenience and safety at checkout, affordability when required, and loyalty rewards that they deserve. With its proven ability to shape consumer habits at scale, Simpl seeks to own each of these segments – meeting the demands for a range of payment and financing options that consumers and merchants want in their daily lives, through the deep horizontal integration we have.
ML is an indispensable part of Simpl today. 100% of our credit decisioning is done by machine intelligence with no human involvement at all. When a user attempts to check out using Simpl, we need to make two key decisions – Should we allow the user to transact and how much credit limit should we allocate to this user.
We achieve this by processing 100+ features including behaviour of the user on merchant, behaviour of similar users historically, signals from app installation, etc., and run them through an ensemble model which is a mix of decision trees, gradient boosting, Bernoulli Naïve Bayes classifiers and simple logistic regression.
Another important aspect of payments is anti-fraud. We have experimented with repurposing time series prediction models and building our own flavour of the same to predict suspicious transactions.
Why was starting Simpl so important to you?
If we view from the perspective of a consumer, the financial system can be oversimplified into two simple operations – debit and credit. While in the case of debit one pays what one has, it is credit where things aren’t as straight forward. This is where banks and financial service providers come into the picture and decide that an individual is good for this money in the future, based on a number of factors. But in the context of the Indian market, credit is rooted into Indian traditions with systems commonly known as Khata which are nothing but house accounts or informal tabs that merchants keep for their loyal and long-time customers.
These traditional credit systems are built on the foundation of trust and faith, and not so much on data, so it’s no surprise that credit card giants have struggled to break into the Indian market.
Despite 800 Mn people in the country owning a bank account with almost all of them owning a debit card, 60% of all ecommerce transactions in India are still done with cash. With 25% of all digital transactions failing at checkout, the heavy dependence on cash can readily be attributed to lack of trust and poor user experience. Paying at the time of delivery builds trust in the transaction and cash on delivery is a true 1-click checkout and this is what BNPL services like ours is trying to emulate.
There was a clear reluctance in consumers towards using credit cards and the biggest source of the disinclination came from the ‘hidden charges’ or the various transaction fees a credit card company charges its customers. Annual maintenance fee, cash advance fee, surcharges on petrol and GST charges are just some of the extra costs a user incurs for using a credit card.
Things are changing with the rise of e-commerce and ecommerce-specific credit products that are opening up Indians to a whole new way of borrowing. And Simpl is inclined towards the intangible elements of trust and experience; the key question for us was how can we monetise that and turn it into a successful business model.
Our offering enabled introduction of trust between the retailer and consumer by enabling the khata like settlement of transactions post purchase. In addition, Simpl delivers exceptional transaction success rates (99%+) to online retailers. Typically, the industry sees payment failures to the tune of 20-30%.
Talk to us about the challenges that you faced in your journey while building a BNPL brand from the ground up. And also touch upon some of the hurdles that Indian consumers and merchants specifically face?
Building a multi-party marketplace from the ground up with an unproven business model is quite challenging. Now we have proved product market fit and we are able to retain attractive unit economics in
the process. The hardest thing was to convince the first set of merchants to join our network because when we approached them, they were going to be the first node of the network (why would anyone want to be that?). We often jokingly say, the first 10 merchants are impossible, the next 100 are very hard, but the next 1000 are easy.
On the consumer side, the same chicken-and-egg problem exists, but our merchant network has now reached the scale where it makes sense for us to aggressively grow the platform. In order to build the infrastructure to scale we had to take a very disciplined engineering and risk management approach.
Because our affinity and credit models are based on machine learning algorithms, we had to open the consumer funnel up wide enough so that we could also observe the bad behavior to build anti-fraud systems and prevent these users from entering the platform when we achieve scale.
Taking those learnings from fraud events and leveraging them to build better risk and underwriting models is really what drives our competitive advantage as we ramp the consumer side.
We believe that our moat is extremely deep, consisting of not only the merchant side integrations and proprietary data, but also our models’ performance over time and the learnings obtained by utilizing them, which create immense barriers to entry for new participants.
Our first ever merchants were a cloud kitchen merchant called Faasos. Simpl emphasised on reimagining payments driven by trust, relationship, and loyalty between merchants and its consumers and today, we’re focused on large e-Commerce merchants and smaller B2B2C merchants that consumers use frequently, and we believe the opportunity is universal across online and offline commerce. We now have 5500+ category leading merchants on board with Simpl with major partnerships like Razorpay for payments, Zomato, Bigbasket, Dunzo, Practo, Faaso’s, FreshMenu, 1mg, Cure.Fit, FreshToHome, Furlenco, etc.
What has been your biggest win so far?
We’ve had many wins – big & small – on the way to where we are now, but if I were to pick one, I’d say winning the trust of our merchants and users, which was crucial in helping us scale from 500 to 5500+ merchants, stands out. We currently have more than 25 mn approved users and more than 90% of our monthly users are repeat users which is a testament to Simpl’s superior user experience.
Where do you see your company going in, say, 5 years?
Pay Later is one of the fastest growing payment categories in the world. With that in mind, Simpl has always focused on small transactions that consumers do frequently. We are approaching this segment with a user experience that is superior to all other current payment options from a consumer and merchant perspective (in India), which drives massive engagement and habit formation.
Simpl has invested 5 years into developing a scalable infrastructure, risk models that perform extraordinarily well and a world class team of data science and engineering talent to continuously improve and expand the platform and suite of products. We have refrained from spending copious amounts of money on consumer side marketing. As we register continual growth, we expect to meaningfully outperform the growth of the underlying market. At the same time, Simpl’s platform strategy has embedded optionality to expand into other regions and launch products in adjacent verticals that are valued by our merchants and consumers.
With Covid, we have seen growth in e-commerce like never before. Both consumers and merchants are also less inclined to use cash. Given the consumer shift to digital payments of late, our goal would be to bring the fastest, safest and the best payment experience to consumers by partnering with category leading merchants across all segments. We have been growing at a rapid pace and plan to keep the momentum going with some new offerings in the pipeline as well.
And we are very excited at the prospect of creating a new age full stack financial network that enables us to empower our merchant partners to build trusted relationships with their consumers. BNPL is a breakout category and we at Simpl are on a mission to create India’s largest BNPL business by working closely with merchants and consumers to solve their problems