Now that the SPC Fund has branched out into later stage investing along with our regular early-stage motion, we want to open-source more of our investment thinking. We’re excited to share this memo from fund Chief of Staff Bala Chandrasekaran on one of our later-stage investments, Money View.
We’ve spent a lot of time over the last few quarters looking at India. The driving factor behind our interest is a rising middle class and the enormous market opportunity that accompanies this growing prosperity.
As of 2022, India’s population stands at 1.4B, and will continue to grow over the coming years. One of the signs of a maturing economy is its ability to provide solutions and services that allow its population to climb up the socioeconomic ladder. India has made strides in the right direction, but we believe large opportunities remain in the financial services sector.
While bank accounts and payment systems have penetrated much of the Indian market, access to broader financial services is still a challenge. Traditional players like HDFC Bank, Bajaj Finance, and ICICI Bank, among others, have created a $700B market cap by focusing on the ~25M households at the top of the income ladder. But in a growing, upwardly-mobile economy like India, we believe that the currently underserved 120M+ midmarket households are an even larger opportunity for the right financial services company.
Traditional financial services infrastructure does a good job of catering to the affluent. But there are fundamental reasons why these same structures will struggle to service the 120M+ lower-middle-class (LMC):
- They are too reliant on traditional data sources that are not easy to come by for the LMC
- They rely heavily on credit scores, which are generally incomplete or insufficient for the LMC
- Their services are too tied to physical locations, failing to reach the LMC
Key components of traditional financial institutions don’t work for midmarket households and will struggle to adjust to serve this growing group.
Additionally, India is undergoing a full digital transformation. Reports estimate there will be 840M total internet users in the country (roughly ~60% of the population) in 2022. That same population has 1B+ bank accounts and ~200M digital payment users.
These structural barriers for incumbents coupled with digital tailwinds lead us to believe that there is a sizable market opportunity for a company that starts with the LMC as their target customer and focuses on building a data-driven, digital-first financial services platform.
What is Money View?
Money View is building a full-stack financial services platform for the deeply underserved lower-middle-class in India. Their mission is to “provide financial service access to everyone with a smartphone and a bank account”. The product wedge: proprietary credit scores based on a growing data moat, which in turn enable personal loans to people previously ineligible. The difference between Money View and traditional financial institutions is Money View’s ability to underwrite for the growing LMC. Traditional institutions, with underwriting processes built on top of affluent-focused credit bureaus, are poorly suited to serve this market.
We built conviction in Money View when we came to understand their underwriting model. Money View is able to analyze risk in the LMC at a higher granularity than traditional credit bureaus, so their data is far superior to what a traditional financial institution would use to evaluate loans. This allows Money View to extend credit to customer segments that historically were cut out of the financial industry. Loans are in high demand and the ability to serve a previously neglected customer base leads to long-term stickiness for the MoneyView product. On top of their wedge, MoneyView is actively expanding across financial products like credit cards, BNPL, insurance, bank accounts, and investing, creating a comprehensive financial partner for their target market.
Money View’s long-term goal is to become the neobank for India’s growing LMC. With the customer loyalty built by finally extending financial services to a population long-denied them, we believe Money View is well-positioned to achieve its goal.
This was briefly discussed in the last section, but Money View’s moat can be broken down in two ways:
First, the underwriting model is the secret sauce. This model allows them to analyze risk at a significantly higher granularity than existing credit bureaus. This in return allows Money View to extend loans to individuals that previously would have been written off. The underwriting model was built from the ground up with the LMC in mind, instead of retrofitting from the affluent-focused model long used by traditional institutional competitors. A purpose-built product is generally more defensible than a jerry-rigged one.
Second, Money View has a very strong data moat. As more individuals come onto the platform, Money View’s underwriting model will get more accurate and robust. This gives Money View a significant head start over competitors.
Our concerns around the Money View investment were less specific to the company itself and more to the macro environment. Companies that rely on underwriting will live and die by their ability to accurately forecast risk, and a significant portion of our bet is a belief in the underwriting strategy that this team has put together.
While the last few years of pandemic upheaval were particularly challenging for businesses that rely on underwriting, the Money View team handled them well. However, future Black Swan events may prove more difficult to manage. Having just lived through the effects of a major, unforeseen macroeconomic event makes us more sensitive to them going forward.
Our diligence and time spent with the Money View team lead us to conclude that there is a large opportunity for a financial services company that focuses on the 120M+ underserved LMC households in India. We strongly believe that MoneyView is in the best position to take advantage of this opportunity.
Long-term, we think Money View is capable of positioning itself as the neobank for India. By building relationships with previously neglected customers at crucial times in their lives, Money View will be able to continue driving down CAC over time and expanding the product offerings.
There's a lot to be excited about here and we are thrilled to have participated in Money View’s Series D financing. We’re looking forward to supporting Sanjay, Puneet, and the rest of their talented team as they build a revolutionary financial services product for the lower-middle class of India.