IDTF Final Report – New FinTech Product – Foro

Submitted by: Harsh Vardhan (61910582); Anuj Bahl (61910577); Akhilesh Oberoi (61910521);
Chayan Kothari (61910514)

Value Proposition

Foro is an online Peer-to-Peer (P2P) loan auctions that enable individual consumers to borrow
and lend money directly to one another.

Over existing Peer to Peer lending platforms, Foro provides the following distinct advantages.
The advantages are spread across both borrowers and lenders -

1. Fair and better prices, than expected from a bank, or a traditional lender
2. Freedom to Commit via Reservation Rate
3. Extremely transparent as the interest rate for the borrower gets decided by the market

Target Customers

Just like any other P2P lending platforms, majority of the borrower customer base comes from
customers looking for either substantially large loans – like real estate, small business loans and
student loans that they cannot get from the bank either due to the issue of collateral or because
of a low credit rating. The other type of customers are those looking for small loans and also for
a shorter duration of time – These are mostly consumer credit card loans.

Pain Points

What makes Foro unique is that it not only solves the pain points of those borrowers and lenders
that do not get best returns in traditional banking scenario but also solves the pain points of
existing users in the P2P lending market. Borrowers from the traditional banking setting that are
unable to get loans either due to their credit score or collateral, can now get a loan via this P2P
lending platform as well as investors can more returns in a shorter duration. Also, borrowers
earlier could not see the cut that the P2P lending platform is taking in the loan processing but
now they can really know that the entire process was transparent as well as they have gotten the
best deal that they deserve due to the bidding model implemented in Foro.

Market Analysis

The Solution & Features

Foro is an online peer to peer (P2P) lending solution that enables individual customers to borrow
and lend money directly to one another. The entire solution is based on the underpinnings of a
private blockchain and the unique feature is that Foro works on the basis of “auctions” –
specificall VCG auctions – where the lenders bid to fulfill a borrower’s request for raising money.

Every borrower has a ‘Trust Rating’ which would be based on their CIBIL Score as well as their
history of activities on the platform. Apart from the choices like partial/full fulfilment of order for
the benefit of borrowers, the platform would also allow its users to trade their portfolio of
borrowings/lending if they want to close up sooner than the dates agreed upon.
Revenue Model

Foro makes money in the 3 following ways -

1. By charging borrowers an origination fees if and only if their loan does get processed
2. Servicing fees charges to investors, this a percentage of the interest charged to investors
3. Additional charges such as late fees on payments made after the due date

The Fintech aspect in the Product

Today, India remains on the cusp of the fourth innovative upset. Since mid-2015, the fintech
business has experienced enormous changes, boss among them being the move towards a
cashless economy. The administration's eager advancement of cashless advances – computerized
wallets, Internet keeping money, the portable driven purpose of offer (POS) and others – has
likewise figured out how to rebuild the monetary part, upsetting the long-held restraining
infrastructure of conventional foundations like banks.

Demonetization: A Major Factor for Internet-Enabled Lending

One factor that has assumed an indispensable job in the ascent of an option fintech industry is
demonetization, instated on November 8, 2016. Post the restriction on INR 500 and INR 1,000
notes, bank stores experienced a noticeable log jam. Credits to SMEs and MSMEs achieved a
sudden end, constraining numerous organizations to look for different techniques for financing.
A year ago, for example, around 34% of P2P borrowers were really entrepreneurs hoping to grow
without depending on banks. As it were, demonetization set the phase for a variety of option
fintech models that are gradually picking up footing in the obtaining and loaning network. These
comprise of new-age patterns, for example, small scale loaning (like Billionloans), transient
payday advances (like EarlySalary that offers credits for a time of seven to 30 days),
crowdfunding, and social loaning.

Unmistakable players in the area incorporate online business-related individual credit suppliers
ZestMoney and CashCare. Bengaluru-based Capital Float and Lendingkart are known to offer
advances to online merchants and independent ventures. Krazybee and GyanDhan are two
different new businesses that encourage simple accessibility of training credits at zero security.
Among all these elective loaning models overwhelming India's fintech industry, shared loaning
intends to stand tall as a feasible and gainful model.

The Rise of Peer To Peer Lending In India

P2P loaning is a sort of obligation financing that enables people just as organizations to acquire
cash on the web, without depending on an authority monetary establishment as a mediator. In
its 2016 "Meeting Paper on Peer to Peer Lending," RBI characterizes P2P loaning as a type of
 crowdfunding that involves issuing unbound credits to borrowers by means of an online
entrance.

It is critical to note here that not all crowdfunding exercises have a place with the class of P2P
loaning. The previous essentially alludes to a procedure, in which individuals from various
districts meet up, regularly through an online stage like Kickstarter and Indiegogo, to fund-raise
that in the end goes into subsidizing a venture, startup or some other sort of business attempt.
In shared financing, then again, borrowers meet with individual moneylenders specifically to gain
individual just as business advances.

Following are some of the services that P2P lending platforms provide in exchange for a fee:

• Coordinating borrowers with explicit loan specialists and speculators dependent on their venture
criteria.
• Directing collaborations between the two gatherings.
• Leading personal investigations and due constancy on borrowers and loan specialists, including
check of financial balance, business status and salary.
• Organizing credit models for advance endorsements.
• Performing credit appraisal and deciding borrower credit chance.
• Taking care of installments and reserve exchange from the borrower's ledger to the loan
specialist and the other way around.
• Managing on-time credit reimbursement to anticipate wrongdoing by naming recuperation
operator.
• Helping borrowers with documentation and lawful consistence.

To profit the administration, borrowers are required to pay a settled start expense, while loan
specialists regularly need to pay an organization charge, contingent upon the terms of the P2P
loaning stage. The financing costs are normally controlled by the stage, however on occasion can
be set according to common understanding between the loan specialist and the borrower.
Distributed loaning organizations are revenue driven associations that produce income from
expenses paid by borrowers and banks. Conversely, customary monetary foundations make cash
by charging credit searchers higher loan fees than the first store rate, otherwise called net
financing cost spread.

Customarily, P2P banks pursue a turnaround closeout framework that enables different
speculators to put offers on borrower's advance proposition. The last at that point gets to either
acknowledge or dismiss the offer, contingent upon their prerequisites. As indicated by an
examination report titled "The Business Models and Economics of Peer-to-Peer Lending" (PDF),
there are three essential shared loaning models at present: customer loaning, in which advances
are issued to people; SME loaning that gives subsidizing to fledgeling organizations; and property
loaning. The last one can be dispensed to people just as organizations and is regularly used to
pay for home loans, private renovation and business exercises.

Borrow Money Lend Money

 Market Analysis

Right now, at an early stage, the P2P lending scene in India is likewise ready to develop into a $4
Bn-$5 Bn industry by 2023. The space's cause really goes back to 2012, when the main distributed
loaning organization I-Lend was propelled. At present, the P2P loaning space is populated by in
excess of 30 players including Faircent, LendBox, LenDenClub, IndiaMoneyMart, Monexo,
Rupaiya Exchange, LoanBaba, CapZest, i2iFunding and some more.

Elective loaning new businesses have just pulled in $220.66 Mn in financing somewhere in the
range of 2015 and 2017, from industry stalwarts, for example, T.V. Mohandas Pai, Fusion
Microfinance CEO Devesh Sachdev, Vikas Kapoor, Vikram Lakhotia, Tracxn Labs, VC firm M&S
Capital Partners and the sky is the limit from there. Of this, almost $50 Mn was verified in H1
2017 by I-Lend (undisclosed), LoanTap ($1.06 Mn), MoneyTap ($12.30 Mn), LoanMeet
(undisclosed), ZipLoan ($0.65 Mn), EarlySalary ($4 Mn), Billionloans ($1 Mn) and others. This
records for around 2.5% level of the general fintech financing of $2 Bn amid the said period,
according to Inc42 Data Labs report.

To help the area's development in an organized and directed design, the Reserve Bank of India
(RBI) is concluding standards for distributed loaning stages, which will be made authority this
month. In light of a 17-page conference paper that the country's focal keeping money foundation
discharged back in April 2016, these rules will probably help steer the nation's social loaning
market forward in the years to come.

Go – To – Market Plan

Over the most recent 10 years, mechanical advancements have made ready for a heap of option
fintech models that endeavor to connect the quick extending hole between conventional keeping
money establishments and reserve searchers. Following are some critical points of interest of the
P2P loaning model:

• Simple, bother free enrollment and credit application process.

• Borrowers can benefit credits at lower loan fees when contrasted with regular monetary
organizations. One of the fundamental explanations behind this is low overhead costs required
for working on the web shared loaning stages.
• Higher quantifiable profits for banks. In contrast to common assets and value, P2P loaning offers
stable rates independent of winning economic situations. Faircent, for example, reliably gives
returns at over 18% per annum.
• Less documentation just as a shorter advance handling time. Advanced loaning stages regularly
help borrowers with documentation and lawful consistence in return for an expense.
• Since advances are unbound, borrowers with a low financial assessment can likewise secure
assets. This dispenses with the requirement for security, which is frequently required for
customary bank advances.
• Simple accessibility of credits for SMEs and MSMEs. In India, deficiency of advantages is a typical
issue looked by private companies and new companies. In such cases, banks will in general reject
credits without substantial resource quality. This is the place P2P loaning comes in.
• Nonstop client bolster that helps clients at each progression of their way.
• Adaptable liquidity designs without unbending lock-in periods.
• Settled regularly scheduled installments of portions from borrowers.

Our Go-To-Market strategy will be based on targeting the customers who will be able to return
us the loan amount in the given tenure. The most desirable target segment includes the student
of tier 1 colleges across India who’ll be able to repay the loan within the stipulated time. It would
be easier with the application as the students with ability to lend will also get a guarantee from
the foro app about the return of the invested capital.

Financial Analysis (Revenues, Expenses, Break-even and Profitability (Period – 5 Years))

Company Name FORO

Year 1 Year 2 Year 3 Year 4 Year 5 Grand Total

No. of loans per person per year 2 2 2 3 3
Number of unique loans per year 500 600 720 864 1,037
Average Lending ticket size 25,000 27,500 30,250 33,275 36,603
Total Revenue 25,000,000 36,300,000 52,707,600 76,531,435 111,123,644 301,662,679

Cost Structure
Infrastructure - - - -
Technical (10% 0f Revenue) 2,500,000 3,630,000 5,270,760 7,653,144 11,112,364 11,400,760
Operational (25000 pm) 900,000 1,500,000 3,000,000 3,000,000 3,000,000 5,400,000
Miscellaneous Expenditure (10% 0f Revenue) 2,500,000 3,630,000 5,270,760 7,653,144 11,112,364 11,400,760
Total Operating Cost 5,900,000 8,760,000 13,541,520 18,306,287 25,224,729 28,201,520
Operating Inflow 19,100,000 27,540,000 39,166,080 58,225,148 85,898,915 273,461,159

FORO- financials.xlsx
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Application Mockups