BYJU’S revamps sales model, introduces affordability test after child rights body’s intervention

Edtech major BYJU’S has announced the introduction of a new sales model and an affordability test for all potential customers weeks after the National Commission for Protection of Child Rights (NCPCR) summoned the company over allegations of hard-selling and mis-selling of courses to students.

The new model, which the company claims is a ‘4-tier tech-driven internal sales process’ will replace its existing direct sales practice. BYJU’s, in a statement, said the newly introduced sales model is far more rigorous, entirely remote and includes a centralised tech-driven audit process to ensure all sales are triple-checked.

“The emergence of the post-pandemic world required us to give a fresh look at how we engage with our customers in the initial stages of a potentially lifelong relationship. BYJU’S is fully committed to a transparent sales mechanism, and our tech-driven, 4-tier approach enhances communication and precludes potential/rare mis-selling,” Mrinal Mohit, CEO, BYJU’S India, said.

NCPCR had summoned the company on December 23 after taking cognizance of a report that alleged that the edtech major was pushing households to take heavy debts and exploiting students. Appearing before the commission, BYJU’S denied the allegations and said it follows a triple-layered audit mechanism to ensure that its sales staff doesn’t pursue customers who are uninterested in or unable to pay for its products. Company had submitted that it will conduct an affordability test to ensure that its courses are not sold to customers whose income is below Rs 25,000 a month, and that it will review its refund policy to pay back the fees collected from parents who would have failed the affordability test.

As per the company, the new process begins with educating an incoming lead about the company’s product portfolio and its new refund policy over a live Zoom session that is recorded for future audit. The interested customers have to give their consent after reading the terms and conditions on the customer consent screen on a custom mobile app. The order verification team then revalidates the consent and double-checks if the customer agrees to make the purchase. Upon receiving another consent from the customer, the sale is closed.

The Bengaluru-based company has now confirmed that a threshold family income of Rs. 25,000 per month is required to purchase any of its products. Families with monthly income of less than Rs 25,000 are qualified for the company’s Education For All (EFA) programme, which provides access to BYJU'S content to students from economically weaker sections of the society free of cost. The company targets to extend this program to one crore children by 2025.

However, the company did not offer details as to how it plans to conduct the affordability test, or what tools, formats, platforms and data would be used to determine the income status of a customer. Experts, speaking to BT last month, feared that an affordability test by the company would be nothing more than a column in the sales form that the customers would inadvertently sign off.

An affordability test is not a common practice among edtech firms in India, which are struggling to keep up the growth momentum after the pandemic-led boom.  BYJU’S does not offer loans directly to its users but connects parents to third-party banks and financial institutions. The financing options, if acceptable to the parents, are concluded between the parent and the third party banks/ financial institutions and the approvals are done by these banks/institutions as per the mandated guidelines, the company said.

In a normal scenario, a lender would conduct an affordability test as a standard protocol at its end irrespective of whether its edtech partner has done the checks or not. Edtech firms in the K12 space have been accused of operating on shady partnerships with financial institutions wherein they demand as many loan approvals as possible irrespective of the financial status of customers. In return, the heavily capitalised start-ups act as guarantors and foot the bill if the customer fails to pay back in time. As maximum approval becomes the mandate, allegations of mis-selling arises where sales professionals do not clearly communicate to customers that they are signing up for a loan, which may deter some.

Speaking to BT last month, NCPCR chief said these partnerships between edtech platforms and financial institutions are illegal because as per the Reserve Bank of India’s (RBI) guidelines for education loans, there is no provision to provide loans to parents for tuition of their children. “There is no mention [in the RBI guidelines] that financial institutions can give loans for the purpose of tuition. Is providing personal loans part of their business?” the chairperson Priyank Kanoongo asked. He said non-payment of such loans will affect the credit score of parents, which in turn can impact their children’s future chances of getting loans for higher education as the parents wouldn’t be eligible to act as guarantors. Also, he said that these loans put children under stress as it becomes difficult for them to discontinue an online programme if they wish to, as their parents wouldn’t let them due to the loans they have taken. The commission said it will approach RBI with a recommendation to ensure proper implementation of the guidelines.

Also Read: National Start-up Day: Why a downturn is the best time to launch a start-up? VCs, founders reflect