This blog looks at a startup called myPaisaa, part of the Financial Inclusion Lab accelerator program, which is supported by some of the largest philanthropic organizations across the world—Bill & Melinda Gates Foundation, J.P. Morgan, Michael & Susan Dell Foundation, MetLife Foundation, and Omidyar Network.
Archana is a 28-year-old who works at a call center in Hyderabad. She earns INR 25,000 (USD 350) per month. After she remits a portion of her income to her parents and pays her expenses, Archana has hardly any money left to save. During emergencies, she usually borrows from friends, colleagues, or local chittis. In Hyderabad, chitti is the common name for rotating savings and credit associations (ROSCAs). Though Archana knows of formal financial products, she prefers to save and borrow through ROSCAs due to their flexibility and convenience, compared to a bank. Millions like Archana in the LMI segment choose chit funds for their credit and saving needs.
How does a typical Indian chit fund work?
In a popular version of ROSCAs, people regularly pool their money in a common fund, usually each month. The members bid for the accumulated pool at each auction, and the lowest bidder wins the amount they bid. The rest of the pool is distributed equally among other members. India has chit funds run by authorized government entities and registered companies, alongside unregistered and informal chit funds. Each of these types of chit funds poses different challenges for investors like Archana.
As the government does not regulate unregistered chit funds, such funds are not generally well-managed, especially the auctions. They also have limited in-person interactions and lack transparency in their operations. On the other hand, registered funds, though regulated, often have poor customer experience due to delayed payouts coupled with inadequate audits and inefficient grievance redress processes. Unethical practices and stories of scams and fraud in recent times have marred the reputation of the chit fund industry.
Can someone salvage the chit fund industry?
Enter myPaisaa, a transparent and innovative digital chit fund platform
Praveen and Ravi, the cofounders of myPaisaa, became friends in college. Praveen used to work in the financial services industry before they founded the startup. While Praveen developed expertise in business development and management and gained experience by running another startup, Ravi worked with multiple top companies in leadership roles.
Their experience with chit funds helped conceive myPaisaa. Both Ravi and Praveen saw their parents save through chit funds and struggle with multiple challenges. These included mismanaged chit funds, fledgling trust, and irregular or delayed payments, especially when needed the most. To overcome these obstacles, Ravi and Praveen founded myPaisaa. The idea was to create an alternate financial product based on the concept of chit funds and social capital, coupled with the power of cutting-edge technology. myPaisaa delivers instant payments after bidding, eliminating multiple processes and irrelevant steps involved in traditional chit funds.
The myPaisaa pitch: Reinventing the traditional concept of chit funds in India
The myPaisaa mobile app is an easy-to-use digital chit fund platform. It offers affordable and accessible financial instruments to help its customers, who are usually from the bottom of the pyramid, develop financial discipline.
The evolution: Identifying challenges and overcoming them
The Financial Inclusion Lab organized clinics, boot camps, and diagnostic sessions and offered technical assistance and mentoring to help the myPaisaa team devise relevant strategies to expand its business.
A significant challenge for myPaisaa was to develop an impactful marketing strategy to increase customer reach and target. The Lab helped the team analyze existing customer data and identify key segments. As part of the Lab, MSC collected insights on the customer journey and identified the role of targeted marketing, as well as ways to implement it to drive the acquisition and engagement of customers.
Investing in a brighter digital future
myPaisaa plans to boost its customer reach and performance through a phygital—the combination of physical and digital—strategy. The myPaisaa team has been focusing on expanding as it reaches out to existing and new chit fund users by showcasing its offerings as a reliable and rewarding investment tool. myPaisaa will continue to educate customers, enhance their experience, and provide personalized products to expand its community of users.
As myPaisaa widens its reach, its larger vision is to remove the skepticism associated with chit funds and make chits an integral instrument for the financial health of millions like Archana in India.
This blog post is part of a series that covers promising FinTechs that have been making a difference to underserved communities. These startups receive support from the Financial Inclusion Lab accelerator program. The Lab is a part of CIIE.CO’s Bharat Inclusion Initiative and is co-powered by MSC. #TechForAll, #BuildingForBharat