The Perfect Match

In Indian society, education has always been seen as a strategic advantage to grow in one’s career. While the challenges of meeting the demand for affordable and quality education have been a mixed bag so far, the un-shackling of education as an industry has started with proactive government steps in bringing autonomy to educational institutions of repute. With the NEP 2020, we can further expect the education system at least to be attuned to future needs, if not the current needs. After all, as a nation, we have to serve over 200 million students in the K12 category alone. 

 The formal education system had an emphasis on test scores, instead of helping develop the next generation’s critical-thinking and self-development areas like soft skills, etc. Education costs have been increasing with much qualitative improvement to showcase. The government of India and various state governments have been working with popular schemes to have better enrolments in public schools and increased participation. Now with the advent of digital and the availability of the internet across the country, access to education could improve. 

Our market has access to cheaper and wider data usage. This has also helped increased EdTech innovations & startups in India. Online learning as a concept is here to stay. Some of them would do better with the hybrid model of learning. User engagement and impact creation with personalized learning ability, gamification, and impact/performance assessment will determine the sustainable success of the EdTechs.

 A boost from Covid: 

The Covid lockdown has forced educational institutions to work remotely and use technology to continue with imparting learning. EdTech companies have benefited from changed consumer behaviour wherein adoption of the digital medium and the consumer willingness to pay for digital education has been fast-tracked.

For EdTech companies, this was a blessing in disguise. Their business boomed in the present time, as students gradually shifted to online classes and tuitions to continue with their preparation for various competitive exams given the shut-down of educational institutions.  

 In 2009, India passed the Right of Children to Free and Compulsory Education Act (RTE), envisioning a future with 100 per cent school enrolment for children aged 6–14 years. In the decade since, the proportion of unenrolled children has dropped to 2.8 per cent, the lowest ever in India’s history. The 2019 National Education Policy (NEP) seeks to address these challenges and extend the scope of RTE to students aged 3–18 years. One of its recommendations is to harness EdTech through app-based learning, online student communities, and lesson delivery beyond ‘chalk and talk’. Given the growing demand for academic coaching outside school, the EdTech industry attracted $1.6 billion^^ in funding during 2014–19 crucial to bridging learning gaps. Thus creating a huge wave of supplementary education, commonly referred to as tuition or coaching-based start-ups, bridging learning gaps and this is fueling EdTech growth over the last 6 years. 

Similarly, the issues of quality and relevance affect higher education also and similarly professional lives too are getting impacted due to automation. It can ensure job security by not only making higher and technical education more accessible but also facilitate the up-skilling of working professionals. Here skill up-gradation focus EdTech plays a crucial role. 

EdTech for adults—whether in the form of vocational skills, tertiary or higher education, or skilling for managerial growth—can make India’s workforce more competitive.

 The Omidyar Network India RedSeer Report highlights EdTech Readiness Framework

The opportunity for EdTech to enable disruption in both K12 and Post-K12 relies on the EdTech Readiness Framework (ERF) acts as a key metric to track the growth drivers of EdTech market. Its 4 pillars are:

1. Digital adoption among families and individual: ~160 MN households with active internet access 
2. Awareness of EdTech: About 80 per cent of the students in K12 are aware of EdTech 
3. Willingness to pay for EdTech solutions: About 60 per cent are aware users willing to pay for EdTech products 
4. Funding in EdTech companies: Over $1.6 bn private investments flow from 2014 to 2019

 By 2022, online education offerings across grades 1 to 12 are projected to increase 6.3 times to create a $ 1.7 bn market, while the post-K12 market is set to grow 3.7 times to create a $ 1.8 bn market. This is going to create a meaningful opportunity for incumbent players as well as space for multiple new startups.

 Now let us look at the two segments of Supplementary Education and Skill Upgradation and understand the customer and can they afford the EdTech offering.

Supplementary Education for K12:

A child goes to an entry level school and thus the need evolves for Supplementary Education or classical tuition services. 

The 30-50-year- old middle and lower-middle-class parent needs to afford the school's fee and the cost of digital education apps + a laptop or smart phone for the child with a good internet connection. The upfront investment of Rs 35,000 to Rs 1,25,000 needs to be made between the hardware and EdTech product offering for the K12

For Test Preparation:

 Older Kota move is not migrated to the mobile phone or desktop screen the parent, not 40yrs + needs to invest in a Laptop and a digital learning course focused to get into medical, IAS, engineering etc and He needs to invest anything between Rs 1,25,000 to Rs 2,50,000

Skill Upgradation or getting a job-ready is one of the biggest opportunities with-in EdTech. With over 50,000 colleges and institutes, the base is large for people who needs to prepare to be jobs ready and by 2022 this market segment has to grow to $1,765mn 

As per Inc42 currently, they are 4,450 EdTech start-ups operating in India. Interestingly, top VCs investing in the category have made many EdTech investments but not participated in build affordability in the category with FinTech investment.  

FinTech Servicing EdTech

Total Investment

Blume Ventures

11

Nil

145+

Sequoia

10

1

180+

Omidyar Network

9

2

NA

Nexus

7

Nil

97+

SAIFPartners(Elevation)

6

1

66+

EdTech and FinTech: The perfect partnership

The emerging EdTech products enable education institutions to save time, raise quality standards and increase engagement between teachers, parents/guardians, and students; sequentially creating a positive impact across the entire education spectrum.

Affordability is powered by credit and enables the user-customer to make a purchase; the mobile phone market saw manufacturers build better quality and differentiated products because affordable-credit made it possible to purchase the product. Credit brings in affordability to add newer consumers who otherwise may have been left out.  

FinTechs enable a complete seamless digital journey in customer purchase; a digital product purchase and customer interaction need a seamless product interface even in lending; for example, you can’t say I am willing to take an online education course which is to start immediately, but my affordability/credit partner will like to do a field verification which would take 3 days or has physical processes that need many a form to be filled. FinTech provides API, App, and SDK journeys to provide seamless interaction and make credit sourcing easy and convenient. 

Courses and nuances of EdTech products and companies are very complex and hyper customisation is needed which the FinTech stack can assist in a big way: traditional lending products have tenures, payment options and are difficult to customise for product nuances. Take an example of an EdTech product; where an 8-week course is a classroom, 12 weeks of digital classes, and 20 weeks on job hands on-experience if not already employed; it needs differential payment terms, composition, and payment structures that a student has to pay for. (as the course costs across stages changes or for a different type of professional.)

More than half the customers will be first-time borrowers or users of credit to purchase service.  This segment is best suited to new-age FinTechs, focused on the next Billion Consumer Segment.  

The Zero cost EMI or The Subventions model: 

Born to build affordability in electronics purchases will fuel the EdTech growth. It helps in two manners - allows education providers to focus on building the best content and in finding students rather than focus on how to get students to pay regularly and make sure that they collect full cost upfront to invest best in material/training tasks. Together they help get more people who invest in skilling up, getting better job prospects, and work on better income opportunities.

Pay per use is a new wave which we talk about; “I will like to pay for elective subjects I want to learn”, an underlying credit line that allows me to help pay for the courses will help sharpen my skills.

 As India marches on this digital journey, the partnerships between EdTech and FinTech will booster the growth and help skill-up India 

 Akshay Mehrotra is the CEO and Co-Founder of EarlySalary.com and Srinath Sridharan is an Independent Markets Commentator and Governance Council Member for FACE

DISCLAIMER: Views expressed are the author's own. Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.