IndiaGold Raises $12M for Digital Gold Credit Platform

India's Enduring Affinity for Gold and a New Fintech Approach

The nation of India maintains a particularly strong cultural connection to gold. It is estimated that South Asian households collectively possess over 25,000 tons of the precious metal, representing roughly half of the country’s total nominal GDP. However, a significant portion of this wealth remains stored unused, often locked away in secure containers for extended periods.

Generational Savings and Untapped Potential

Across all socioeconomic levels, Indians have historically favored gold as a means of preserving their savings – or at least a portion thereof. The demand for gold within India is unparalleled globally, making the country a leading importer of this valuable commodity.

Gold as Security and the Associated Stigma

Indians utilize gold not only as a safeguard against financial market volatility but also as collateral for obtaining credit. However, the act of selling gold, whether in jewelry form or otherwise, often carries a social stigma – a perception of financial hardship.

Furthermore, storing gold at home presents inherent security risks.

Indiagold: A New Funding Round and Innovative Services

Indiagold, a relatively new company focused on unlocking the value of privately held gold, announced on Friday a successful $12 million Series A funding round. This financing was spearheaded by Prosus’ PayU, typically focused on more established ventures, alongside Falcon’s Alpha Wave Incubation (AWI) fund.

Additional participation came from Better Tomorrow Ventures, 3one4 Capital, Rainmatter Capital, and existing investor Leo Capital, bringing the startup’s total funding to $14 million.

A Digital Credit Platform Built on Gold

Founded by Nitin Misra and Deepak Abbot, both former Paytm executives, Indiagold is developing a gold-centric digital credit platform within the world’s second-largest internet market. The company leverages gold holdings to assess creditworthiness and provides Application Programming Interfaces (APIs) for banks and lenders seeking to access this largely untapped customer base.

Core Offerings: Secure Storage and Gold-Backed Loans

Indiagold currently offers two primary services. They provide a convenient and affordable solution for secure gold storage, and they facilitate access to loans secured against customers’ gold reserves.

A Secure and Transparent Process

Upon signing up, Indiagold agents visit customers’ homes to inspect and weigh their gold. The items are then placed in tamper-proof bags affixed with RFID stickers. These bags are secured within a steel box locked using the customer’s fingerprint.

Throughout the transport process to the designated vault, customers receive a live tracking feed via the Indiagold application.

Building Trust and Overcoming Traditional Hesitations

The process is designed to be straightforward and build customer confidence, addressing the emotional attachment and traditional hesitations surrounding gold ownership.

“This entire business is predicated on trust,” Misra explained in a TechCrunch interview. “Unlike some startup cultures that prioritize rapid iteration, we must invest time in establishing trust with our customers.”

Affordable and Insured Gold Storage

Indiagold’s storage fees are significantly lower than those charged by traditional banks – just a few dollars annually, compared to hundreds. Moreover, the company provides insurance coverage for stored gold, offering an additional layer of security.

Real-Time Valuation and Instant Credit Access

Customers can monitor the real-time value of their stored gold through the Indiagold app. Should they require funds, the platform can facilitate a line of credit within 30 seconds.

A Vast Untapped Market

Utilizing gold as loan collateral represents a substantial opportunity within the Indian financial landscape – one that remains largely unrealized.

According to a recent Bernstein report, “Despite the substantial gold reserves held by Indian households, the gold loan market has barely begun to tap into this potential. The gold collateral held by Muthoot Finance (166 tons) represents less than 1% of the estimated total gold reserves (~25,000 tons). This is largely due to gold being viewed as a family heirloom passed down through generations.”

Customers retain the flexibility to borrow against only a portion of their stored gold, and the biometric security measures provide assurance against unauthorized access or tampering.

Navigating Challenges and Achieving Growth

Indiagold faced significant hurdles this year, including a 70% business decline during the peak of the second wave of the coronavirus pandemic, as reported by Misra and Abbot. “We have experienced considerable challenges during this relatively short period,” Misra noted.

However, business has since rebounded to an all-time high by the first half of the current month.

Industry Recognition and Future Expansion

“Indiagold’s innovative doorstep gold loan and gold locker products deliver an exceptional customer experience and enable more affordable credit options. The rapid traction Indiagold has achieved is a testament to its superior product capabilities and the expertise of its founders. We believe the gold loan market is poised for disruption and are excited to support Indiagold’s vision,” stated Navroz D. Udwadia, co-founder of Falcon Edge Capital.

Currently operating in the National Capital Region and Indore, Indiagold plans to expand to 10 cities by the end of the fiscal year. The company is also focused on broadening its product portfolio. PayU has expressed interest in exploring potential collaborations with Indiagold on future product offerings.

Emerging Competition in the Gold Fintech Space

Several startups are now exploring opportunities within the Indian gold market. Jar, a Bangalore-based company founded this year, is focused on helping young users begin saving through investments in digital gold.