Ola seeks to take NBFC route to drive growth

Bengaluru-based Ola is looking to deepen a short-term credit service it currently provides on a pilot basis to riders on its app, launch a credit card in partnership with a bank and sell insurance to its driver-partners as well as riders. It already offers a trip-insurance service to customers. This is as per a report in the Economic Times.

What Ola is looking to do is leverage its distribution platform in adjacent categories, after having stepped into food delivery with Foodpanda and a potential entry into pharma delivery. The SoftBank-backed company already operates what is called Ola Credit, which is a pay later product, and now wants to deepen its lending offerings through an NBFC arm.

These moves are also aimed at roping in separate capital for its digital wallet Ola Money. There had been discussions earlier that Foodpanda may tap funds independently, as it fights deep-pocketed rivals Swiggy and Zomato in the highly competitive food-delivery market.

As reported by the newspaper around 4^th of December, the taxi-hailing app has a $1 billion financing offer from its largest investor SoftBank. But cofounder Bhavish Aggarwal may not take the entire amount to avoid the Japanese group from ratcheting up its stake. SoftBank holds around 26% of Ola.

Ola has applied to the central bank for the NBFC licence so that it can expand the operations of Ola Money Postpaid, or Ola Credit, which is a buy-now-pay-later product.

Currently, through the Ola Money Postpaid option, users can take multiple rides and club all the payments together for settlement in one go. An industry executive said the taxi aggregator was taking a credit risk on the user for a short period of time, which makes it mandatory to be reported on the books of a licensed lending entity.

Ola had launched a pilot of Ola Credit in 2016 by offering it to a small user base. The company in a recent note said it had seen 30% month-on-month growth on the adoption of the feature and was all set to take it live across the company’s 150 million user base.

While the product will start with a 15-day credit cycle, it could be extended to 30 days depending on the repayment behaviour of customers. Ola Money Postpaid is made available to customers based on internal big data risk scoring algorithms, the company said last week. “We will also extend its reach beyond mobility and integrate it into other segments such as food, entertainment and utilities in the coming months,” it said in a blogpost.

Nitin Gupta, a cofounder of PayU India, was appointed as the CEO of Ola Money in December 2017, with the intention of scaling the cab aggregator’s financial services business.

“Some of these efforts have been in the pipeline for a long time, but they haven’t hit the market yet. With the core business slowing down, this is one critical area that can see an aggressive bet from Ola going ahead,” a person with knowledge of the developments has been quoted in the report.

Ola’s entry into financial services could encourage other consumer Internet companies also to apply for NBFC licences. While this could help expand the credit market, it may affect standalone digital lending platforms. The buy-now-paylater market has been getting traction as it evolves across sectors like food delivery, ecommerce, online ticket booking and others. “Financial services is a difficult game to crack; every player cannot play it that well which makes these consumer-facing Internet firms entering into lending a risky proposition,” said a top executive of an early-stage lending startup.n earlier newsreport around the 24^th of September said that Ola and rival Uber, while increasing their absolute number of daily rides, saw growth decline to 20% on average in 2018 to 3.5 million rides across all segments, including taxis, autorickshaws and shared cabs. It was 57% growth in 2017 and 90% in 2016. In the past year, there has been a palpable slowdown in the online taxi business, largely due to supply constraints with driver income falling.