Rydo: Rides for financial inclusion

About 4.5 million auto rickshaw drivers serve 70% of India’s paratransit needs generating USD 20 Bn annual revenue, making this the source of primary income for about 25 million people ~ 1.5% of the nation’s population. This industry is growing at 12-13% annually and is set to double by 2030. 

These drivers invest about USD 4000 to buy the vehicle and take home about USD 10 per day after meeting operating expenses. Their household income is about USD 300 per month. 95% of this industry works informally as the transactions are too small and too many. Due to this they lack access to formal financial & social security products.

The key challenges to their financial inclusion are

• Lack of income records based on which their credit can be assessed. The auto drivers find rides on the roadside and service them. There is no formal structure to record this data offline. Though there is significant adoption of digital payments by the passengers and drivers, it does not translate to creating a digital imprint of income. 

• Lack of financial products that are suitable to their daily income flow pattern. Presently most formal loans need to be repaid on a monthly installment pattern. However the drivers' income flow is daily. This would mean that they have to save up through the month for the repayment. Their incomes are so low that invariably any money that reaches their home gets spent. They end up resorting to exploitatively expensive informal borrowing that accepts daily repayment, resulting in further reduction in income available for themselves.

• Lack of transaction infrastructure to engage with them. Even if formal lenders are ready to build products suitable for their daily cash flow pattern, there is no platform through which they can engage and transact meaningfully with this segment.

The Rydo platform addresses this problem of distribution comprehensively to facilitate financial inclusion.

The solution starts at creating a digital imprint of the driver’s income. This can be done through a digital ride hailing platform. Auto drivers are onboarded on the platform to provide rides to passengers. Thus, digital imprint of the driver's income is created.

This data can then be used to obtain them access to formal financial and social security products by making it available to lenders and insurers. The institutions and the auto driver can transact through the "virtual account" of the driver created in the platform. 

As the engagement with the drivers is realtime products for the drivers can be tailored to their cash flow. The institution can provide them the option of daily repayment using technology. This virtual account will also allow the driver to invest in micro savings products to enable them to create wealth. They can also be provided with suitable insurance products at a payment plan suitable for them.

An auto rickshaw driver invests about USD 4000 to buy the vehicle to start the service. He invests about USD 5 on fuel and spend 12 to 14 hours every day to generate a ride revenue of USD 20. he uses USD 5 to 7 to meet repayment commitments & other operating expenses and take home about USD 8 to 10 per day. 95% of this industry works informally and the transactions are too small and too many (about 12 to 16 a day).

This is a non-aspirational trade and the drivers are predominantly school dropouts. The reason for dropping out may vary from inability to cope with the school curriculum or family financial circumstances that led to the need for him to don the role of a wage earner. Most of these drivers started this as a stop gap arrangement to pay off a debt but got stuck in the trade due to piling financial commitments.

Typically, their family comprise of dependent parents, wife and 2 children.  With their spouse supporting them with income from housekeeping or small trading their household income is about USD 300 to 400 per month. Their children go to public schools or some affordable private school.

They may carry a debt of USD 3000 to 4000 created due to medical exigencies or failed business or expenses towards their children's education effort apart from their borrowing for purchase of the vehicle. These debts can carry in interest rate of anywhere between 36 to 60% per annum. 

Their cash flows are little and daily. They do not have any significant insurance coverage putting them at higher risk of economic collapse. 

Prakash started his banking career in 2006, handling a loan portfolio of Small Commercial Vehicles Hubli - a tier 2 city in India. He found that 3 wheeler (auto rickshaw) portfolio performed poorly because of product-market misfit. The cash flow of this segment was daily  while the repayment term was monthly. The borrowers were not of the literacy level or affluence where they could save up and pay the installment. Their incomes are so low that a single unfortunate event would significantly upset their ability to pay. He took it up with the management and in a short while the product was withdrawn, which was a solution for the bank. However this problem has been nagging him since, and he was looking to build a solution that would sustainably address this problem. In 2016 he joined NTC Logistics where he was heading the fleet operations for about 4 years during which he was exposed to a 5000 strong truck driver/cleaner community, where he saw similarities in demography among the auto drivers & truck drivers, and differences in livelihood sustainability. This gave him a deeper understanding of the possible solution. 

Vinay started his career in accounting and quickly moved to technology operations. He joined Akshaya Patra to implement technology for the organsiation and found his love for social impact. He continued to grow within the organisation to become the COO managing operations of serving food to over 0.75 million underserved children under the state’s midday meals scheme, apart from implementing technology and other sound management systems in the organsiation. While in his role of managing operations, Vinay incubated Akshaya Nidhi which was a for profit sustainability arm of Akshaya Patra and ran it successfully for 4 years, generaating contributions of over INR 7 crores PAT to Akshaya Patra. In 2020 he joined Rane t4u and started working with Prakash on building platforms for the logistics sector.

Senthil is a software engineer who started his career as a programmer at CTS and grew through the ranks handling various roles including ‘Business and Technology Consulting’ for a couple of years overseas (US), in the client location for a leading Transportation Insurance company.  He had exhibited a strong entrepreneurial spirit as an “Innovation Champion” even during his professional career by anchoring his account team towards the YOY Innovation Target of $3M. Senthil had participated in national level innovation event and had received numerous accolades from myGOV and Digital India Initiatives. He has a US Patent filed and pending for approval in his name towards the Insurance Underwriting Process. 

Prakash brings in the understanding of the demography of the drivers and the ways in which their lives can be impacted; Vinay provides the insight into how the social sector works and his experience in frugally incubating organisations; Senthil brings in leadership for technology management. As they together felt the need for such a platform, they decided to take up entrepreneurship to further this.

We are presently serving about 50 drivers and 4000 passengers at Tumkur, a small town near Bangalore.

We have spent the past 2 years understanding the needs of the drivers and passengers and have built the MVP platform. To further scale, grow and sustain, apart from investment,  we need strong collaborations with 

• Lending institutions that are aligned with our financial inclusion vision, and can create products specifically suitable to auto rickshaw drivers needs and aspirations. The drivers need small ticket loans with a daily repayment option. We need a collaborator who can take a significant and patient approach to financially include this community

• Insurers. The drivers and their families have specific insurance needs and require payment plans that are not too heavy on their wallet. We need collaboration with insurers who can look at this segment with a long term vision of inclusion with profitability.

Rydo approaches the mobile app based ride hailing from the supply angle and uses the technology for financial inclusion of the providers/drivers

Rydo’s paying customers are the passengers and the impact customers are the drivers.

Ride hailing technology solves a convenience problem of discovery of a ride for the passenger. Considering that the ride hailing technology has been commoditized, supply quality and consistency will decide the success of the platforms in future. This requires the platform to be useful for the supply providers. We have the following key insights with regard to the industry 

• Passengers are not loyal to any platform, because paratransit is only a fleeting need, and the technology provides only convenience. If the passengers do not get a ride on any platform, they shall still somehow find a ride offline and complete the activity of traveling. Hence building loyalty with customer is nearly impossible. The key challenges passengers presently face on platforms are inconsistent availability and cancellations by drivers.

• Drivers have been servicing this need for much long before this technology was conceived, and this is livelihood for them. The offline market is still significantly high and nearly 95% of the industry is still offline. Hence finding rides cannot be the suitable value proposition for drivers. Generating income is not the greatest challenge a driver faces. His biggest problem is lack of financial products and social security. It is possible to build loyalty with drivers by addressing this need.

Hence, we have built a platform that makes it sensible for the drivers to be loyal to. By addressing their financial inclusion needs, we are able to build a supply base that is loyal and vested in the success of the platform. This in turn results in consistent availability of supply and service quality. Presently we are able to achieve over 50% conversion of the tries on our platform despite some technical and operational challenges due to low scale. At scale we are confident of achieving 75% conversion.

We have also built our business model that provides opportunity for more participation from drivers. We have separated passenger acquisition and service delivery as distinct business operations. The goals of the service delivery arm include livelihood solutions which are in alignment with the mandate of most of the driver unions. Hence, we can franchise out the service delivery to the driver unions with a standard SOP, allowing them self-governance of their primary operations. Keeping the driver database under one umbrella will help Rydo, and in turn the unions, better negotiating power with the financial services providers serving the financial inclusion needs of the drivers. 

Our innovation is in the supply focused business model resulting in efficiency of the platform services, that allows participation of the providers. 

We can further adopt this model in to impact the livelihood and lives of any platform gigworker community.

Our goals for next year is to scale the solution in Tumkur, where we have done the pilot and impact livelihoods of atleast 1500 drivers with 25% additional cash flow through financial inclusion.

There are about 700 cities like Tumkur in India. In the next 5 years we should scale our operations to 100 cities and provide financial inclusion for about 150,000 drivers.

The key impact measurements are 

• Average increase in daily cash flow - Target of 25%

• No. of drivers provided access to loans

• No. of driver families provided with sufficient, appropriate insurance cover

• No. of drivers families provided with access to their entitlements that are useful and impactful

• No. of rides served

• Platform efficiency of conversion 

We have separated the functions of technology management and passenger acquisition from the service delivery function. Also we have created the service delivery vertical to have significant value for the providers, allowing for participation from them. This creates interest for the providers to make the platform successful. This vested base of service providers shall be used to deliver consistent and good quality service to passengers. We believe that our solution will work and sustain because 

• Digitizing the rides digitizes the driver's income data. 

• The digital income data provides the foundation for assessment by formal lenders, resulting in loan disbursements.

• As the rides are only an initial step for the drivers towards their financial inclusion, the focus shifts to loans and social security products. 

• Continuation of this support in financial inclusion is contingent to the driver consistently being consistently available on the platform and performing the service.

• This results in consistent availability of service from the platform.

• The consistent service availability increases passenger traffic.

• Increased passenger traffic attracts more drivers to the platform improving availability and efficiency.

• Due to the importance of their participation in the platform, the drivers willingly comply to the service quality levels expected of them. 

• This results in growth of the impact solution sustainably.

The fundamental technology is the platform for app based ride hailing. We integrate with fintech and insure tech platforms for leveraging the data generated in the ride hailing platform resulting in financial inclusion for the auto drivers.

Our mentor Hanisha (Hanisha Vaswani | LinkedIn), is an accomplished woman, advising us on fundraise and collaborations. 45% shares in the company are held by 2 women, who have chosen not to be part of the board at current scale and may join the board in future. Going further we shall include people on board and team based on merit, irrespective of gender race or religion.

Rydo is a ride hailing platform providing app based auto rickshaw ride discovery for paratransit passengers. Our primary service is ride hailing and the paying customer is the passenger. 

We use the ride data in the platform to facilitate financial inclusion for the drivers providing services in the platform. This in turn helps us build a vested and loyal driver base that is essential for the success of any ride hailing platform. 

We act as the channel for the financial institutions that provide the products and services to the drivers. These institutions can source, assess, process, deliver and transact with the driver on the platform.

Rydo has 3 revenue streams

• Convenience fees of Rs. 20/- per ride to the passenger. This shall comprise about 80% of our revenue.

• Daily subscription of Rs. 25/- per driver to be visible on the  platform for 24 hours and receive ride notifications. This is about 15% of our revenue.

• Facilitation commission from the collaborators who provide their products/services to the. This is about 5% of our revenue.

Rydo targets an annual revenue of Rs. 23,000/- from each driver based on the following assumptions

• Drivers shall operate for 300 day on the platform ~ Rs. 25 x 300 = Rs. 7,500/- subscription

• Drivers shall provide minimum of 1000 rides per annum @ of about 3 rides a day ~ Rs. 20 x 1000 = 20,000/-

• We shall earn an average of Rs. 1,000/- per driver as facilitation fees from collaborators. 

Each driver shall operate about 20 years with Rydo providing a lifetime value of Rs. 4.6 lakhs to Rydo.

Estimated lifetime value created for a driver over 20 years is Rs. 22.5 lakhs.

Rydo has 3 revenue streams

• Convenience fees of Rs. 20/- (USD 0.25) per ride to the passenger. This shall comprise about 80% of our revenue.

• Daily subscription of Rs. 25/- (USD 0.30) per driver to be visible on the  platform for 24 hours and receive ride notifications. This is about 15% of our revenue.

• Facilitation commission from the collaborators who provide their products/services to the. This is about 5% of our revenue.

Rydo targets an annual revenue of Rs. 30,000/- (USD 350) through each driver based on the following assumptions

• Drivers shall operate for 300 day on the platform ~ USD 90 subscription

• Drivers shall provide minimum of 1000 rides per annum @ of about 3 rides a day ~ USD 250/-

• We shall earn an average of USD 15 per driver as facilitation fees from collaborators. 

Each driver shall operate about 20 years with Rydo providing a lifetime value of USD 7100 to Rydo.

Estimated lifetime value created for the driver over 20 years is USD 30,000.

With the current unit economics, we shall have a sustained EBIDTA of about 40% once we reach full scale.

We are a bootstrapped entity and the promoters have invested Rs. 25 Lakhs (USD 30,000) of personal money.

We have obtained a Grant of Rs. 25 lakhs (USD 30,000) through incubation at CIIE, IIM, Ahmedabad. 

We have obtained a Grant Rs. 5 lakhs (USD 6000) through incubation at iSeed, IRMA, Anand.