Bajaj Finance - how does Bajaj Finance make money on no cost EMI ? how is it a goldmine for customer acquisition and collecting insights and data on customers for bajaj finance? 
Bajaj Finance is India’s largest consumer durable financier and finances more than 70% of all consumer durables financed in India. BAF’s mainstay is no cost EMIs where a consumer who buys a TV, AC or a fridge is offered a 0% EMI with no/minimal processing fees. 1/
Such a transaction is a win-win-win for the customer, the manufacturer and for Bajaj Finance because: 2/
The customer is able to pay for the product of his choice over a period of 6 months at zero or minimal additional cost. In the above illustration if we assume the processing fee of Rs. 400 as a cost to the customer, the customer is able to get 6-month financing at only 2.8% pa 3/
The manufacturer is able to increase the inventory turnover for the retailers by offering 0% EMI schemes. The 5% discount offered by the manufacturer in the above example is a marketing expense for the manufacturer. 4/
There is also a likelihood of the customer making a higher value purchase i.e. buying a 45-inch TV instead of a 40-inch TV because there is 0% financing available. 5/
in this process it is able to make 20%+ yields on loans to affluent Indians. In addition to making money on the first loan, Bajaj Finance is also able to get more data on these customers by taking minimal risk as these are 6 month loans with a relatively small ticket size. 6/
The consumer financing business is Bajaj Finance’s customer acquisition funnel:
The subvention model explained above works well not only for consumer durables but also for mobile phones, electronics, furniture 7/
The subvention model explained above works well not only for consumer durables but also for mobile phones, electronics, furniture 7/
and because of its compelling proposition is likely to be used for apparel, fashion and other small ticket purchases as well. Bajaj Finance already moves about 30% of electronics, 15% of smartphones and 10% of organised furniture sold in India. 8/
This financing construct provides Bajaj Finance with massive amounts of customer data which is used to filter out the good customers from the bad and take a call on what sort of a product should be offered to which customer. 9/
It is difficult for other lenders to replace Bajaj Finance
Geographical presence:- companies like Samsung, LG, Sony, etc. would want to deal with a consumer financier which has the widest geographical presence so that all its retail touch points are able to benefit from it. 10/
Geographical presence:- companies like Samsung, LG, Sony, etc. would want to deal with a consumer financier which has the widest geographical presence so that all its retail touch points are able to benefit from it. 10/
Ability to approve a large proportion of loans:- The retailer/ manufacturer would also want the financier to approve a large percentage of loans at a high velocity so as to convert customer footfall in their stores to actual sales. 11/
Collection infrastructure to collect small ticket loans:- Because these are small ticket unsecured loans, it is extremely important to have a delinquency bucket wise granular collections infrastructure which is able to collect overdues in a cost-efficient manner. 12/
I hope you liked this small blog about Bajaj Finance .
Disc- invested, no recommendation 13/13
Disc- invested, no recommendation 13/13
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