BharatPe forays into P2P lending with ‘12% Club’ App

 Merchant payments and financial services provider, BharatPe, is bolstering its consumer play, foraying into the peer-to-peer (P2P) lending space with the launch of its product – 12% Club.

BharatPe’s P2P offering will allow individual investors to invest and borrow at 12% interest through the ‘12% Club app.

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For the consumer product, BharatPe has partnered with LenDenClub and is in the process of onboarding Liquiloans. With the same partners, the fintech had launched P2P lending for its merchants back in 2019.

P2P investors on BharatPe’s platform will be lending to its merchants, as it wants to ensure low delinquencies.
Since these merchants leverage BharatPe’s payment infrastructure, the company will be able to better underwrite these loans, depending on business cash flows and help pay back this credit by even deducting a small portion from daily payouts, the company said.

The borrowing on ‘12% Club’ will be fueled by a standard non-banking finance companies (NBFC) such as Hindon Mercantile to give loans to consumers.

“We did a soft-launch for the product earlier this month and think of ‘12% Club’ as a good alternative to park extra liquidity, without taking the high risks of equity. Further, it allows investors to withdraw from the offering at any time. Since BharatPe has millions of merchants, there is no concentration risk to lending to a small cohort,”

According to Grover, the average duration of the loans on the platform are expected to be between three and 12 months. BharatPe’s ‘12% Club’ is already witnessing a monthly investment run rate of $5 million by individual investors, and loan disbursals worth $1 million.

While most of the growth has been achieved through referrals, the app is seeing close to 2500 daily downloads, according to the company. BharatPe had first launched its P2P lending offering to employees earlier this year.

BharatPe, recently entered India’s coveted unicorn league at a valuation of $2.85 billion, after it raised $370 million in a primary and secondary mix, as a part of a Series E funding round led by new investor New York-based Tiger Global Management.

What is P2P lending?

  • P2P lending is not a new feature.
  • In 2017, the Reserve Bank of India had brought this service under its regulatory purview.
  • Even at the time, there were more than 20 P2P lending players in the market but RBI’s regulations ensured only the serious ones with watertight business models remained in the sector.
  • In P2P lending, users sitting on idle money provide loans to potential borrowers identified by the service provider.
  • These lenders then receive payments from the borrowers on a set basis — either one time, or in equated monthly instalments.
  • After RBI issued its regulations in 2017, the space saw a spree of fundraising involving some of the existing players in the segment.
  • Some of the major companies operating in this space include RupeeCircle, Finzy, IndiaMoneyMart, etc.

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What are the risks?

  • One of the biggest risks associated with this kind of lending is the non-repayment of loans.
  • Given that P2P lending is a form of unsecured loan, there is no guarantee put up by the borrower for the lender to redeem in case of a default.
  • However, the unsecured nature of the loan is also the reason behind the high return on investment compared to other debt instruments.

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About BharatPe “12% Club”?

  • “Consumers on the 12% Club app can invest their savings anytime by choosing to lend money through BharatPe’s partner P2P NBFCs.
  • Additionally, consumers can avail collateral-free loans of up to Rs. 10 lakh on the 12 % Club for a tenure of 3 months, as per their convenience,” the statement said.
  • BharatPe said there will be no processing charges or pre-payment charges on the consumer loans, and added that the loan eligibility will be defined based on a number of factors,
  • Including consumer’s credit score, the shopping history using Payback loyalty system or the payments done via BharatPe QR.
  • Consumers investing via the app can put in a request to withdraw their investment anytime, partially or completely, without any withdrawal charges.
  • They can start by investing Rs. 1,000 and the upper limit for investment by an individual is currently set at Rs. 10 lakh.
  • The company said this would be increased to Rs. 50 lakh over the next few months.

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Conclusion

The rolling out of P2P lending by BharatPe marks fintechs trying to roll out newer features to keep captive audiences within the ecosystem, allowing them to earn and borrow at competitive market rates.

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