2 Million ONLINE Leads Market for BFSI Sector in India!
One of the largest spenders on internet in India is the Banking and Finance Services Industry (BFSI). No, don’t be under any illusion, BFSI sector is not the most evolved sector when it comes to using the web to it’s full potential.
Anyways, a large chunk of spending by BFSI can be attributed to generating and buying leads for various products including loans, insurance and credit cards.
Let’s try and estimate the total quantum of leads that are generated on the web today in India annually for the financial sector.
Let’s look at the Credit Card market first:
Total Credit Card Base in India: 27.5 million
This base should increase to about 40m by 2010. (Source: Indian Express, Oct 19, 2008)
Hence roughly the market is growing by 25%.
This means that between 2007 and 2008, roughly 5.5m credit cards were added, and between 2008 and 2009 roughly 6.8m cards will be added.
Now, how many of these cards originated ‘online’?
Again assuming that online mechanism contributes to only about 5% of the overall cards issued in the country: we get a figure of 3.4lac cards issued through online origination.
So for the year 2008-09, we should expect 3.4 lac cards to be issued through the ‘online origination’ channel.
But not all leads that originate online are successful, infact the success ratio for a lead through any channel ranges from 20% to 30%
Optimistically, if we assume that 25% of all leads converted into successful issuance: the total number of leads to be generated ‘online’ in 2008-09 should be: 1.38m
India Online Credit Card Leads Generation Market Size: 1.38m
Value of each lead (considering duplication, false leads etc.) @ INR 80- About INR 110m (USD 2.2m)
Let’s do a similar analysis for Loans Leads in India
Let’s use a surrogate here and try estimate the market size:
ApnaLoan claims to have serviced 4lac customers till today. (Source: www.apnaloan.com)
Assumptions:
Since ApnaLoan is a lead based model these 4lac customers are essentially leads.
Apna Loan is a market leader and hence we assume that it controls about 40% of the market alone. (The rest is controlled by Banks and various other small time lead generators)
Apna Loan is active since last 8 years. Let’s assume that they serviced 50% of their entire base during the last 2 years.
Implications:
This means that Apna loan generated 2 lac leads in the last 2 years
And since the market is growing at 25 odd% per year, we assume that it generated roughly 90000 leads in 2007-08 and 110,000 leads in 2008-09
Now linking back with our assumptions, we know that 1.1 lac leads are 40% of the total market.
Which implies that the total online loans lead generation market size is: 2.75lac
The value of this market @ INR 120 per lead is: INR33m (More than half-a-million USD)
Insurance:
Total Insurance market in India is worth INR 1.5lac Cr. (USD 30b). (Source: www.indiaonestop.com)
This market is growing at about 17% per annum.
Which means we shall add INR 25000Cr. (USD5b) in 2008-09 to our base.
Assuming that the average premium size is INR 10,000, we shall hence add 2.5Cr policies in 2008-09.
Assuming that online contributes to just about 0.5% of the total policies issued: the market size is about 1.27lac.
Since, again, not all leads convert into policies, and assuming that only 30% of leads finally get converted;
The total market size of Online Insurance Leads: 4.25 Lac
The value of this market @ INR120 is: INR 5.1Cr. (USD1m)
Conclusion:
Total online leads for financial sector- around 2million per year
Total Market Value @ INR 95: INR 19 Cr. (USD 3.8m) per year
Caveat: We have used various surrogates and assumptions, including in-exhaustive range of products and lead fee. Recession has also taken a toll in terms of contraction of credit card issuance and loan sanctions by banks. Hence the above may not be an exactly true picture of Lead economy for Financial sector in India. The attempt was to put forward a logical thought process and derive a value and size from the same. This article can help get a view of the estimates and also provide a base for further calculations.
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Mar 12th, 2009 at 11:21 am
The assumptions and surrogates used are for real. I have seen people go overboard with the “1 billion population” tag and forgetting the online participation.
Thanks for the useful analysis.
Mar 14th, 2009 at 3:30 pm
Hi i don’t know whether the stats are real but i will generally increase because India’s economy is rapidly growing and further the literacy rate is also increasing so its no wonder that many people will try to use the online services instead of going in person and getting the job done.
Apr 16th, 2009 at 2:06 am
I’ve been doing a small research (primary) to get some idea of how big online loan origination in India could be. Using some of your basic assumptions my projections seems to be much bigger. Mu below peojections are infact on the conservative side:
CREDIT CARDS:
Google and Media Screen research said, about 18% of financial service are sold online. Though this would include stocks, mutual funds etc., among asset products credit cards has a much higher internet penetration, so I would assume about 5 L Cards to be issued online from the total 6.8 M Cards, which is roughly about 7.3%.
The approval rate for an application to a card is about 40-45%, this result in about 11 L applications (assuming approval rate of 42%). Portals sell a lead to at least 3-4 agencies/banks and there is hardly any filtration (qualification) of customer in terms of his/her eligibility. Hence the hit rate of lead to application should ranges about 10-15%. At 15%, the total number of leads generated from online will be about 80L. At Rs 80 per lead, the market will be about 64 Cr INR.
LOANS:
If you go by the Alexa ratings, the other portals like dela4loans, itrust, loanraja, paisawiasa, loanwal, etc. are also not very far behind, dela4loans claims about 1 L customer in the first year. I would rather put it this way, of the total online leads, 50% are coming from these independent portals and the rest from individual banks’ site, if you do a Google search, banks websites are as (if not more) prominent in the SRP (result page) as portals. And out of the 50% from portals I would say about 30% would be Apnaloan, so net to net Apna Loan market share should not be more then 15% of total online leads. Apna loan website says more than 4 L customer benefited from apnaloan, it can be interpreted as:
1.Customer who gets the loan
2.Customer whose application is submitted (As even in Home Loan the approval rate is not 100%)
3.Customer who tenders his/her lead
Lets assume point three as that’s the safest bet. As I’ve said before a lead is given to atleast 3-4 agencies (I’ve personally tried it for almost all sites and more then once), this means the number of leads generating from portals will be sold to atleast three entities.
Lets net off about 25% (I was told by an owner of a portal that the number of leads for credit card and personal loan is almost the same) of 1.1 L customer as coming from Credit Cards which we have already provision in the credit card projections. So out of 1.1 L leads, about 82K leads will be from loans. At 15% of market share the total market size will be about 5.5L leads. Considering half of these leads coming from portals are sold 3.5 times and also counting leads through banks website as one lead, the total lead traded should be about 12 L (9.6 L Leads sold by portals and 2.7 L going through Banks’ websites). At Rs 150 per lead (A big ticket lead like business loan/home loan can touch Rs 350 per lead) the market size will be about 19 Cr INR.
May 1st, 2009 at 4:05 pm
thank you for the great analysis. By the way, how did you arrive at the lead sale rate (for example, Rs80 per lead)? Is there some inductrsy agreed standard among the banks for similar rates?
May 7th, 2009 at 1:57 pm
Hi Alok,
Thanks for joining in. I have taken Rs80 as an average rate for loans, considering that the leads sell from Rs 45 to Rs 120, depending upon the qualification, uniqueness and loan type.
Hope that clarifies
May 14th, 2009 at 5:24 pm
Don’t these guys sell the same lead to all the 20 players? So shouldn’t we be multiplying the lead revenue by 20?
May 25th, 2009 at 10:47 pm
Hi Saurabh,
I was just wondering why affiliate marketing is not present in india. all mature western countries have established affiliate networks. that obviates the need for these often erroneous lead generation/counting problems and is a great solution for financial institutes as well as comparison websites. your thoughts would be appreciated.
May 27th, 2009 at 7:31 am
I agree with you Alok. Affilitae marketing is a great slution for finance and travel websites, infact for almost all types of verticals.
Affilitae marketing works well in scenarios were we have huge volumes and huge variety of products, in India we lack both as of now; hence it doesn’t create enough value for independents to become part of an affiliate. Coupled with that online buying needs to grow further to really boost value to the seller.
Having said that, marketers are now begining to explore affiliate marketing, and I won’t be surprised if it becomes the buzz word for cost effective online marketing very soon.
Jul 6th, 2009 at 9:22 am
[...] 2 Million ONLINE Leads Market for BFSI Sector in India! [...]
Jul 8th, 2009 at 2:09 pm
Late reply helps sometimes..
So much of obvious potential, how come you didnt wait to make http://www.onimoney.com the best portal in India?
Anil
Jul 17th, 2009 at 9:21 pm
Saurabh- I have a trivial question. Whom do you sell these leads to? Can you sell them to media agancies who in turn can sell them to their BFSI clients?
Or do these banks buy these leads directly?
Jul 17th, 2009 at 10:46 pm
Hi Sac
The leads can be sold to Banks directly or to agencies. Infact the leads can also be sold to Direct Sales Agents and other online portals (like policybazaar, rupeetalk etc.)
Jul 18th, 2009 at 6:21 pm
Thanks Saurabh!
Which are the leading digital media agencies that buy such leads? Also can one sell these leads to them on “cost per conversion” basis?
I think policybazaar and rupeetalk have different models. Whereas policybazaar tries to act as an online insurance broker, rupeetalk and apnaloan act more like lead aggregators. Which business model according to you is better?
Lead generation business might be high volume low margin game whereas online DSA being a low volume and high margin game.
Jul 19th, 2009 at 10:11 am
Hi Sac,
I think all the major agencies, today work on leads model, including Quasar, Interactive Avenues etc.
You can sell on cost per conversion basis, and if so, should talk directly to clients. Almost all insurance companies are rightaway willing to work and give you anywhere between 75-100% of commissions. e.g. if youu were to convert a life insurance worth Rs10,000 as premium, then your commission could be anywhere between 1400-2000 or even higher depending upon the type of product.
Policybazaar has a backend tie up with a broker, hence Policybazaar itself does not have a licence for broking. But the bottomline across is to generate qualified leads and then either convert them or sell them forward.
My own perosnla view is that-
1. Conversion model is a much better model for long term- it also rquires investment in
a. setting up national infrastructure-offline and online (of sales, and fulfilment)
b. transparent and SLA based agreement with banks alongwith very good understanding- so that your rejection rates are within limit (especially in case of loans and credit cards).
c. develop multiple channels for customer acquisition- affiliates, sub-DSAs, search engine etc.
d. wide variety of products- for various needs and seasons. Use your infratsructure to sell everything- gold coins, loans, insurance, dmat accounts, etc.
If one can do tha above then one should enter the convsrion model
Lead based model requires 2 main ingreditents:
a. volumes
b CRM
It’s very easy to start but has huge invalidation rate, hence is not very profitable. It can work only on huge volumes
Ther can be other models as well- like a hybrid model etc. which I am trying out.
Jul 19th, 2009 at 2:35 pm
Saurabh,
What are the reasons for high invalidation rate in the online channel?
If you end up setting huge offline infrastructure, then you end up being in an offline model where costs can easily spiral out of control! In that case you might be aiming to become Charles Schwab of India. To run that kind of operation you really need qualified financial planners and not your regular DSA guy.In this case, online channel is just one of the components of your business.
You seem to be sceptical of a pure online model- any particular reasons for that? Is it because of the fact that Indian customer is still wary of online entities?
Jul 31st, 2009 at 10:06 am
Hi Sac,
The lack of proper tracking and authentication mechanisms coupled with lack of expectation management lead to high invalidations.
To me, there is a dire need in India for a fulfilment model- that integrates offline and online mechanisms. I am biased towards a fulfilment model and will put my money on the same.
Finance portals need to sell diverse portfolio of products, be sensitive to the needs, play a consulting role, serve through varied means and accept payments through varied means and also execute the last mile- that’s the way to reach hundreds of millions of people beyond metros.
Otherwise, online finance portals are available a dime a dozen- there is no reason why you or I should go to another ‘apnaloan’?
Dec 20th, 2009 at 3:53 pm
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