Auto drivers in India experience regular cash flow problems and resort to taking informal credit to resolve this issue. Consequently, they find themselves trapped in a vicious cycle of debt. How can technology be used to solve this?

Auto drivers are the ones driving autos in the city independently or for ride-hailing apps such as Ola, Uber, Namma Yatri? à Any

Confirming the issue once more – The monthly expenses of an auto driver > the monthly income that auto drivers earn. As a result, they must borrow money through informal channels such as moneylenders at exorbitant interest rates as they do not have a good credit history or collateral to give, they cannot borrow money from banks. To repay a previous debt, they take up debt from another moneylender.

Are there any budgetary or time constraints I should be aware of? à None

Are we considering the auto drivers of any specific region say Bangalore? à Let’s go ahead with that.

I am assuming most of the auto drivers do have bank accounts as they all use QR codes to accept payments from passengers.

I will structure the answer by first discussing the business goal of such a product, look at the pain points and prioritize them. Then I will brainstorm a few solutions and evaluate how we can go about solving the issue.

The idea of providing low-income folks such as auto drivers with credit at lower rates and pulling them out of the vicious cycle seems to be of huge societal impact. But a business entering into such a market would obviously want revenue and in turn profit to continue its business, apart from the societal benefit angle. The mission of such a company would be to credit lending at affordable rates with techno infused efficient credit usage.

Pain Points:

1. Lack judicious utilization of income.
2. Have not received formal education è Lack basic financial understanding of money.
3. No credit history so they cannot take loans from banks at lower interest rates.
4. Don’t find the bank atmosphere very welcoming to visit banks and discuss loans.

The 1st 2 pain points are about the regular cash flow problems that the auto drivers routinely experience, and the 3rd pain point is about the auto drivers resorting to taking informal credit. So, the first 3 pain points need to be prioritized. The 4th pain point does not seem to be very severe in comparison to the others.

The goal of the users is to find efficient ways to handle cash and in order to so, get credit at lower interest rates.

Solutions:

1. Financial Literacy Videos
2. Efficient income, expense, and credit handling platform
3. Efficient income growth platform

Solution 1 – Financial Literacy Videos:

• Most of the auto drivers have smartphones and access to Internet. Whenever they are waiting, they watch videos or listen to songs. So, curate a list of videos/audio recordings to exactly teach the dos and don’ts of finance, the very basic investment strategies applicable for small sums of money (the compounding phenomenon) and the various banking services applicable to them. 
• The videos should be very personalized (talking about their income, expenses) to auto drivers so that they can connect to the videos easily.
• The videos and the platform should be available in regional languages. 
• The videos should be fun by asking them questions in between (giving them multiple scenarios that they face in everyday lives and ask them to pick the right one. The leaderboard concept can also be brought in to help them escape their mundane lives.

Solution 2 - Efficient income, expense, and credit handling platform

• A platform that the auto drivers can sign into and create an account to get credit at lower interest rates. For signing up, apart from the personal information details, the auto drivers would be asked to provide an approximation of their monthly income and expenses. They would also be asked to link their UPI ids used for ride payments with the account.
• The underlying model can track the driver’s expenses and income done through the UPI ids as well as explicitly ask them to input the expenses/income when done in cash or through any other channels. Every month, the underlying model could suggest how efficiently the money (income + credit) could have been utilized as well as send them notifications/warnings when auto drivers engage in foolish activities. The platform should constantly be asking for their feedback.
• The auto drivers should be able to interact with the platform through voice as much as possible and the platform should support in regional languages.
• The business can charge a small fee for doing the above depending upon the credit amount being lent to the auto drivers. The underlying model will remind them of the interest payments to be made. If the auto driver continues to make late payments (say 10 times) , once their account has sufficient amount, the business can have tie ups with banks to extract the interest payments from his/he respective account (prior permission can be taken from the auto driver at the time of loan disbursal).
• In the meantime, the underlying model should continue to create and update their credit history to determine the subsequent loan disbursals.

Solution 3 - Efficient income growth platform

• A platform that the auto drivers can sign into and create an account to invest very small sums of money into certain low risk investment opportunities.
• Either the auto drivers can directly choose where to invest or entrust the responsibility to the company. For signing up, apart from the personal information details, the auto drivers would be asked to link their accounts with their bank accounts.
• The underlying model can track the driver’s portfolio, suggest if the portfolio needs to be diversified, send out notifications if the person has not invested for long, show warning if the person is trying to invest a higher sum of money. The platform should constantly be asking for their feedback.
• The auto drivers should be able to interact with the platform through voice as much as possible and the platform should support in regional languages.
• The business can charge a small fee for doing the above.

With the last 2 solutions, the organization should invest heavily in user privacy and make sure that none of their services is enticing the user to invest in any particular stock or mutual fund or so.

The organization should start with the solution 1 as it’s a low risk and low effort requiring solution. Through Solution 1, the organization can try to generate a user based and earn trust. This solution tries to resolve the first 2 pain points.

Next the organization can pick up the Solution 2 as it requires high effort for implementation, but it resolves all the prioritized pain points and aligns with both the user and business goals.

Depending on the way the platform is received by the auto drivers, the business can think about the implementation of Solution 3.