Demand for credit to pay rent is high in the time of lockdown, says Paymatrix

In the time of Lockdown, FinTechs operating in lending space are seeing an unusual demand. Paymatrix, has seen all-time high demand in March and witnessing 10-20% in April. Paymatrix allows individuals and SMEs to pay in cash against their creditcard. Currently, the demand is huge for paying rents as people want to preserve cash says, Mukesh Anchuri, Co-founder & CEO, Paymatrix a firm operates from Hyderabad. (FinTech Dairy: Lockdown Special Episode 4)

Video Interview Transcription:

Q. How do you see the FinTech environment, what are FinTechs from Hyderabad doing in the lockdown?
A. The current crisis is both a challenge and an opportunity for FinTechs in Hyderabad as well as FinTechs in general. Most of the FinTechs are using this opportunity to ramp up their product development capabilities. Because, FinTechs are either linked to credit or insurance opportunities. FinTechs who are working in chit space or operating in these domains are affected by the existing cash credit in the market. For instance, people are opting for a monthly moratorium to pay their chits, so you don’t see much activity for a startup in this sector. I see much of my peer FinTechs in Hyderabad using this opportunity to ramp up or bring back the backlog in the product development pipeline. Coming back to the growth or acquisition front, of course this is a challenging period for all FinTechs. We are just waiting and keeping our fingers crossed to see what happens further.

Q. Has Paymatrix seen rise in credit demand recently? Are people opting for more credit?
We help people to put all their expenses on their credit card even when the recipient doesn’t hold a point of sale terminal. For example, say you want to pay your landlord via credit card because you have cash and the landlord doesn’t have a point of sale terminal. You come onto pay matrix, sign up and use your credit card. We will then pay your landlord on your behalf. In the time of coronavirus crisis, people are really uncertain about what is going to happen over the next couple of months, and would want to retain their cash. What we see is that people are coming up with new cases where they want to put money on their credit card. Rather than just using money from their bank account or debit card, they would want to put this on a credit card and get the 45 days of credit or until they get their next paycheck. The situation right now is that most of the users are uncertain about their next paycheck. So rather they would want to avail the benefits of the moratorium and also stick to the cash in their bank. This is what data shows us. As for how this affects us in terms of growth, we didn’t face any problems in March and were functioning at an all time high. In April we definitely see a peak growth of around 10-20% in our business. But the fact that many of the users have matched their credit card or have put majority of their expenses on it and are availing the moratorium. So, when they are doing that, you don’t have limit…. So, they are holding cash in their banks and have also used a significant portion of their credit card. They are just waiting for the next couple of months to wait for the moratorium to get over, to just stick to the very same cash situation. So what we see is that this peak growth will continue for the next couple of months, and once this moratorium gets over or unless we get to come up with new cases where we present them an opportunity to pay those expenses which currently they are paying with cash or a card, we expect the coming few months to be a challenge.

Q. What is the exact trend that you see; can you break it for me? Where do you see huge credit hunger or demand right now?
Let’s divide the users into two areas – individuals and small businesses, where small businesses refer to startup founders or small entrepreneurs running their own business. So, if we do an analysis of individuals. For example, if a person is earning Rs 1 lakh rupees, 20% of it goes for rent and 4-5% for maintenance. Then a significant portion goes into saving to pay for their child’s education fee which usually comes after a semester. Then they keep some money aside for emergencies and medical expenses. They also have travel, groceries and shopping expenses. They also have a savings portion. Now if you take a look at these expense tickets, just try to see which ones you can postpone or avoid. May be rent? No, the landlord wants his money on time irrespective of the crisis. They have to pay it within the timeline even if they get their salary or not. This is a ticket which we see most of the users trying to put on a credit card. Initially what they mentioned was that rent is something that I have already included in my budget, why would I want to shift it to my credit card? Why pay that 1-2% extra? Now in this current situation they’re saying I’d like to retain my cash, so let me put this 20-25% of my expenditure on credit card. Same is the case with maintenance. So, the major tickets which are moving towards short term credit on cards are rent, maintenance. We also see a couple of customers using it for medical emergencies, wherein the recipient doesn’t want to bear that extra convenience fee but the one who is going to pay is the one who needs credit. Another one is tuition fees. Many students are now opting to pay the institute where they were earlier paying the fees through net banking or direct transfer, now they are okay to put this on their credit card and convert it into EMIs. Since many of these small institutions don’t have that option, so they come onto pay matrix, make the payment and convert it into EMIs. Now coming to small businesses, where we have observed an interesting trend. For them, working capital is now a big issue. Revenues are almost zero, but the expenses are still there. So, what they are looking at is if they are able to get a for the next 45-60 days. Of course, credit card can provide upto 45-50 days of limit. So what they’re doing, whether is for rent, or to pay vendors, or if there are some material purchases or goods purchases, they’re still trying to put it on cards and paying …… so that’s how both individuals and businesses are trying to retain that working capital or cash flow. What we see is that, the situation is going to get difficult if they don’t have at least a reasonable amount of cash flows for the next 50 days.

Q. Is there a surge in demand for medical emergencies, (in the time of coronavirus)
No, thankfully I haven’t seen any surge in expense tickets for medical emergencies as such, so that’s good. There are a couple of cases as I said, but no such surge in numbers. We have seen a surge in people putting their rentals on cards.

Q. How do you evaluate the demand in the time of Lockdown vs. before lockdown?
We have been growing on an average of 15-20% since the last few months. March wasn’t a problem for us since most of our transactions happened in the first half, whereas the crisis peaked in the second half. So March was a good month for us. We achieved an all time high of crossing around 10.15 crores. But having said that, we’re seeing a visible difference in April. So, if we do a comparison of first 10 days of March with that of April, I am able to see that we are able to reach up to only 60-70% of volumes. Hence, this month we are probably expecting a dent of 15-20% in our growth.

Also read: Hyderabad FinTechs: Low-cost model a major driver

Follow and connect with us on , Facebook, Linkedin


Supported by: