The fintech startup harnesses AI-ML-driven models to help merchants digitize bookkeeping and deliver benefits from data-driven insights.
Technological obsolescence has been one of the most significant pain points for micro, small and medium enterprises (MSMEs). Due to the lack of resources, budgets, and experience, it has become more challenging for micro and small enterprises to upgrade and modernize their business capabilities.
While most large businesses have expanded their digital capabilities, micro and small business owners have to do many catchups to transform their cumbersome manual processes, manage business ledgers and simplify business operations.
One of the biggest hurdles for merchants is to keep instant track of pending receivables from customers and make decisions around giving credit or not to their specific customers. While most large businesses have expanded their digital capabilities, micro and small business owners have to do many catchups to transform their cumbersome manual processes, manage business ledgers and simplify business operations.
Bangalore-based fintech startup Khatabook which offers digital ledger services is trying to address some of these problems by digitizing the accounts of micro and small business enterprises and giving them a much-needed competitive edge in the post-pandemic business environment.
User retention and training a big challenge
Khatabook offers a suite of digital solutions powered by AI and ML technologies, helping merchants track their transactions, send periodic reminders to creditors and collect payments securely in a seamless manner. According to the company, convincing offline merchants to switch to online and training them for digital transactions is the biggest hurdle they've been facing.
The understanding of online platforms has increased tremendously over the last few years. However, many traditional merchants are still not comfortable using them. So Khatabook is persistently making solid efforts to educate its target user base about the advantage of digital and how these tools can provide better cash flow visibility and strengthen business performance."While the trust in the digital platforms have gone up, all of them [MSME] have some common and different needs. So we are working to build generic solutions that meet all of their use cases and focusing on unique solutions that can meet our users' diverse needs," says Gaurav Lahoti, Vice President of Engineering, Khatabook.
The company continuously identifies customer pain points through data-driven intelligence and evaluates the best ways to reduce churn on its platform.
Khatabook platform has a registered user base of over five crore merchants across 13 Indian languages. Most of its ten million-plus monthly active merchants fall in the groceries, textiles, apparel, and footwear segment.
Leveraging the advantages of cloud
Khatabook began its operations in 2019 and has primarily grown as a remote-first company because of the pandemic-triggered lockdown and intermitting work-from-home decrees in the last two years. During the previous three years, it attributes its growth to hiring good talent and building the right processes, which helped the company move fast in designing applications and exchanging creative ideas.
"In today's market, businesses – be it small or big— have any data that can help them do risk modeling for lending. There are a lot of emerging technologies that can enable that. And we want every merchant to benefit from such technologies and better their decision-making," Lahoti says.
The digital bookkeeping app, which has recently raised USD 100 Mn in a Series C round, says it has been continuously innovating to identify how a software product can help India's MSMEs overcome such obstacles and improve their business efficiency and incomes by harnessing tech.
Khatabook says that it runs a security-conscious business, and to ensure the data security and privacy of its users, it has robust processes and compliance in place.
"For instance, folks who have access to the data only have access to the personally identifiable information. The phone numbers are completely masked. Addresses are entirely hidden unless someone requires them within the company. And when someone asks for the data, they have a complete log of who asked for what data at what point in time?
The road ahead
The company's AI-embedded easy-to-use interface is being offered in 13 vernacular languages, which has helped it to expand its user base to over 4500 cities and towns in record time. Khatabook has recently launched an exclusive cashbook android app and unveiled automated bot call reminders, one of the firsts of IVR tech designed for Indian MSMEs. Khatabook users can also receive payments directly into their bank account with UPI payments through its platform.
Being a data-driven company, it plans to simplify its interface further and make customer onboarding easier. It also focuses on retention metrics to hold its users to its platform.
"We are like a new age evolved software layer. The new-age technology has made the lines blurred. Largely because it has become easier and easier to build technologies concerning controls, many third-party SaaS companies are coming and building solutions. It makes it easy to assemble things such as lego pieces and put technology on top. A good amount of work can be done by that. That has helped provide more functionality in a single place," Lahoti elucidates.
Khatabook says its focus has been to deliver the advantage of the cloud and data-driven technologies to businesses of every size. "While most large enterprises have successfully harnessed the potential of data, the market had very little to offer for MSMEs when we started," Lahoti adds.
"A simple example is like, if an SMS is sent to a user, you want to check probably a few seconds later, whether it was delivered or not, if not, then you will want to send it to WhatsApp if not, you would want to do something else, but there is some time gap that you need between all these actions in that alignment. So those kinds of things have been dealt with in the infrastructure," says Lahoti.
Targeting the next growth phase, Khatabook also plans to provide diverse financing options to micro and small businesses through its SaaS accounting software BiZ Analyst, which it recently acquired for $10 million. "On the product front, I would say lending is something that, we are working a lot from a data science and machine learning perspective, especially on the risk modeling front," Lahoti informs.
Khatabook has conducted some pilots and will soon unveil its app's short-term and long-term lending options. Earlier this year, it shared its intentions to become a digital bank for MSMEs before the end of the current calendar year.
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