US-based fintech firm announces its expansion in India's lending space

California-based fintech company Tala said that it is bringing its lending app to India. This expansion was announced along with a new $50 million Series C funding led by Revolution Growth its operations in the country which is already in progress. In addition to Revolution Growth, Tala’s Series C round includes existing investors IVP, Data Collective, Lowercase Capital, Ribbit Capital, and Female Founders Fund. Steve Murray, managing partner at Revolution Growth, will join Tala’s board of directors.

The company said in its statement that it also recently raised an additional $15 million to power its loan book and that the round brings Tala’s total financing to around $105 million.

Tala was founded in 2012 by Siroya, who grew up in India and the United States and has a background in global health, microfinance, and investment banking, including with the United Nations Population Fund, Health Net, Citigroup and UBS. The US-headquartered Tala, launched its lending app in Kenya first in 2014, and then expanded to Tanzania, Philippines, and Mexico last year. Now it plans to used fresh funding to expand in India. The company has already set up its offices in Mumbai and Bangalore, and it is currently building out its local team and product testing with a small segment of customers in order to adapt its app to the India marketplace. Learnings from this pilot, the company said that it is laying the groundwork for a full launch in India later this year.

Tala currently has about 215 employees across offices in Santa Monica, Nairobi, Dar Es Salaam, Manila, Mexico City, Mumbai, and Bangalore. It claims that it has so far delivered more than 6 million loans to nearly 1.3 million customers and originated more than $300 million.

How it works

Tala has its own credit scoring technology which uses users’ phone and calling behaviour including texts and calls, merchant transactions, app usage, and personal identifiers. These signals serve as a proxy for traditional financial data, helping Tala expand credit access to customers with little or no formal financial history. Tala requires no collateral. Users need only download the app and grant Tala access to key pieces of data on their Android smartphone. Tala disburses loans between $10 and $500 USD to a mobile wallet or via payment rails of the customer’s choosing. It said in its statement that more than 85% of Tala’s customers receive credit in less than 10 minutes.

Lending Space India

A bunch of technology platform has joined the lending space off lately in the country. Last month, we reported that mobile wallet company Mobikwik is working on the launch of a lending product that will offer instant credit to customers directly from its app. Fintech giant Paytm is too trying to enter the lending space and is seeking a licence from the Reserve Bank of India (RBI) to become a peer-to-peer lending platform. Other than these two, Tala will compete with players like NeoGrowth, Paytm-backed CreditMate, CASHe, LendingKart, MoneyTap, EasySalry, Faircent, LoanMeet amongst others.RBI guidelines on P2P lending: Note that, the Reserve Bank of India (RBI) had come out with final guidelines in October 2017 for peer-to-peer (P2P) lending platforms, according to which P2P lending companies will be regulated as non-banking finance companies (NBFCs) and will come under the purview of the RBI. According to the guidelines, the P2P platforms will act as only as an online intermediary and not raise deposits. These platforms will only act as a facilitator between different parties, and cannot provide any credit enhancement or credit guarantee. The RBI also directs that these companies cannot cross-sell other any product except for loan specific insurance products, and are not permitted international flow of funds. Also, the P2P lending platforms are supposed to undertake due diligence on the participants including credit assessment and risk profiling of the borrowers and disclose the same to their prospective lenders. They will also have to take prior and explicit consent of participants to access their credit information. The guidelines add that, the platforms will have to provide assistance in disbursement and repayments of loan amount and render services for recovery of loans originated on the platform.