NiYO already has about one million customers, and it believes that this group will be converted to middle class within ten to fifteen years.
Editor’s note: This article is from WeChat public account “Zhixiang.com /a>” (ID:passagegroup), author Ebin Luo Ruiqi.
Since 2013, the whirlwind of a “new bank” (neo-bank) has swept the world. It is a new type of digital bank that provides traditional banking services without any branches.
NiYO is a “new bank” in India. It serves the blue-collar workers in India, providing them with payroll solutions and other related products. In July, it announced the issuance of Series B financing from Horizons Ventures, Tencent and JS Capital. According to data from Traxcn, the Indian data analysis platform, Tencent’s second shot in India this year was an investment in online education unicorn Byju’s. So far, NiYO has raised a total of 49 million US dollars.
NiYO was established in 2015, and the earliest business was tax management. The Modi government’s banknotes in 2016 completely changed the fate of NiYO.
On November 8, the demolition order was released. On November 20th, NiYO released the first product. At that time, some customers contacted them and said that they were having trouble paying their salary, and then NiYO’s blue-collar wage solution came into being. In the first three months of the banknote order, it opened 2,000 accounts, and all customers took the initiative to find the door.
This business, which was supposed to last only a few months, has been growing. At present, NiYO has about one million customers and about 100,000 new customers each month.
After it got Tencent’s investment, The Passage interviewed NiYO’s co-founder Vinay Bagri. In the interview, he said that the current company’s revenue is growing six times a year, the next step will be to vigorously develop credit business, and will also start mergers and acquisitions and global expansion.
The right side of the picture is Vinay Bagri
Zhixiang.com: What is NiYO’s business model?
Vinay Bagri: Our business is mainly divided into two parts. One is NiYO Bharat (“India” in Hindi) and the other is NiYO Global.
NiYO Bharat is the “new bank” for blue-collar employees. On a global scale, if you look at a new bank like Revolut or N26, it’s usually aimed at millennials or higher-income people, but we’re geared to blue-collars. The waste order has completely reshaped us.
We offer all new banking facilities. We offer a completely seamless service – from a security perspective and a banking perspective, this is our commitment to consumers around the world. Our technology is built in-house, which allows us to significantly reduce costs, so those in India who are already under-invested in financial benefits can benefit from it.
There are two reasons. First of all, for private banks, the cost is high. To establish different branches, hire people and pay salaries, these costs will be passed on to the customers in the end, regardless of the size of the customers.
If a customer’s salary is 100,000 rupees, you can naturally make more money from him. If the customer’s salary is only 10,000 rupees, then the possibility of cross-selling and the amount of the loan will be very low. Therefore, private banks are not interested in customers with wages below 15,000 to 20,000. The market is big, and even without these customers, they can live very well.
Second, the government is willing to go to this event, for example, the launch of Jan Dhan (Pradhan Mantri Jan Dhan Yojana, the Indian government’s financial inclusion project), but the government has no modern facilities. If you open a Jan Dhan account, its app may not provide the language you use, which makes it difficult for customers to use their services.
We know that this space has always existed because I am a working-class person. We realize that state-owned banks and private banks do not fully serve this market segment, which is our opportunity. Now, users can open a full payroll account with us. It is a prepaid system with a deposit limit of 100,000 rupees. But other features are the same as traditional bank cards, you can save money, transfer money or send money, you can also withdraw money from ATM. Customers also have a physical card, and we use Rupay to issue a bank card.
We don’t do To C business. Our business is a typical payroll account, working with companies, and we deal with companies with an average size of 100 to 200 employees.
志象网: Why do these companies choose to work with you?
Vinay Bagri: Imagine a typical blue-collar scenario: Suppose you are a small factory in Thrissur (a small city in Kerala) with 100-200 employees. When you open a payroll account for these employees, no bank will be willing to open a payroll account for you, which is a problem for employers. The Labor Law stipulates that if the salary is above 10,000 rupees, it cannot be paid in cash. But private banks won’t accept this kind of business, which doesn’t make sense to it, and in state-owned banks you need a long queue.
So there is no way to get good service when they pay their salary, nor can they use NEFT (National Electronic Funds Transfer) in bulk. And we provide them with a platform, as long as the employee is in service, it is a free human resource management system. All employees are on the platform and we pay wages in real time.
Zhixiang.com: Why can’t big banks do this?
Vinay Bagri: There are two reasons. If it does this, it must do it on its existing technology. This requires both human and system costs. For us, our technology is purpose-built and there is no cost to transform.
We don’t have the cost of distribution. For them, the cost of all branches and infrastructure will be borne by each customer. And our entire customer management is in the cloud, no need to set up branches.
Zhixiang.com: What else do you have in other businesses?
Vinay Bagri: Six months ago, we launched the NiYO Global business, which now has about 50,000 customers. NiYO Global serves travelers and is suitable for customers who consider themselves to be citizens of the world. With this card, you don’t have to use foreign exchange when you travel abroad. It is connected to the current exchange rate, you can directly swipe your card.
In India, MDR (retailer discount rates) is declining, but global MDRs are still quite strong. Niyo Global is a Visa card, anywhere in the world youCan be used. When the customer uses this card, Visa will transfer the discount to us, and the whole process is seamless.
For NiYO Global customers, we do not charge any fees on ATMs, and our global business has grown sixfold in the past six months.
We also did some credit business. We do not do this business ourselves, but we work with banks or NBFCs (non-bank financial companies) to provide credit.
Zhixiang.com: How does NiYO get customers?
Vinay Bagri: Our products are in line with market demand and we have gained considerable users within a year. Initially, we started with tax management products and are still continuing, but we never actively acquire users. After about three months, the product and the market achieved a high degree of fit.
Then the banknote policy was released, and we launched NiYO Bharat. After doing it for a while, we realized that we can continue to get scale, with 100 million people in this area. After about two to three years, we have achieved economies of scale.
Zhixiang.com: How do you plan to use new financing?
Vinay Bagri: There are three main aspects. The first is to expand the scope of business. We currently have operations in about 38 cities in India and we plan to enter 138 cities in the coming year.
Second, we also do very little marketing. So far, we have spent less than 500,000 rupees (about 50,000 yuan) on marketing, and more is word of mouth. We will do more brand building activities. Most people didn’t know about us before this round of financing.
The third is the product itself. We have to do a lot for SMEs, and we also want to provide more customers for the terminal, so product and technology development is our third investment area.
On a global scale, we are exploring whether we can expand to countries in Southeast Asia. The funds for NiYO Bharat and NiYO Global will be half and half.
At the moment, we have 100 technicians and developers, and we are going to expand it two to three times. In addition, we are looking for opportunities to acquire in the following four areas: travel, lending, wealth management and payroll processing. We are in contact and discussion with some companies.
Zhixiang.com: What is the income model of NiYO?
Vinay Bagri: We charge an annual fee from the end user. In addition to the salary account, we charge more than 200 debit cards.
What we want to build is a new bank, which has three aspects. One is the deal, we are doing it now.
The second one is a loan, and we have completed several loan pilots. We realize that because we give our customers a salary, we have some advantages in credit reporting. When they start using the staging, we have a chance to be prioritized, so we will put a lot of energy into the loan field.
The third is wealth management. We have conducted some pilots in mutual funds, gold, and time deposits.
Zhangxiang.com: Will your loan product model be similar to EarlySalary?
Vinay Bagri: EarlySalary is for people with a salary of more than 20,000 rupees. And our users work around 10,000 rupees, we have to build our own model.
We will work closely with some partners. Our target users don’t have many sources of loans, and they don’t have too many credit records. We will work with our partners to create credit records for them, starting with some small products, such as 500 to 2,000 rupees. After the credit record is established, it will be developed on this basis.
We will work with banks on projects such as risk control. When we fully understand the market, we may do it ourselves. We don’t have to pursue growth every year to finance, and with what we have done in three or five years, we may take ten years to do it. After we have fully determined and understood the market, let us do it ourselves.
In terms of interest rates, ideally, we expect interest rates to be around 18%. The interest rate of a microfinance company cannot exceed 48%, while the upper limit of a bank is 36%.
Zhixiang.com: How did you find investors and successfully finance?
Vinay Bagri: We have always been very lucky. We did not take the initiative to find anypeople.
This Horizon, which was jointly invested with Tencent, is an investor in our A round. We did not intend to make a new round of financing. Horizon and Tencent took the initiative to find us and said that we are very optimistic about our business. India’s blue collar is a big market and it will become an important market segment.
Tencent has seen how this market is developing in China. In the past 15 to 20 years, the former blue-collar workers have gradually turned into middle class. They are the biggest consumers in China. Tencent believes that if we can get a good customer base in two to three years, with the economic growth of India, this group of users will gradually become a middle class. This is where they bet.
Everyone who invests in us treats us as a banking service. The blue-collar business is a long-tail business. We can have 5 million loyal customers and earn very little money from everyone, but the user base is very large.