Indian start-up Zaggle registers new fintech ZikZuk to offer SMEs credit

Zaggle, a 2011-founded Software-as-a-Service (SaaS) fintech based out of Mumbai, has registered a new fintech start-up called “ZikZuk”.

Until now, Zaggle has acquired clientele such as Microsoft, Infosys, Unilever, and Nasdaq-listed Indian online travel agency Yatra.

Zaggle’s CEO Avinash Godkhindi and chairman Raj N Phani

It delivers these customers two core SaaS solutions. One centres around expense management. Whilst the other facilitates the distribution of reward-based products to brands’ dealers and distributors.

“We have a rich database of SME [small and medium-sized enterprise] customers who have received these reward points, and now we want to serve them directly,” Avinash Godkhindi, Zaggle’s CEO, tells FinTech Futures.

A new credit card in India

ZikZuk is a new banking platform in India focused on SMEs and SME lending. It classifies SMEs as companies which turnover between $1.5-2 million, all the way up to $100 million.

The new fintech has already launched its credit “founders’ card”. “Right now, our focus is on India,” says Godkhindi. “The country is very credit hungry.”

As of 2019, just 3.85% of Indian consumers owned credit, according to BankBazaar Moneymood’s 2020 report. As for businesses, a number of incumbents offer corporate cards – including YES Bank, Citi, and HDFC Bank – but few newer players have disrupted the space.

Zaggle has registered ZikZuk as a separate enterprise. “It means easier absorption of capital and institutional investment, and it’s easier to attract talent,” explains Godkhindi.

The CEO is in the process of hiring a separate team, including a CEO. “We’ve largely hired externally,” he says.

“What typically happens when you’re looking at the best people, line managers are unwilling to let go of them.” So, if Zaggle recruited internally, Godkhindi’s options were to either cause stress on its operation or avoid disruption and not pick the best-suited people.

SMEs, not MSMEs

Often bundled together with India’s micro-SME (MSME) market, it’s often unclear exactly how many SMEs India’s 1.3-billion population houses.

According to November 2020 IBEF government data, there are some 63 million MSMEs in India. But there’s a much smaller number of SMEs. The IBEF says there’s as few as 300,000.

Since last April, Godkhindi says Zaggle’s transaction growth has grown almost six times

Zaggle serves just 4,500 customers, but the majority of these are enterprise-paying customers – which have led the fintech to turn a profit as of last financial year.

They also serve a cumulative ten million direct users, and some 10,000 merchants. The start-up figures it can put its client book to work, by registering a separate company – ZikZuk – to go after its merchant relationships.

Godkhindi says Zaggle already has a “cultivated” list of 100,000 SMEs it can reach out to via ZikZuk.

“Our focus is on SMEs – closer to the ‘M’ and a large ‘S’, and not MSMEs,” explains the CEO. “We understand this space (SMEs) far better. But we would consider the MSME space in the future.”

Since last April, Godkhindi says Zaggle’s transaction growth has grown almost six times. The fintech is currently looking to raise, but it hasn’t raised a round in the last year like many fintechs did to live out the COVID-19 crisis.

“We’ve not felt the need to raise capital,” says Godkhindi. “It’s much tougher to create value out of capital raising, even if the capital itself is easily-available in the market.”

Finding the right fit

In the first four-to-five years of Zaggle’s operation, Godkhindi says the fintech was simply “trying to find the right product market fit”.

In the next two years, Godkhindi wants ZikZuk to take itself across the globe

“At that time in India [2011-16], we needed to carefully choose what not to do.” Between 2014 and 2015, fintech-related firms in India leaped on mobile wallets, Zaggle’s CEO explains.

“We thought these would soon be replicated by Big Techs. So, we didn’t see the value in having a separate wallet. A lot of companies rushed behind this and burned a lot of cash on cashbacks.”

With an evolving product offering in place, Godkhindi is far more optimistic about Zaggle, and now ZikZuk’s, position in a market where “competition is extremely high”.

Boasting partners such as HSBC, Development Bank of Singapore, ICICI Bank, and international car payment service RuPay, Zaggle has come a long way since its product fit-searching days.

In the next two years, Godkhindi wants ZikZuk to take itself across the globe. The newly established fintech has its eyes on Singapore, the US and Canada – where Zaggle’s other offices are situated.

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