Decoding Shorts - 4
The cost of education has constantly been on the rise in India. Be it pre-school through higher education. All parents would want to give their children the best quality of education, but it comes with a considerable cost. Paying exorbitant fees may not be feasible for each parent, and they may either have to cut down on their other expenses or resort to loans. Sensing this problem and create an impactful solution, Rohit Gajbhiye founded Financepeer
FinancePeer provides the option of paying fees through “No Cost EMI.” Rather than paying the fees upfront, parents can now pay fees in EMIs without any interest burden. But if it is a No Cost EMI, how does the startup make money? Let’s delve deep into the business model.
Though the startup doesn’t charge any interest from the parents, it charges a small percentage fee from the lending partner. Consider it as referral/sourcing fees. But again, if the parents are not paying interest, how does the lender make money? The educational institution bears the ultimate interest costs because they get the fees upfront, solving their working capital requirements. The parents get to pay fees in a stalled manner. The lenders increase their loan book, and FinancePeer earns the sourcing fees. Isn’t it a WIN-WIN model for all the parties?
And the market is quite huge to tap. The Indian education sector crossed $117 Bn in 2020. Online education alone is expected to grow at 52% CAGR, thanks to the Ed-techs in India. The favourable demographics – 580 Mn population in the age group of 5-24, provides a massive opportunity for FinancePeer to scale exponentially.
FinancePeer enjoys a very high Life Time Value (LTV) of customers simply because most of them would like to pay fees through No Cost EMI. And this fact provides many opportunities to the startup. Once the customers are acquired, FinancePeer can also provide loans themselves to earn interest income. Apart from the core business, FinancePeer has also started Student Reward Cards and Utility Cards with partnered Educational Institutions as value-added services.
Having raised $4 Mn in the last 03 years, FP has expanded its network to 4,500 educational institutions and has provided loans of $70 Mn. Even with higher CAC in the 1st year, the higher LTV enables FP to profit with better margins in the long run. The cross-selling products are an add-on with lower CAC and better margins.
FinancePeer introduced Rohit Sharma as their brand ambassador to creates strong influence and brand recognition. To onboard a strong personality in the early stage of the startup is a bold move. But considering the vision and macro-economic factors staying positive for Fintech and Edtech of the world, FP is well-positioned as a FinEd-tech Co. to grow beyond leaps and bounds.
Does it have the potential to turn into a Unicorn? We would love to hear your views! Author - Rahil Shah