You set aside the gold chains, the solid gold bracelets and necklaces, maybe some bangles—that ought to fetch a good sum, you think. The Rupeek representative comes to your house, values your gold, completes your KYC, takes it to one of Rupeek's lending partners like Federal Bank, which then checks the gold. If everything runs smoothly, the bank keeps the gold, and you receive the loan amount in your account. This at-home service has earned Rupeek many new customers and many new loans. The company hit an annual loan disbursement rate of $1 billion in December 2021, and over 60% of Rupeek's customer base took their first gold loan ever through the service. While a large part of the uptick in usage of the lending service comes as a fallout of the pandemic—loans backed by gold jewellery jumped 141% between January 2020 and December 2021—there's a certain lure to Rupeek's at-home, urban, digital-savvy model. And sure, so far, Rupeek has been targeting a specific urban, wealthy cohort—folks who seek gold loans valued over Rs 30,000 ($400). After all, Rupeek spends about Rs 3,000-5,000 ($40-$70) per new customer. And that sort of customer acquisition cost wouldn't make sense for low-ticket loans. Here's the tricky part, though. The sub-Rs 30,000 gold loan market is exactly what Rupeek needs to expand into. According to a December 2021 investor presentation by Muthoot Finance, rural India accounts for 65% of India’s total gold stock. The real demand for gold loans, thus, is in rural and semi-urban parts of India. The parts Rupeek doesn't serve. Now, Rupeek will need to change who it lends to and that will bring it into conflict with gold-lending non-banking financial companies like Muthoot and Manappuram Finance, who already rule the roost. Around 46% of Manappuram’s gold assets under management (AUM), for instance, come from rural and semi-urban areas, and, get this, online gold loans account for 54% of its gold loan AUM. So while the pandemic has helped Rupeek reach the homes of people who never took a gold loan before, it now needs to expand beyond homes and banks, into semi-urban jewellery stores, tier-2 and -3 city bank branches. Can it?
Hope you have a nice weekend, and let us know if you're planning to get a Rupeek credit card!