Using AI to Create a Trustworthy Lending Ecosystem

The banking system in India has been hit by several cases of loan defaulters and frauds on one side and a huge credit gap on the other side. This is caused due to inefficient sourcing and processing, lack of reach and trust deficit between sourcing and underwriting. Decimal Technologies, a Gurgaon-based fintech firm, aims to leverage latest technologies to address customer pain-points such as this to make the lending ecosystem efficient and trust oriented. For example, the fintech provider recently launched Saarathi, an AI-based product that offers a transparent, low-cost process to the lender ecosystem ensuring loan files are trustworthy and fraud-proof.

In a recent conversation with CXOToday, Lalit Mehta, Co-founder & CEO, Decimal Technologies, talks about how the company is leveraging technology to address the lack of transparency and trust in the lending ecosystem and why there’s no looking back for India’s fintech sector’s growth in the post-Covid era, and many more. Excerpts.

Can you tell us about any new technology trends you have observed in the last one year that may have a lasting impact on this sector?

The global pandemic pushed banks to integrate technologies into their services faster than before and reassess their traditional business models. We saw five years’ worth of digital transformation take place in a matter of six months. Many traditional banks, be it public, private or cooperative, adopted digital solutions to stay resilient and cater to customer demands. Niche FinTech players collaborated with banks and financial institutions to digitize their operations. For example, video-KYC was introduced to enable seamless onboarding of customers and to service and retain existing customers, resulting in a reduced acquisition cost. Insurtech was another area that witnessed significant adoption during the pandemic and will continue to do so. With an estimated internet user base of 829 million and customers’ preference for contactless insurance products, India provides a conducive environment for insurance players to establish themselves. Digital banking, of course, picked up as the lockdown restricted usage of ATMs and POS terminals at stores.

How did the pandemic impact your business?

As I said earlier, the pace at which banks adopted digital technologies and innovation was faster in the last 6-8 months than we have seen in the last five years. So, naturally the pace at which our partnership deals with banks were closing also accelerated. In the first few months of lockdown, we were able to close a deal with a bank we had earlier been in talks with for a couple of years now. Banks realized that digitization is essential for both their business and customer satisfaction in today’s new normal. Video-based KYC is one service that we were able to integrate into the digital banking operations which allowed completely virtual authentication of customer data and identity.

You have recently launched Saarathi. How does it address one of Indian banking sector’s biggest challenges of loan frauds and default?

India’s banking system suffered many cases of loan defaulters and frauds in the recent times. To top it all, there’s a huge credit gap of over $300 Billion that the banking system is currently dealing with, which is further accelerated by economic inactivity due to Covid-19 this year. Loan frauds and defaults usually occur due to lack of reach and trust between sourcing and underwriting, preceded by inefficient sourcing and processing. With the launch of Saarathi, we aim to leverage emerging technologies such as artificial intelligence and machine learning to facilitate an intelligence driven end-to-end loan journey. Saarathi will help create a low-cost and transparent lender ecosystem to fraud-proof the loan files and make the approval process five times faster for our customers. Our AI-enabled financial services distribution platform will also help them decrease their operational costs as they can now procure and process loan files from anywhere with just a click on the app. Right from finding leads, to amplifying their network and even scaling their business, users can add new verticals such as credit cards, insurance and mortgage to their offerings with Saarathi.

For Decimal, where do you see growth coming from in 2021?

Lending is a space that is currently witnessing considerable growth and innovation, and we foresee a huge chunk of our growth coming from this area. The launch of Saarathi was extremely successful as we saw interest from both small and large banks. With Saarathi, we expect to generate approximately over $100 million in revenue in the next 5 financial years. In fact, the pilot product itself witnessed double digit week-on-week growth among our channel partners. We now also offer end-to-end digital processes for personal, business, gold, home and auto loans. The introduction of Open Credit Enablement Network or OCEN will be a huge push towards digitization of credit.

While it’s difficult to make predictions, what according to you is the future of India’s fintech space, at least in the next 12-18 months?

India’s fintech ecosystem is still at its nascent stage but thanks to India’s digitally savvy population, there is untapped opportunity to develop innovative solutions and support India’s transformation into a digital economy. In 2021, we’ll see more Hybrid Banks becoming mainstream. Financial Institutions will combine the brick and mortar model of banking with digital banking to create an integrated banking experience. Customer satisfaction and retention will sit at the heart of banks’ long term strategies. Banks will continue to adopt innovation solutions to gain competitive edge and will collaborate with specialized hi-tech partners to drive efficiencies. And, to fulfill this demand, smaller, niche fintech players will enter India’s fintech ecosystem. The lending sector will adopt artificial intelligence to curb bad loans and frauds, and leverage alternate data sources such as Google reviews/ score of a business, repayment of utility bills by individuals, mobile wallets, grocery buying habits, psychometrics etc. to assess credit worthiness. The BFSI industry will once again focus on Blockchain for simpler integration, increased transparency and enhanced security.