Here’s a story about the importance of keeping your customers close. As product folks, when prioritising or testing features - you’re making bets. Usually we’re mentally calculating the odds of the bets succeeding. Those odds come from our expectations of how people behave and how the world works. Once we were discussing launching a loans feature on Instamojo. It was fintech season and being a lender also meant you get funded on that basis. So why not? We weren’t going to pivot into a full-stack Lender overnight but there definitely might be an opportunity for us, given that our customer base is small businesses . And we found one.
Instamojo as a payments company took 2 days to process your payments i.e. if someone paid you on the 1st, the money would hit your bank account on the 3rd. This presented a lending opportunity . We could give customers their payments right away (technically lending them the money) and not make the final payment later. Sounds good!
The first question was, who would want this? Which sort of customers fall short of cash in this manner? Fortunately for us, we had done user research a few months earlier and had 6 distinct personas of our users right in front of us. One of these had a clear case of cashflow issues - Event Organisers . Event organisers have to pay their vendors before the event - this can vary from a small advance to the whole amount. They receive the payments on an ongoing basis from ticket sales, with many of those sales happening really close to the event date . In many cases, Events were also considered a high risk category so depending on the seller profile we would withhold payouts until the event occured, making life for the organiser harder . OK, so at least one segment of customers could be targeted.There were other categories, but this had the strongest fit.
Next up, how do we price this? No fancy price elasticity test, our normal commissions were 2% so we were proposing 2.5% for early payouts because … it sounded good. This 2.5% charge drove some folks in the team insane. The objections were not to the need but to exorbitant cost. Counter-arguments were on the lines of “OMG an interest rate 0.5% for 2 days, that’s crazy! Do you how much that is in APR terms? More than 5000% . No one will take this man.It’s obviously cheaper to take money from a credit card. The APR is 40% there”
My reaction was “Umm. That’s not how they think” The calculations were correct but the expected behaviour was off by a light year. Imagine a busy event organiser being chased her vendors. Getting “Madam . Please release the payment“ calls from 3 different people every day_._ She is already paying 2% for getting her payments processed, an extra 0.5% doesn’t seem like a lot for reducing the hassles involved in dealing with vendors . And most importantly, busy in the moment, getting her event up and running - Do you think she will pull up an Excel sheet and do APR calculations? My hunch was that the thought wouldn’t even cross her mind. If she thought an extra 1000-2000 would make things smoother for her, she’d just click and proceed.
We did the pilot and things went as I had expected. It saw decent uptake, much higher than even I expected. We received zero complaints saying “in APR terms you rates are exorbitant” Fun fact I discovered later. Both the people objecting to the interest rates had taken out home loans! Was it a case of too much unconscious sympathy for self and too little empathy with users. Maybe. This opens up the interesting question: Am I also affected by my life’s circumstances when thinking of people’s behaviour? Yes! Of course. How can I counter that? Talk to people often. Do user research. Live their life for a while.