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Aiming for automated decision making with minimum human intervention

Santanu Agarwal reveals that Paisalo is in the process of deploying external support to scan through borrower applications

Paisalo’s credit matrix algorithms provide better risk management by using AI & ML for analytics:

Paisalo Digital is a category B non-deposit-taking NBFC with 116 branches across 10 states and like any frontline financial services institutions it uses technology to evolve and grow business effectively and efficiently. For, it believes that a strong technology backbone is not just a standout measure but a solvency factor. Digital has always been a big part of its strategy. And speaking about the tech infrastructure it has created, the company’s Deputy CEO Santanu Agarwal says the focus has always remained to digitally transform the business even as ensuring that technological solutions are simple, effective and efficient that they make the customer experience unique, robust and trustworthy.

The company’s digital strategy had been under development, improvement and implementation since 2013. It started digital signing of loan documents in January 2016. Says Agarwal: “In fact, we were among the first NBFCs in the country to do this. Our model was based on high tech and high touch; we believe that technology is an enabler and logic-based solution provider. While the physical touch allows us to maintain close proximity and ears to the ground reality, which is extremely important to develop, we have deployed and demonstrated real world performance of the technology.”

Paisalo, a listed entity on the stock exchanges, does not use distributors, agents or any other third party for sourcing, servicing and recovery. Agarwal points out: “We operate Paisalo app on intranet rather than internet to achieve sourcing, servicing and recovery. 100% cases are sourced and serviced via Paisalo app since January 2018.”


Paisalo does not do online marketing for onboarding of borrowers. Online efforts for marketing are limited to maintaining social media presence. Currently, its IT team consists of 10 people. And the company mainly operates in tier 3 and below centers and hence social media and other apps do not help its credit matrix algorithms much for analysis.”
Its total serviced customers are 1.5 million, out of which current customers are 400,000. Its area of operations covers Delhi, Uttar Pradesh, Uttarakhand, Haryana, Himachal Pradesh, Rajasthan, Punjab, Bihar, Gujarat and Maharashtra.


Paisalo has taken up several initiatives in the last 1 year, implementing a robust, scalable and trustworthy technological architecture. These initiatives have become the foundation and stepping stone for adopting artificial intelligence and machine learning integrated processes that drive efficiency and provide a seamless and easy experience for the borrowers. The initiatives on artificial intelligence and machine learning were started in January 2018.

Says Agarwal: “Since the deployment of ML and AI based analytics, our credit matrix algorithms for credit, credential and character check have provided better reliability in terms of risk management and risk underwriting. We have constantly been upgrading the customer on-boarding and service technology architecture to give it a quick, easy and more paperless customer sourcing and servicing experience for our borrowers. It utilizes proprietary and in-house developed digital workflow and management platform. These initiatives have yielded good results by providing efficient expenses management and elevated profits. The learnings from this are now being introduced in the business across the financial products offered by us, thus helping save time, resources and errors, and providing a pathway towards automated-decision making with minimum human intervention.”

The company understands that data analysis with minimal and only statutory personal information storage is important. Data analysis is increasingly playing a role in taking efficient and effective decisions. Agarwal says the company is accessing data from internal and external sources to understand the borrowers and their geographical, demographic details and their historical and current performance. Further, it is in the process of deploying external support to scan through borrower applications, he adds, revealing that it uses internal data to support all the points of decision making relating to credit, credential, and character check. The company has partnered with credit information bureaus CRIF Highmark and Experian.


Paisalo understands the importance of protecting its as well as borrowers’ data which underlines the need for a fool-proof system of security covering its technology infrastructure for ensuring that there is no unauthorised and unwanted access to or misuse or spillage of data. Agarwal says the company uses experts and experienced in-house team to manage its cybersecurity program, which includes protecting with multi-layered security control, 24×7 monitoring, quick recovery of operations in case of a breach.


Agarwal states that the company’s funding MSMEs has continued uninterrupted during the lockdown and it will continue to support this sector as well as MFIs by providing liquidity to them. “NBFCs like ours undercut the local moneylenders by a huge margin with our deep-rooted presence, and we are in a sweet spot for leveraging the growing capabilities of India to provide loans and other necessary financial instruments to grow and nurture their income generation business and embark on India’s economic growth,” says he.


Paisalo has signed a co-origination agreement with State Bank of India, its first, for creating and deploying one of the country’s first digital co-origination platforms. SBI contributes 80% and Paisalo has to contribute 20% of loan value under the co-origination model. Risk and reward sharing too is in this ratio. Says Santanu Agarwal, CEO, Paisalo: “Our biggest accomplishment in terms of digital strategy for FY 2019-20 was technology integration between SBI platform and Paisalo platform for co-origination of priority sector loans (PSL). SBI’s low cost of funds and our low cost of operations result in lowest borrowing cost offering to the bottom of pyramid customers. So, technology at Paisalo has been fairly successful, but in today’s dynamic society and ever-changing technology, we are constantly going to spend on R&D and deploy more efficient and effective technology ssytems. Digital is very much important for accomplishing a scalable lending model with effective and efficient risk aversion.”


At Paisalo, borrower experience is regarded as a key pillar of success and for ensuring timely recovery. The company has continued to build a customer-centric design thinking across its financial products, customer servicing, customer management and customer recovery. Says Santanu Agarwal: “To drive and achieve this agenda, we hire focus groups to give feedback on our Paisalo app that borrowers use. We have developed bilingual intranet apps so that the branch staff is efficiently and effectively able to source and service customers. We also provide door-step recovery from borrowers, so that the burden of coming to the branch does not hamper the business of the borrower. We have many more such efforts through which we are continuously responding to the evolving borrower needs. We are institutionalizing these processes across the company to ensure a seamless experience for all our borrower segments throughout the value chain.” The company’s IT capex is about Rs60 million and opex is Rs3 million with a yoy growth in opex at about 6%.

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