Today my online behaviour is tracked constantly to create a virtual persona. That persona is constantly being bombarded with offers to spend or invest my money whether it be on ecommerce, travel, insurance or even financial products. In this world of confusion is there someone that can bring in simplicity for me to achieve my goals?
What is the use case?
A set of smart founders could create a service that:
- Allows me to tell them what I would like to purchase and set these products as my goals
- Allows me to set deadlines to achieve these goals
- Creates an investment plan (based on my risk-taking ability).
- Chooses a date to automatically transfer money from my checking account into my goal based account
- Constantly tracks my spending to keep me on track to achieve these goals
- Provides a daily/weekly/monthly report tracking my progress in relation to the goals
- Let’s me know if there is any offer on a product that is part of my goal basket
What is the business model?
Online retailers utilise re-targeting, discounting offers, and financing offers to convert those on the fence of making a purchase. However, I haven’t come across any players that are utilizing the age-old selling technique known as the layaway plan. A layaway plan allows a buyer to choose what they want, put down a small deposit to place the item on hold and finally choose an interest free payment plan to pay off the balance for that item. Once the balance in paid off, the item is taken out of layaway and the sales is rung up.
On the flip side, there are numerous wealth management apps that will help me plan for retirement but none that will allow me to plan for purchasing specific products by a deadline while accounting for my recurring expenses. In a world of increasing demands and availability there arises a need to strategically save.
A service that allows me to choose an item from Amazon, or vacation from MakeMyTrip or that love couch that I always wanted from PepperFry and sets up an investment plan for me to achieve that goal by a certain date solves a problem for both the seller & the buyer.
What is the revenue model?
- Fees from mutual funds for bringing in investments
- Affiliate commissions from retailers where the goal proceeds are spent
What is the total addressable market?
As per the latest data available from the RBI for the month of September 2017
|In millions except transaction size||Debit (YOY growth)||Credit (YOY growth)|
|Number of Cards||819.76 (11%)||33.34 (22%)|
|Number of Transactions: POS||265.30 (89%)||112.63 (27%)|
|Transacted Value: POS||366,292 (67%)||374,654 (25%)|
|Transaction Size||Rs. 1380 (-12%)||Rs. 3326 (-1%)|
As the data suggests Indians are getting comfortable using cards to settle bills, with debit cards continuing to dominate digital spending in India. In addition, mutual funds AUM’s grew 31% to 21 trillion rupees in October 2017, suggesting that more Indians were adopting mutual funds to save & invest. Both trends strongly indicate a shift in how Indians are spending & investing their money.
Utilising a bottom up approach we assume:
- Credit card owners (CCO) have higher incomes than debit card owners (DCO) i.e. higher spends.
- An annual vacation for a CCO is Rs. 1 lakh vs Rs. 50,000 for a DCO
- A major annual purchase for a CCO is Rs. 50,000 vs Rs. 25,000 for a DCO
- Only 20% of DCO make enough money to a worthwhile customer
Therefore, the total addressable market for
CCO (33.34 m x 1L) + (33.34 m x 0.50L) = INR 5000 billion
DCO (819.76 m x 20% x 0.50L) + (819.76 m x 20% x 0.25L) = INR 12,296 billion
Combining 1 + 2 we get a TAM of 17,296 billion
Tracxn suggests that a startup that does this would fall under the automated micro-savings or automated micro-investment platform categories. There are currently only 5 start-ups that fall under these categories, 1 of which has been acqui-hired (SYM).
Globally Accorns, Moneybox and Dvendo are the most prominent startups in this space with Accorn in the lead, having raised over $107 million from Paypal, Rakuten, Bain, Great Oaks and 8 others.
While we can all agree that goal-based saving makes sense for the new age Indian, what remains important is how we create an emotional bond with the saver. This can be done by giving them the reigns to choose what they want to purchase so that they can dream up an image of ownership or enjoyment and be motivated to achieve it.
Allowing retailers to know that a potential buyer is saving up money for a future purchase will be valuable information. Retailers can tap into this data and make strategic offers to drive up sales or even plan future sales as the data gets richer.
I for one am excited about working on this idea!