Digital lending startup Zype is focusing on expanding its customer base mainly in the tier II cities and beyond, in a bid to compete in a crowded consumer credit market in India, its founder and chief executive officer Yogi Sadana said.
“These are the areas where you would see more of the employment generation, and more of the consumption being spread out. So, now people with high disposable income would want to consume the next tech product,” Sadana told Fe in an interaction, adding that metros are already saturated from a demand standpoint.
Unlike most digital lenders, which focus on deepening their customer base in the metros, Zype sees a bigger opportunity beyond the tier I cities in places such as Mysore and Vijayawada. Currently, about 60% of its revenue comes from tier II and tier III cities, and the remaining from tier 1.
“The demand is highly concentrated and competitive in metros. So if you are able to figure out pockets of demand where competition is low and the risk is low, then these places form a big part of your mix,” Sadana said. Zype competes with digital lending platforms such as Kreditbee, MoneyTap, CASHe, and Fibe, as also with traditional lenders.
While the competition remains high, Sadana expects the robust demand for unsecured personal loans to continue in the next year. As per RBI data, unsecured personal loans have increased 23% from a year ago as of September.
“The robustness of the demand would continue in my view because people are very confident about their opportunities within the country. There is stability within the government and their policies as well,” he noted.
However, with the central bank’s recent move to increase risk weight for unsecured consumer credit by 25%, most small-ticket lending apps have seen an impact on their business. “So for us, there would be an increase in the cost of borrowing and we’d have to see how much of it we can absorb and how much of it we have to pass away,” he said.
Sadana is, however, confident that since they have recently began operations, they are just starting to leverage their equity, unlike a lender who is already over-leveraged. Within September of 2024, he expects to increase Zype’s AUM to Rs 500 crore.