Designing a loan application experience on Groww (a leading stock broking app)

You might be wondering, What does a stock broking app have anything to do with loans? At first glance, these two financial services seem worlds apart. Stockbroking is about investing and growing wealth, while loans are about borrowing money. But what if we could bridge this gap?

Disclaimer: This is a personal project and no way endorsed or connected with Groww

Context

Imagine this situation, where you require a good amount of cash to cover expenses such as medical bills, home repairs, or unexpected emergencies. If it is a planned expense you would be saving up from the last 3–4 months. But it’s not, so you might have these options:

• Medical insurance
• Friends or family
• Credit cards
• Personal Loan
• Sell your investments or assets

But everything has its pros and cons like high interest rates, hesitation to ask others, loss of financial stability, and decrease in credit score. What if, we have another option along with these options

Imagine turning your investments into instant cash without selling a single share or mutual funds.

Introducing Loan against mutual funds.

What is a Loan against mutual funds(LMAF)?

It’s a type of loan where you pledge your existing mutual funds to get cash without actually selling them and gain the returns.

Why did I choose Groww?

Groww is one of the leading stock broking apps from where you can buy stocks and mutual funds with over 50 million users on its platform and has been rated 4.4 stars on Playstore. The platform offers access to more than 6,000 mutual funds from over 35 fund houses, providing investors with a wide range of choices. And also I have been a constant user of Groww and have been investing for the past year.

Thus, choosing an app like Groww was appropriate as I have been using it, familiar with it and would be one of the best sources to take out loans against your mutual funds because you might have already been investing on the platform.

Primary Goal: Designing a feature that allows people to take an instant loan against their mutual funds.

Prototype

Before we go ahead, Here is the prototype that you can play around with.

Research

Secondary Research

To get more perspective about the loans against mutual funds and also the process to avail it to understand the pain points, and problems, I have gone through numerous articles, YouTube videos and Reddit.

Findings

• Limitations: You can not keep ELSS mutual funds, mutual funds which are in Demat mode as collateral. The limit you get is approximately: 50% of equity funds and 80% of debt funds. The limit gets decreased or increased based on market fluctuations.
• Lack of Awareness: Few people who are well versed in investing, and personal finance don’t know about this type of loan and are unsure about the safety of the loan.

• Looking for alternatives: People are hesitant to sell their holdings for expenses and looking for alternatives like personal loans, and loans against securities.

User Research and Competitive Analysis

To understand how other apps like Small Case, Yenmo, and Volt Money solve this, I made one of my friends apply for the loan and record it.😂😂

Competitive Analysis: Every app has a few redundant steps like entering PAN number, Aadhar number, Phone number, DOB, and Bank Details due to lack of user data, which is a huge BONUS for Groww to use in their favour because while opening a demat account you need to give all these details.

User Research: The loan-taking process is a huge task because it is related to savings, investments and emotions.

• My friend was so hesitant to apply and I forced/begged him to apply for it because he hadn’t heard about it before and was unsure about the loan or its benefits.
• At every step, he is extra careful to proceed to the next step because of not knowing what the next step will be.
• He felt confused and frustrated while entering his details such as PAN and Aadhar Number uncertain about why these were necessary.

Based on my findings:

Creating awareness, Gaining Trust, Clarity and Transparency are the things I need to solve for.

Visual Design

I have started going through the Groww mobile app to understand their visual style/language. Took a lot of screenshots for reference that had filled my gallery.

Home Screen

I added relevant information so that the user understood what this loan is, why one should choose this over other loans, benefits, and how simple to get it to create awareness and trust.

Fetching Funds and Calculating Credit Limit

We have to fetch the user’s mutual funds to find the credit limit. I have used the existing Groww’s OTP entering screens.

Confirming Loan Amount

After calculating the credit limit, the users can see the details of the loan like total credit limit, interest, duration and mutual funds the user is going to pledge.

There is a limitation while pledging, users cannot pledge mutual funds which are in demat mode and the ELSS funds, which have to be communicated to the users.

Editing the Loan Amount

Users can decrease or increase the loan amount either by editing the amount directly or the amount they need from a fund.

Let’s say I have four funds, each worth ₹1,00,000. This totals my credit limit to approximately ₹2,00,000, with each fund contributing ₹50,000. However, if I only need ₹1,00,000, I can adjust the amount. This will automatically calculate the amount of funds I will pledge, which would be ₹25,000 per fund.

Now, what if I want to pledge only 2 funds instead of all 4 fund?

In that case, I can adjust the value of each fund that I want to pledge. For example, I could pledge ₹50,000 from each of the two funds.

KYC Verification and Setting up Autopay

After confirming the amount, the user has to go through an Aadhar KYC to start the loan application and set up autopay so that they never miss out on the monthly repayments.

As I said earlier in the findings section

The purpose of each step in the process is not clear, making it difficult to understand why this step is necessary.

KYC verification is essential in the loan application process, while autopay is an optional convenience.

How does Autopay work on Groww?

Autopay is currently available for SIPs. So while starting an SIP, Groww makes the user set the autopay active.

Whereas here, Autopay will be activated only when the user withdraws the money out of Groww. So I felt like we could give the user the option to skip the autopay setup while applying. So that

• The user can quickly go to the agreement page and complete the loan application.
• We can reduce the API calls to third parties that are used for setting autopay.

Signing the Loan Agreement

After the KYC verification and autopay setup, the user has to lock the mutual funds through OTP verification to pledge them and sign the loan agreement to complete the loan application.

I made the agreement generator animation on Lottie and Rive to integrate it into Figma but the clarity kept decreasing so I again did it on Figma but the animation was not smooth. So I have attached it below, you can see the animation. If you want the even higher resolution animation, I have also published it on Rive Community(link).

Home Screen

After the application process is completed, the user lands on the home screen with a success message. Once the application user can withdraw the amount to their account.

The Problem after the loan application gets approved

The existing pattern across all platforms is after the application is approved, the user has to withdraw it from the app. I felt confused because mostly on all platforms, adding a bank account is a mandatory step.

Then why not transfer the money to their bank account directly?

The reason or the conclusion I got is-

This type of loan acts like an “Overdraft”. That means the bank or the NBFC provides loan amount that the user can withdraw whenever they want. Because the user has to pay the interest only to the amount they have used but not for the whole credit amount. It’s like having access to the balance in your bank account, but you want only one chunk of it. So if the whole money gets transferred to their bank account they have to pay interest for the extra amount which they might not use. So it felt this was a viable option.

Amount withdrawal

The user can withdraw the amount as they wish. I have used the existing Groww’s flow and screens for this.

There is a limitation for LAMF which has to be addressed

The credit limit gets decreased or increased based on market fluctuations.

Every loan provider periodically reassesses users’ credit limits, typically every two months(my assumption). If the value of the pledged funds changes, the credit limit may increase or decrease accordingly. If a user has withdrawn more than their current limit, they will be required to repay the excess amount within 7 days.

So we need to educate the user not to use the whole limit. But if they want to withdraw they can.

Edge Cases

Not Eligible for the loan: If the user’s portfolio value is less than ₹50,000, they are not eligible for the loan.

Skip Autopay and Autopay cancel: If the user skips the autopay step or cancels the setup while entering the bank details.

Due Date missed and Credit Limit Decreased: If the loan repayment date is crossed and the user hasn’t paid the bill. Suppose the limit was decreased due to a revision of the credit limit.

Additional Screens

Here are a few extra screens that are not part of the loan application happy flow.

And it’s a wrap!!!

Closing Notes

• I worked on this project at night after my work hours and weekends. So this took around 2–3 weeks, in which I spent around 5 days to write this article(because I suck at it).
• This has a lot more potential to integrate with Groww Pay for setting up autopay and paying bills.
• While working on this project, I had several back-and-forth thoughts like whether this new feature was necessary, whether people would use this loan, does this solve the users’ existing problems with other apps which I feel were the driving factors.
• Understanding the design system of Groww felt like a fun challenge. I tried everywhere to find the font of Groww and finally got it from **My developer personality is stopping me from spilling this secret(DM me on X if you want to know this)**.

👏It would mean a lot to me if you could long press on the clap icon, drop a few claps & show your support.

I’m currently seeking opportunities as a Product Designer. Feel free to connect with me on X(Twitter) and LinkedIn for feedback, collaboration opportunities, or to just have a chat. I’d be glad to have a chat! :)