Fast-tracking of innovation growth with Fintechs and how can NBFCs leverage for their own growth. This was the topic of discussion at the panel discussion. Post-pandemic demand is pushing the markets to grow. Which in turn is enabling the NBFCs to look for different business models. The traditional products have now transformed into specific products for a specific customer segment. The panelists discussed, how NBFCs are creating an edge using technology provided by fintechs:
Panelists:
- Aditya Agrawal, Head-Business, WeRize
- Ashwini Kumar, General Manager India, MPOWER Financing
- Sandeep Sonpatki, Chief Business Officer, LendingKart
- Anil Pinapala, Founder, Vivifi
- Vaibhav S Joshi, Co-Founder & CEO, Easy Pay
- Dr. Jasmin Gupta, Co Founder & CEO, LXME
- Gangadhar Kodandaram, Chief Revenue Officer, Skit.ai
- Sushil Zaregaonkar, Partner, EY India, (Moderator)
Sushil: How are you leveraging fintech, social media and digital data? And how has it helped you to launch new products around this segment?
Dr. Jasmin: LXME is the first neo bank focussing on women customers. We are integrating wealth tech, bank tech, payment, and lending tech all into one platform. This will make money management easy for women. The starting point is giving financial literacy to women using simple customized games. We aim to make the financial journey easy for women who are otherwise left out of mainstream financial platforms. We offer products which cater to women’s specific persona. LXME is one stop shop for bank accounts, loans, and debit cards. Innovation is required in not just product offerings or sourcing strategies but also in risk management.
Sushil: How is sourcing from the digital savvy model different from the distribution-led model especially in tier 2 and 3 cities?
Aditya: As a player in smaller towns, we are trying to solve their financial service. There are many institutions catering for millennials. We are trying to focus on the section where a total household earning average is around `30,000. They are literate but are not very tech savvy or do not trust the technology. We are trying to create social distribution model. Our products are sold by small wealth advisers and employees of cooperative banks and CAs. They already have a customer pool around them and that helps us to get new customers. We haven’t employed any sales team. A centralized team takes them on the entire onboarding journey and educates them on various applications of our platform. A complete customized portfolio is created for them where marketing, social media, website, digital QR codes, and digital visiting cards all are created for them. We are making them micro-entrepreneurs.
Sushil: What is the transformation that NBFCs have undergone with the help of technology? It is not about one customer-one product anymore. With a good customer, you want to have a longer relationship.
Sandeep: Traditionally banks would have taken more time for digitization due to various factors. Fintechs have helped to fastrack the entire industry. We do a psychological analysis of the customer and try to understand customer behavior. When more and better data is available, we are able to serve the customer with more curated products. Fintechs have played in breaking boundaries around data because they are able to democratize data around different platforms, which they can do as they are performing over several platforms. In the beginning, we started catering to unserved and underserved customers.
Sushil: How is this space evolving? Have you witnessed product bundling for a specific customer segment?
Sandeep: Our focus has been on unsecured loans for businesses. Regulators’ permission for co-lending has boosted the ecosystem of NBFCs and banks. Banks have the capital and have built on infrastructure, whereas the fintechs and NBFCs have greater expertise in customer-specific products. Banks are hence partnering with various fintechs to serve explicit customers. As a platform, we are bridging multiple expertise of fintechs and banks and lenders to provide the capital.
Sushil: How do you look at the unorganized sector and will banks and fintechs have deeper relationship in serving customers? Have fintechs been able to bring the unorganized section under an organised financial system? Has this benefitted the people in tier-3 and 4 with cash withdrawal, bill payment, insurance, etc?
Vaibhav: We are trying to create a neo-bank targeting the MSMEs, which are the second largest employer in the country and have been neglected by banking institutions. Now we see that in smaller towns the grocery stores have been empowered and made as mini-ATMs. They act as cash deposit centres with the help of domestic remittance and also withdrawal is also possible. We are focussing on MSMEs which can be a grocer, mobile store or textile store. They have revenues in the form of cash or digital. They are helped to go digital and a bouquet of services is offered which makes transactions digital in a simple way. Underwriting is now done in a unique way which extensively uses the technology. While capturing the inventory, of a shop the algorithm calculates the value and prepares a proper assessment of the customer. When the customer downloads our app, we are able to read through the bank statements by going through the SMSes. This allows us to conclude the net worth of the customer. We are also able to profile the customer based on his social media interactions. Most of the customers on our platform have been onboarded with minimum credit scores and a majority of them have been introduced to an organized financial system. While most of the customer’s CIBIL score is null, we are able to onboard them with the help of alternate data.
Sushil: While many innovations are happening around onboarding, what are the innovations happening in the transaction section? What are the mechanisms or channels to transact with the customer digitally?
Vaibhav: We start with digitising the cash inflow. Providing MSMEs with AEPS allows them to manage cash without the need for them to go to the bank and get caught in paperwork and other charges. This strategy has reaped good benefits. With our neo bank about to launch these customers will be prompted to open a digital account on our platform. This opening is going to be as simple and quick as possible. In no time the customer will be able to open a current account and start transacting. With technological advances, we are able to read invoices and offer payables on our banking platform. And the similar process is set for receivables. With these data points, we are able to explore more products for the customer. Other avenues like investment and stocks are also offered to the customer. Mediclaim, fire insurance, term policy, etc, are also offered to the customer.
Sushil: In your opinion how is voice AI going to take this experience forward? Do you think in rural market voice will be able to achieve financial inclusion?
Gangadhar: Giving access to our data opens up privacy issues. Couple of decades back one had to get a guarantor to get all kinds of loans. Even getting an education loan was a tedious process. Now we see that at the fingertip people have access to credit. With smaller loan tickets, NBFCs would like to resolve any issues via mobile itself. We help businesses deliver customer experience at the same time while not incurring more operational costs which in turn reduces profit. In my experience NBFCs deploy their tools and AI mostly for the collection of money. Most customers do want to pay back the loan but due to circumstances, they do not. With the help of telcos, we have found that with a couple of nudges loan repayments happen. We have been able to successfully use voice bots and reduced the cost for the lender and recovered the credit at the same time. We are also using local vernacular languages for the rural section where English is not commonly used. These bots help in the collection of loans and upsell or cross-sell of products also. Many agencies are now adopting automation and voice AI. The future of voice tech is having personalised voice offering services to customers. Innovation and technology always take precedence over regulations.
Sushil: I would like to get some snippets about the regulatory point. How do regulations impact innovations in product development?
Anil: Our main goal is to provide credit to underserved and unserved customers. They have not got loans from any NBFC or bank as their income is very low. Our challenge was to design credit that the customers could pay back. Our products are mostly EMI free and are flexible. The customer can pay the amount back whenever they want, and how much ever they want without being fined with a penalty. The new RBI regulations address crucial aspects of licensing. The triggering point was illegal loan platforms and coercive collection practices. This brings protection to consumers. Lending without a balance sheet increases the risk for the lender. To be able to lend responsibly and for healthy growth of the ecosystem, some regulations are important. This also provides guard rails to innovations. All along we have seen government and regulator-led initiatives in India. And more innovations will happen with these regulations in place and better with time.
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