Having worked in the financial services sector for around 12 years, when Pavan Adipuram, Malla Reddy Chitti and Sridhar Reddy wanted to start something new, doing something in the fintech space was an obvious choice for them.
“A detailed research in this fintech area revealed that there are two type of fintech startups, one in payment solutions and the other in P2P platforms. We felt the need of introducing something very different which can fill the gap, which P2P and banks are not able to address, both being a complicated subjects to understand for the common man,” Pavan says.
While trying to identify other areas in the financial space, they realised that chit funds was one area that needed to be addressed. It is the one type of investment that most people understood but the challenge was that it seemed to be unstructured. There was lack of technology and if improved upon, chit funds could play a major role in financial inclusion.
“There are about 30,000 registered chit funds across India doing legitimate businesses worth around Rs 40,000 crores of business. The challenge again here is subcribers seem to be lacking some visibility and trust in these companies. We decided to start working on these challenges to use technology and see if we can revive this industry to its much deserved recognition,” Sridhar says.
So with the intention of bringing about disruption in this space, they began interacting with all the top chit fund companies that have been in the business for over 30 years and enjoyed a good reputation. Several interactions later, Pavan, Malla Reddy and Sridhar decided that this is one area that could work as a good business idea.
After three to four months of extensive research, they founded ChitMonks in February 2016 – a marketplace for everything Chit funds.
ChitMonks connects all registered chit fund companies on to one platform and promotes their chit funds. And then it introduces customers looking to join a chit fund to their platform and educates them about the entire process of how a chit fund works. It then introduces them to the registered chit funds that can meet their saving and investment requirements.
“Our job start from introducing the customer to chit fund company and then we work with the customer every month to understand their financial needs and plan chit fund management through our algorithmic calculations,” Malla Reddy says.
ChitMonks has different actors in the system. First is the chit fund companies, who they call the foreman. ChitMonks on boards their products, explains the procedure to subscribers and introduced the subscribers to the companies. It has 15 companies on board.
Then there are the subscribers. As mentioned earlier, ChitMonks educates them about the process, introduces the right chit to them and helps them manage chit funds in a smarter way. It has 50 subscribers on board since launch.
It also has agents who help the subscribers and foremen do the business through ChitMonks.
When we think of Chit funds, unfortunately the first thing that comes to mind is the various scams that we have come across in India itself. This is also made many lose their trust in this form of investment.
But to ensure customers do not have such doubts, ChitMonk says that it only brings on board registered chit funds that have been in the business for at least 20 years.
“If you see, registered chit fund companies never cheated customers. And they attract only genuine customers. We have a checklist that any chit fund has to check off before we bring them on board. The check list includes prerequisites like the number of years they have been in the business, they should have handled customers at a certain scale. The average age of a company on our platform is over 25 years. And the youngest company has been around for 12 years. Only once we are fully confident they have no intentions to cheat do we bring them on board,” Sridhar says.
Additionally, ChitMonk educates customers on to how it works, and makes a company profile for them of every chit fund. And not just that, only the on-boarding process is online. After that, ChitMonks makes the subscriber meet the branch manager of that chit fund and ensures there is a physical interaction, so that the customer can trust who they’re putting their money with.
Since their launch, ChitMonks has done around Rs 500 crore of Auction turn over (ATO) per month. And while subscribers are on-boarded digitally, they reach out of every chit fund physically.
For every successful conversion of the subscriber, ChitMonks charges the chit fund a royalty of 1% of the chit value. This service is completely free for subscribers.
ChitMonks now has a presence in Telangana, Andhra Pradesh, Karnataka, Tamil Nadu, Mumbai and Delhi. It has partners with whom it works in these states.
The company has so far invested around Rs 50 lakh so far including fixed expenses, most of it being bootstrapped. “We raised our first angel round of funding in TiE-ISB connect 2016 event at Guardian Angel pitch. We raised about Rs 1 Crore in February 2017 and we started to streamline different activities with focus on revenue generation and product development as well,” Pavan says.
Being the only marketplace for chit funds in India, ChitMonks is confident of enjoying the first-mover advantage and claims to be poised to capture 80% of the business done by the industry by the end of this year.
“We are the technological partners for All India Association of Chit Funds now. We have got access to multiple chit fund companies in the business. The next big thing for us is to enable these chit fund companies to use a Payment Gateway to accept the payments online. We have successfully implemented the same and we are in the process of on boarding few companies in the immediate future,” Malla Reddy says.
ChitMonks is now working on a next-generation Chit fund technology, which it believes will transform the way Chit Fund businesses will be run in future. It says that it is already working on a pilot project and will soon unveil the same.
The right-member team is on its way to break even by the end of this year in the current form. However, it is continuously making investments into the new futuristic product it is working on.