Classmates on the MBA course at Stanford University, Axio co-founders Sashank Rishyasringa and Gaurav Hinduja always knew they wanted to return to India at the end of their studies. “We were passionate about doing something that would have a real impact back home,” recalls Rishyasringa. “But when we started looking at potential opportunities, we realised many of our fellow entrepreneurs felt the same – so many different sectors and markets seemed well catered for.”
In the end, however, that initial frustration led to inspiration. “We spotted that almost all of those entrepreneurs were running into the same problem – India’s affordability gap,” Rishyasringa explains. In any given sector, the number of Indians with the disposable income to take advantage of the exciting new ventures launched was limited. “It felt like a horizontal problem that was holding back multiple verticals,” Rishyasringa adds.
That realisation led to the launch of Axio, a fintech start-up that aims to bridge the affordability gap by ensuring many more Indians can access credit – that they can boost their disposable income with borrowing, in other words.
Currently, only 30 million or so Indians have credit cards and access to other types of lending from traditional financial services providers such as banks. The vast majority of the 1.4 billion population are excluded from these services.
Axios believes as many of 100 million of these people have begun transacting digitally in the past three years – buying goods on digital marketplaces, for example, or setting up businesses that trade through e-commerce. The number is set to reach 300 million over the next couple of years. This is Axio’s target market.
The company’s signature product is buy-now-pay-later (BNPL) finance, which is offered to consumers when they make purchases through any of the multiple online marketplaces and retailers with which Axio has built partnerships – including Amazon India. Customers put down a deposit on their purchase, with Axio paying the rest of the upfront cost; the borrower than repays this amount, with interest, through a number of smaller instalments.
The business model is built on Axio’s technology, with its data engine able to offer a lending decision to a consumer within three seconds of a request being made. In effect, the business offers instantaneous decisions to customers at the point of purchase.
BNPL arrangements are growing in popularity all around the world, and in some regions, there is now something of a backlash, with concern mounting that consumers are being encouraged to take on debt they cannot afford to repay. But there is a crucial difference between those arrangements and what Axio offers, says Rishyasringa.
“In regions such as Europe, consumers are using BNPL on top of all the other credit products they have access to,” he says. “In India, we’re addressing a structural gap in the credit market; this is most consumers’ first point of entry to credit.”
Axio lends only relatively small amounts to new customers, he explains, with the aim of helping them to build up a good credit record. Assuming they keep up their side of the bargain, making repayments when they’re due, Axio’s borrowers can increase their credit availability over time. The company has also recently launched unsecured loans, offering finance of up to $2,000 to customers with the best track records.
Rishyasringa and Hinduja see themselves as pioneers in this regard, opening up an area of financial services in a country where exclusion remains a significant issue for the vast majority. Axio also offers a financial management app, with facilities such as budget management and savings reminders. “We’re working to drive the behavioural change that we need to see around money management in India,” Rishyasringa adds.
Launched nine years ago, Axio’s growth accelerated last year when it picked up $50 million of new funding from investors. The business now has 6 million customers and is adding new borrowers at a rate of 15,000 a day. Lending is running at an annualised rate of $700 million – and the founders expect to break through the $1 billion mark in the next six to nine months.
Encouragingly, borrowers appear to behaving well. The company’s default rate is running at around 1 to 1.5%, which is low for sub-prime lending. Rishyasringa credits this to Axio’s responsible lending policies – and to the increasing sophistication of the data engine it uses to make underwriting decisions.
As for the future, there is clearly plenty of market to go at, if India’s digital user population really is set to rise from 100 million to 300 million over the next couple of years. But the company’s founders also see potential for expansion into new areas. They have already begun partnering with providers in spaces such as health, education and travel, where consumers often need help with big ticket purchases, and the launch of the loans business represents a first foray into broader credit products.
Rishyasringa is particularly proud of the fact that 60% of new borrowers coming to the site are from areas outside India’s 10 biggest cities – a constituency that has traditionally found it even harder to access financial services. “We are really keen to regionalise and localise even further,” he says.