Getting an electric vehicle (EV) financed sits among the top challenges that are hindering the adoption of EVs in India. Blame it on lack of data or proof of concept, but many traditional banks and financial institutions continue to see financing EVs, especially two and three-wheelers, as a major business risk.
A report published by Niti Aayog and RMI India had previously noted that EV buyers currently face financing challenges, such as high interest and insurance rates, low loan-to-value ratios, and limited specialised financing options. As per RMI and Niti Aayog, these challenges will only become more critical to address as EV adoption picks up. The report 'Mobilising Finance for EVs in India' identified the EV finance market opportunity to reach approximately INR 3.7 crore by 2030.
RevFin, a financial technology start-up, is trying to help address this issue. Headquartered in New Delhi, the start-up claims to have disbursed INR 65 crore in financing EVs.
Sameer Aggarwal, Founder & CEO, RevFin, said, 'We have been doing this for almost three and half years now. RevFin is disbursing INR 10 crore to 15 crore on an average every month for last few months. We are in the process of raising more debt and have raised INR 100 crore so far. We have also raised INR 20 crore against equity. Our forecast for FY23 is disbursing INR 450 crore in EV loans.'
Tier 2, Tier 3 and no credit reports
Unlike many other NBFCs and banks which primarily look towards Tier-1 cities in India to fulfil their lending requirements, Aggarwal headed Revfin is spreading its wings in Tier-2, Tier-3 and beyond markets. The company collaborates with EV brands and OEMs and has its representative placed at the dealership of these OEMs/brands to help walk-in consumers get financial assistance. The setup is traditional because it looks like a copycat of the model followed by traditional NBFCs and banks, but closer scrutiny reveals many differences.
Unlike traditional banks and OEMs, RevFin does not require the credit history of an intending buyer. The start-up doesn't even look (as a mandatory check) into the financial transactions carried out by its potential clients. Most of the individuals that Revfin has financed have been otherwise unable to apply for loans elsewhere. Their inability to apply for loans was probably the problem statement that Aggarwal saw for founding his first start-up.
'When we look at the commercial electric three-wheeler segment and the intending buyers from Tier-2/3/4 markets, we find that these potential buyers are generally financially not included. Most of them have never had a loan in the past and hence they do not have a credit history. They don't even have banking transaction data as everyday operations are done in cash,' shared Aggarwal.
Aggarwal, in collaboration with IIT Kharagpur, has built a technology that helps RevFin evaluate people's profiles and assess whether they are a good fit for disbursing loans or not. This financial technology start-up does most of its business in the commercial categories of electric three-wheelers. It is worth noting here that Aggarwal had completed his Master's Degree in Business Management from IIT Kharagpur. He has worked with HSBC in the past as a Group Risk Manager who looked after managing all aspects of credit risk.
'Apart from normal checks like KYC, we have built proprietary technologies which include psychometric analysis. Every user goes through this test. We are able to understand personality traits of users based on the results. These results have a direct connection with every user's intention to repay,' explained Aggarwal.
RevFin also captures biometrics of a user, which include videos, voice and fingerprints of a user. A match of the photos provided by a user is also done with the images in the government-issued identity cards. The start-up does not stop at handing over the loans, but it also claims to follow gamification technologies to inspire users to pay back EMIs in time. It also incentivises users who do not fall short of making payments. This incentive could lower interest rates and access to additional products as well.
NPA Less Than 2%
The start-up, as something mandatory, only finances EVs for individuals. Financing commercial EVs for fleets is on the cards, but the same is done via a different approach. RevFin finances EVs in the name of drivers working for a fleet. Telematics is also embedded in the financed EVs as a part of the deal. The same, according to Aggarwal, creates a win-win situation for drivers as they can easily locate their vehicles in cases of theft, and for RevFin as the company can easily locate a vehicle in case the user is not willing to pay.
'Telematics also help us find out if a vehicle has been standing idle for days. This is a pointer that hints that the owner may not be working and might also miss on payments. This is just one example of proactive collection strategies that we deploy,' said Aggarwal.
RevFin has so far collaborated with 15 e3W OEMs and is actively working with six of them. The start-up claims that its Non Performing Asset (NPA) rate is lower than not just its competitors but also traditional banks and lending institutions.
'Probably a bold statement, but we have the lowest NPA in the industry. We have lower NPAs than lenders who operate in the ICE category of vehicles. Our gross NPA is approximately 1.5%. Our net NPA is less than 1%,' claimed Aggarwal. He explained that three-wheeler electric vehicles present a good earning opportunity to people, and to keep earning, these people have to pay EMIs to own the vehicle. EVs recovered from users not willing to pay back loans are then refurbished by dealers/OEMs before putting on sale again.
The start-up, as per Aggarwal, does not just work with every electric three-wheeler OEM. RevFin selects these based on pilots the start-up runs at the OEM dealerships. Aggarwal explains that the same is done to ensure that the product has the mettle to serve an individual as a mode of earning. The company has started to finance commercial e2W and is setting up a shop in the commercial four-wheeler space as well.
'So far, we have worked only with e3W OEMs. We have also tied up with e2W brands, and four-wheelers are on the cards too,' concluded Aggarwal.