Learnings

• Spent couple of days with DSAs (Direct Selling Agent - synonym for mortgage brokers who are registered with the bank & are paid a commission by the banks on successful loan disbursement)
  • Tier 1 State Players: looking for s/w to scale, working at 50-100M$ disbursement @ 1% = 1M$ ARR
  • Tier 2: biggest challenge is Marketing, getting new leads, @ 0.5% margin
  • Tier 3: serving clients who mostly got rejected by a bank / NBFC once - no strong direction of how to scale, focused on backdoor channels etc. @ 0.5% margin from bank + 1-2% from the individual who was rejected

• Eligibility is key. You can’t buy loan, you have to be eligible to get it.

  • A better underwriting solution for MSMEs (with AI?)
  • Can we make more people eligible?

• Further discussions with the founder of Aagey (Tier 1, established state level DSA)

  • Guesstimate: they’re doing ~100M$ disbursement annually as a DSA in Bangalore
  • Over many years they have built a template to match loan seeker to financial institute- Using this, they increased their fulfilment rate (loan approval rate) from average 30% to 80%.
    • A: They use 12 params like type of property, size, etc. to classify the property
    • B: Similarly classify the individual
    • Have about 150k combinations based on different params
    • Based on overlap of A & B- they get a shortlist of banks / NBFCs that will give them loan
    • Even the one’s who are giving the loan, they would offer different LTVs & Tenures
    • Higher LTV, higher tenure → higher loan disbursement
    • Based on this, they sort the banks who find the customer eligible for loan. And then lay these options (~2 to 5) in front of customer to choose from. Then apply.

• Being large = more margin

  • 0.5% to 1 % to 1.5% as you go from beginner to state player (1 bank 1-2M$ per month) to national player (10M$ per month per bank)

• Mortgage vs real estate

  • Focusing on mortgages more for now. The process is more structured, easier to scale.

• Motilal Oswal vs Zerodha :: Andromeda vs LoanVaala.co (ours- we bought this domain after testing some names for memorability)

• Does this mean that we have a vast opportunity space to build a mortgage product in India as the target is 50%+ in other countries? Or it is saturated already as the market is currently developing & 10% is good enough? Should we even try to increase mortgage penetration- does it create real value? Or it's just a way to make money?

  • Ref the doc here: (mainly read the last 2 Q/A around desired penetration in India is not 50%+ like US but 15 to 20% as we’re currently a lower-middle income country & debt-to-income ratios won’t be stable beyond mortgages reaching 20% of GDP) https://chatgpt.com/share/67230224-e848-8008-b879-18a0198d7942

Top Problems by DSAs of different sizes

• Independent Player in Tier 3
  • Only people who are unable to get a loan directly come to them, many tried once earlier & got rejected via the bank / NBFC.
  • Lead gen- 1 person served by them brings 3 people via referral in next few months on average.
  • Have very high margins, along with bank they also get 2 to 3% from customer for getting the loan approved for them.
  • Problem: I feel they are too absorbed in day to day, since back channeling etc. stuff are involved, & it is handled by business owner first hand, they don’t have width to think around how to grow and hence didn’t have a strong clear idea on what is their core problems. They listed lots of frustrations from how the cibil of clients is low (~400) to how they lack manners to how they have high expectations etc. They did mention, they are thinking on how to grow further from here- again no clarity. Lack of clarity & direction is the biggest problem since the work they are doing is non-scalable.
  • Learnings: you can’t grow via the grey zone, even with high margins- your brain is constantly busy putting out fire case to case, you are unable to delegate things as there are too many variables & lack of structured process.
  • I sat in their office for hours, to see the process end-to-end. Initially with the goal of doing 1 transaction myself, but then i realised that is a space i do not want to dive into- the area is too grey.
• Independent Player in Tier 2
  • Problem: Lead gen, ideally qualified lead gen. Offered 50% of the bank commission upfront on successful disbursement.
  • Interestingly, they are working with the agent codes that give them about 0.5% commissions only because the scale is small. I should ask them next time, why don’t they join a bigger distributor network, use their code get 1%, keep 0.1% to the distributor & still retain 0.9%. Close to double the earnings, for no extra effort. (This is not a workaround, this is the model these distributors are promoting themselves like AndroMeda)
• Large State Player in Tier 1
  • Aagey.com founder - uses a data driven process for decision making using excels
  • Problem: To scale they feel a software enabled solution is important. The person had tried a few times doing it themselves but now is more inclined to partner with someone from software side to take things forward.

Opportunities for 10x product

1. Banks & even tech companies like BankBazaar & PaisaBazaar- their reps are available 10 am to 6pm. Many folks are engaged in their work at this time. Should we provide exact same service: mortgage agent in Tier 1, 2 but we provide the service from 6 pm to 12 midnight - on phone calls + GMeets. Or even loan-assistant-at-your-door-step booking, just like Uber (might have safety concerns given late night slots, better ask them to meet at near by cafe?)
2. Arbitrage Opportunity: Leveraging higher margin by registering as a national player (1.5%) and offering DSAs to use our code & do what they are doing but earn more. Important Q: the banks can give preliminary license and hold it for 3 months for us. we need to grow big, grow fast to reach about 10-20M$ monthly disbursement for each bank to retain the national player partnership with them.
3. Founder Aagey, mentioned he would like to collaborate to build the software solution leveraging their data & matching process. I said, would love to discuss further after I study the domain a bit more.

• Is this engagement valuable for us? If yes, then at what terms- as a equity partnership, advisory, JV royalty based, etc. I feel the founder is ambitious & this is his core business, so he would be more vested, but would seek a bigger chunk as well.