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    Neobanking company Fi’s revival hinges on its credit offerings


    Internally, the Fi is experimenting with a new user onboarding flow called Fi Lite, where customers are not mandated to open a digital banking account anymore, rather can directly opt for credit products. Fi is also planning to rejig its one-time joining fee of Rs 2,000 for credit card customers to expand its card base.

    Fi cofoundersETtech
    (From left) Fi cofounders Sujith Narayanan and Sumit Gwalani
    Neobanking firm Fi, which has fired a tenth of its staff and is 30% behind in meeting its bare minimum revenue targets for the fiscal, is counting on credit to revive its troubled operations.

    Over the past few months, the company has been changing its user acquisition model to focus mainly on credit-worthy customers as it seeks to double down on the credit card and personal loan business, at least four people aware of the matter told ET.

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    Internally, the company is experimenting with a new user onboarding flow called Fi Lite, where customers are not mandated to open a digital banking account anymore, rather they can directly opt for credit products. Fi Lite is not live to users yet.

    When Fi was started by Sujith Narayanan and Sumit Gwalani, former Google Pay top executives, in 2019, it was positioned as a neobanking platform offering savings accounts of Federal Bank to users.

    Last year, the Peak XV and Temasek-backed neobank diversified to offer investment options to users including mutual funds and peer-to-peer investments (with Liquiloans).

    To expand its card base, Fi is planning to rejig its one- time joining fee of Rs 2,000 for credit card customers, in a bid to position itself as a mass product, the people cited above said.

    FI GFXETtech

    However, lack of multiple credit partners on the supply side, a smaller base of creditworthy customers, reduction in user acquisition spends and depleting cash runway have led to significant obstructions for the fintech firm to fully execute its credit strategy, the people said.

    In an all-hands meeting with employees last week announcing the latest layoffs, Narayanan had said that the company wants to have a cash runway of two years.

    Till date, Fi has raised just over $140 million from investors such as Ribbit Capital, B Capital Group, and Alpha Wave. Its last funding round was in August 2022 when the company secured around $71 million at a valuation of $540 million, according to Tracxn.

    This comes even as the company experiments with newer secured credit products internally including credit against salary and loans against mutual funds.

    Fi is also looking to launch loans against mutual funds and a credit product against fixed deposits in the coming months, the people said.

    “We are constantly looking at revenue and product optimisation and are focused on doubling down on certain product areas given the current market conditions and consumer preferences. We will focus on key product areas including credit focused products. The transition from growth to revenue focused is consistent with all players,” said Narayanan, also the chief executive of Fi in response to ET’s queries.

    Narayanan declined to comment on specific business numbers.

    Fi currently makes revenues through international payments on debit card, interest income (1%) on the deposits, personal loans, besides charging a one-time fee for its credit card.

    Credit card growth muted

    Facing severe competition from the likes of OneCard and Jupiter, new user signups have been muted for Fi’s credit products.

    For instance, the company launched its co-branded credit card with Federal Bank, almost three months back, but has only issued between 6000 - 8000 new credit cards – a far departure from the target of 100,000 credit cards it set out to reach by FY24-end, two of the four people cited above said.

    Data from RBI shows that Federal Bank has issued more than 70,000 cards between May and August 2023.

    “Of Fi’s 3 million customer base, only 80,000 are eligible for the credit card, according to its banking partner, which is a steep drop in the funnel. In the first month, they did about 3000-4000 new credit cards but since then new signups have fallen to a few hundreds,” said one of the persons aware of the internal metrics.

    On personal loans launched this year, Fi has only been able to build a book size of roughly around Rs 60 crore, one of the persons quoted earlier said.

    Even as fintech stays in limited release of its credit product, until Fi Lite is shipped to users, it faces challenges around a shrinking credit user base, as competition steps up.

    “Fi’s banking partner Federal Bank works with other fintechs (Jupiter, Uni) under co-branded arrangements, which has further shrunk the addressable user base. Federal ensures that it isn’t giving a credit card product to the same user (applying from different fintech platforms),” said one of the people cited above.

    To add to the woes, the company has made steep cuts on customer acquisition spends, leading to newer deposit account openings being down to one-tenth, two people told ET.

    “With cost cutting, customer acquisition spends are down by half and newer base of account openings have fallen to one-tenth from 150,000 - 180,000 (monthly) to roughly 15,000 - 18,000,” said one of the persons ET contacted.

    The person added that the company will look to open up its marketing spends once Fi Lite goes live and it has figured its credit strategy.

    According to people cited above, Fi may see larger spends on its credit card, attracting only serious customers with a joining fee — it still needs to work faster on increasing its consumer base.

    Boasting a base of 3.5 million deposit accounts, almost 70% of these accounts hold no balance, and almost 50% of account users generate no revenue for Fi presently, confirmed two people aware of the company’s internal metrics.

    Federal Bank did not comment on ET’s queries.

    Further, its credit against salary product – pay day loans which allows users to access their salaries before the credit date — is expected to address only a small base of 10,000 deposit accounts on the platform, sources added.

    Fi reported gross revenues of Rs 25.8 crore in FY22, a significant increase from Rs 1.2 crore it clocked in the previous fiscal. However, losses swelled to Rs 245 crore in FY22, from Rs 50.2 crore in FY21, according to Tracxn data. The company is yet to report its FY23 figures.

    Limited credit partners

    To make the environment challenging, Fi has only one major banking partner, Federal Bank which powers right from new account openings to credit for fintech.

    It is in talks with IDFC First Bank and P2P lending platform Liquiloans to power consumer loans on its platform; however, the partners still haven’t started rolling out credit to its users.

    “While the tech integration is done, Liquiloans wanted to underwrite customers directly on Fi Lite, because of which the process is a little delayed,” said one of the people cited above.

    Liquiloans is expected to power small ticket credit transactions between Rs 10,000 - Rs 30,000 on the app, with higher credit sizes taken on by Federal Bank.

    “IDFC First Bank works with many technology partners on the lending side on a routine basis, and we are unable to comment on any specific tie-ups,” said a bank spokesperson.

    The lack of newer partners on the supply side has the potential to further slow down its ability to dole out credit faster to users, impacting growth. ET had reported in August that Fi had failed to procure a non-bank licence from the Reserve Bank of India.

    Jupiter has been doling out co-branded credit cards also in partnership with CSB Bank.
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