The majority of banks and financial services in India focus their attention on a minority of India’s 1.3 billion population. A large segment remains underserved. 80% of the working population of India is engaged in the informal sector, with a substantial number of households belonging to the lower-and middle-income class. These households have strong aspirations, but inadequate savings to convert their dreams into reality. Lakshya’s mission is to be the financial enabler to this end of the market by growing self-reliant customers who don’t need to fall into a vicious loaning cycle.
Kusuma is 25 years old and works in back office operations for a company in Bangalore. She dreams of being able to follow an MBA and eventually find a job in human resources. Despite working hard, her father’s failing health threatened her family’s financial future. “My father was in the hospital. He is a heart patient. If his BP is normal, there is no problem. If his BP varies, it means we suddenly need to take him to the hospital. And have regular check-ups. It is lifelong.”
There is a need to change the norm from loaning to saving
“Before Lakshya whenever an emergency happened, I asked credit from someone,” Kusuma explains. “We used to pledge gold. We would have to pay a lot of interest. 10-15% per month.” Today the answer for many informal workers like Kusuma is still a loan. Have a medical emergency? Want a new phone? Need to pay a fee? Take out a loan.
This isn’t strange, on the contrary it is the primary offering financial service providers are incentivized to provide to this segment of the market. Increased access to financial avenues, opening of millions of bank accounts have not translated into increased usage for this market segment due to lack of product innovation. One big reason being loans currently give a better margin than savings, and savings require a behavioral change. The Indian customer still needs to be convinced to start saving, to “part” with their money.
Out of 918 fintechs in India within the relevant domain, Lakshya is one of only two working with this target segment to build a business model with savings as a core offering. Lack of proven business models around savings products is one of the key hindrances in getting innovation rolling in the market.
Going against the grain to change the market for good
Lakshya was build as part of Enviu’s larger financial inclusion ambition to improve the financial stability and self-reliance of India’s lower class.. Lakshya jumps in the innovation gap to lead the market with a sustainable savings product model that makes a difference in this customer segment’s lives.
This is what separates Lakshya from the rest. The understanding that whilst increasing inclusion is done on the individual level, generational – even societal – change is created. To create real sustainable change, change that shapes generations, a fundamental remodeling of behavior is vital. Getting customers on its app is just the first step. Plus, Lakshya’s products are 100% bottom up: Customer designed and building on the needs and behaviours of the target segment, creating a very flexible product.
Once onboard customers are encouraged to deposit through app notifications, prompts and calls. Key to this behavioral shift is translating obscure financial savings targets into tangible achievements, or specific needs. Customers can choose to save towards a variety of targets, from school fees & insurance to a new car, or motorbike. Making these saving targets transactional illustrates how useful saving can be and is key in ensuring saving behaviors are retained and valued.
And they’re well on their way to proving to the market it is possible with the potential to break even in a year if they reach 20,000 customers. This is a very realistic future with partnerships lined up with rickshaw unions unlocking access to more than 200,000 drivers in Bangalore alone, each with a high need for savings products. Through Lakshya unions can promote safe and secure savings to meet the life goals of their members.
Getting customers to start saving is only the beginning. Consistent saving is a perfect foundation to extend the product range to for example insurance. Armed with behavioral nudges through digital content intervention tailored to specific users, Lakshya envisions applied financial literacy that drives stability into this segment’s life.
Already creating real impact now
Whilst it will take time to fully engage the potential market, Lakshya is already creating real impact for customers like Kusuma.
Now a customer of Lakshya for a while, Kusuma explains to us: “Every month I get a message or a call from Lakshya to confirm before deducting from our account. This is good because sometimes without thinking we used to spend that money.” This change in behavior pushed by Lakshya has already paid dividends, saving Kusuma no less than three costly loans: “I have already had to withdraw three times for [my father’s] medical emergencies.”
Lakshya is giving its customers control back over their own lives. “Saving with Lakshya gives me confidence and comfort,” Kusuma asserts. “When the first emergency happened, I remembered: I am saving, we have some money in the bank. I don’t need to ask anyone.”
“I wanted to do further studies but I couldn’t because of my father’s health condition. Lakshya is now helping me to plan and save up to do an MBA. My absolute dream is to work in Human Resources.”