Ola to shutter Avail Finance app, integrate it with Ola Money

ET tried to take a loan through the app, but the service was unavailable.

“The company stopped disbursing loans in December. Only the collection of loans will take place throughout the year, which will be completed in December 2023, as Avail offered one-year loans,” a person in the know said.

ET has learnt that the company is working on a new lending service that will be made available to customers through the Ola app and the Ola Money app.

Read | A tumultuous 2023 awaits fintech startups

“Avail’s services have been integrated with Ola Financial Services. We are now offering products and services to drivers and customers through Ola Financial Services,” the company said in response to ET’s queries.

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The development comes amid increased regulatory scrutiny on online digital lending practices by the Reserve Bank of India.Ride-hailing firm Ola acquired Avail Finance, founded by Ola founder Bhavish Aggarwal’s brother Ankush Aggarwal, for about $50 million in April last year.

What’s next for Ola Financial Services?
In a recently concluded town hall before the start of the New Year, Bhavish Aggarwal told employees that Ola Financial Services will help other group entities like its cab service and electric vehicle (EV) business.

Ola Financial provides services such as an e-wallet called Ola Money, enables loans for the purchase of Ola’s EVs, provides insurance products for both EV buyers and ride-hailing customers, and a Buy-Now-Pay-Later service called Ola Money Postpaid.

The Ola Money Postpaid business helps users avail of the service for the Ola cab and pay later. The company also has a service called Ola Money Postpaid Plus, a BNPL offering that can be used with external merchants and sellers.

The company’s insurance products not only include insurance for every ride that a customer takes, but also health insurance, gadget insurance, motor insurance, and travel insurance.

In line with the firm’s new vision of catering to the Ola ecosystem, the source quoted earlier in the story said the company may also shut down the Postpaid Plus service.

Ola, however, denied that the service would be shut.

Lending in a tough spot
The changes at Ola Financial and in the broader fintech industry come at a time when RBI’s latest lending guidelines have reduced the role of fintech firms without an active non-banking finance company (NBFC) licence to just loan services providers, putting more responsibility in the hands of regulated entities.

In 2021, Avail Finance was in talks to acquire Art Climate Finance (India) Pvt Ltd for its NBFC licence. It could not, however, procure the necessary regulatory approval to proceed with the transaction, sources told ET.

Before its acquisition, Avail had active lending partnerships with Vivriti Capital, Apollo Finvest India, and Pinnacle Capital Solutions, among other lenders.

ET reported last month that practices such as first loan default guarantee (FLDG) have disappeared from the industry, dealing a blow to smaller fintech firms that are forced to borrow at higher costs.

“Anyone without an NBFC licence is doomed for now. Even participating in co-lending partnerships requires a licence, which is getting very hard for fintechs to find (apply) on their own. To add to this, fluctuation in the lending market and increase in repo rates are also shoring up borrowing costs for fintechs, which is likely to lead to exit of some unprofitable players from the segment,” a fintech entrepreneur who did not wish to be named said.

Even as FLDG partnerships dry up between financial service providers and regulated fintech firms, borrowing rates (or cost of funds) have shot up for new-age fintech NBFCs that do not have a long credit history.

Coupled with RBI’s decision to increase repo rates, this has come as a double whammy for smaller lending fintech firms, further reducing margins and increasing cost of doing business.