A weaver uses a handloom to make a silk saree in Varanasi, India. (Photograph: Dhiraj Singh/Bloomberg)

Fintech Tracker: Can CreditMonk Make User Reviews Relevant To Small Business? 

What’s the first thing you do when planning a holiday? If you are one of the millions of users of a service like TripAdvisor, you probably check what other travelers have to say about a particular destination or a place to stay. One bad review and you may think twice before booking.

What if you could do the same for a company you were dealing with? How good is the company’s track record? How easy is it to get payments from the company?

That’s the idea behind financial technology firm CreditMonk – an open-source platform that allows businesses to rate each other based on payment behaviour.

CreditMonk was founded by Ridhi Doongursee, a graduate of Warwick Business School, who worked briefly for UBS in London before moving back to India. She returned to work for her family-owned manufacturing business. Once back in India, Doongursee faced the same problems all small business owners do. Among them, constant delays in payments.

That experience led to the launch of CreditMonk in May 2016. The company is creating a database which clients can access to get an idea of the payment track-record of firms they may be dealing with. This is not unlike the information that credit bureaus like CIBIL provide. The difference is that while CIBIL gets its data on repayments of loans from banks and financial institutions, CreditMonk depends on ratings generated by users.

Doongursee claims that 15 lakh small and medium enterprises are listed on CreditMonk and can be rated there. The website also has a provision to add any missing companies, she said.

The process of rating a company on the website is similar to rating a hotel on a website like TripAdvisor. A reviewer first has to sign in to the website and disclose which company they represent. A company that is listed on the website can then be rated on a scale of one to five on the basis of various parameters.

The review seeks information on how long a company normally takes to make a payment and the payment method used. A reviewer has the option of leaving comments and feedback. Finally, the reviewer must confirm that his/her company has an actual transaction history with the company being reviewed.

The reviewer can choose to post the review anonymously on the website but since a log-in is mandatory to write a review in the first place, CreditMonk can investigate claims of a false review, if such a situation arises, Doongursee said.

CreditMonk also has filters in place to red flag instances where companies are rating their competition.

Fintech Tracker: Can CreditMonk Make User Reviews Relevant To Small Business? 

Can CreditMonk Be A Money Spinner?

It has barely been a year since CreditMonk’s website went live. The objective at this stage, according to Doongursee, is to create awareness about the platform. Once the website achieves scale, multiple revenue streams could potentially open up, she said. Currently, CreditMonk does not generate any revenue.

“We have our plan clearly chalked out. There are various models. We have subscription, we have various origination fees, commissions, debt clean up and credit services,” she said.

The venture has been bootstrapped so far but the promoters are in talks with venture capitalists and other potential investors. Doongursee insists, though, that fundraising is not a priority at present.

Facilitating Lending

The next stage in CreditMonk’s development is to facilitate lending to small and medium enterprises (SME). Many of these companies lack access to formal credit primarily because they do not have detailed credit histories.

According to data available on the Reserve Bank of India’s website, the banking sector’s outstanding loans to micro, small, and medium enterprises as on January 20 this year was Rs 4.5 lakh crore – 6.75 percent of gross outstanding credit. Banking credit to large corporates was nearly five times higher at Rs 21.3 lakh crore.

“SMEs don’t have the balance sheets and financial documents to get funds. We’re looking to enable that. So the data we give is what enables other businesses to sell on credit, which is like giving a loan. So it can also help people interested in lending,” said Doongursee.

In the next three to four months, CreditMonk intends to launch a service that will analyse a company’s ability to pay based on financial information provided by them. This information, coupled with peer reviews on the site, will also give a potential lender a sense of a borrower’s intent to pay, she said.

The final objective, Doongursee believes, is to get businesses to start stating on their invoices how they rate on CreditMonk.

“That means they will get paid on time because people will not want to be rated badly. So their payments get cleaned up, plus they can ask their suppliers to give them better credit terms, to give them better rates and get access to more credit. And potentially more loans,” she said.

Is The Model Viable?

CreditMonk is likely to face a challenge in building credibility while it sets up its database, according to Mahesh Murthy, a venture capitalist, and a co-founder at Seedfund.

“You’re trying to build a database of opinions but it would take you a long while to get enough opinions for it to matter. Assume there are 10 million businesses. For you to have a reasonably balanced opinion on each of those, you need to have at least 10 opinions,” said Murthy. “This is a very long haul. I believe that for all the time till they get there, nobody is going to be happy with the product.”

The other problem Murthy flagged off is that, in his experience, small firms often face delayed payments from large corporates. In such a situation, a negative review is not likely to significantly affect business prospects for the large company, he said.

“It’s quite possible that the large company will serve you with a legal notice, or it could even claim that payment was withheld because of lack of quality,” said Murthy.

Doongursee accepts that building awareness for CreditMonk is the biggest challenge. She hopes that with greater internet penetration, the time taken by platforms like TripAdvisor and Zomato to achieve scale can be reduced.