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Diversifying Landscape Of SME Digital Lending

In an interview with BW Businessworld, Arvind Nahata, CBO & Co-founder, Decimal Technologies share his thoughts on the future of banking, financial services, cloud-based lending marketplace, fintech industry, AI and ML technologies and more. Excerpts:

1. What was the idea behind the launch of Decimal Technologies? How was the journey so far?

Decimal Technologies started in 2009 when the appetite for digitisation of industries was still in its nascent stage. The beginning of Decimal was not as a banking and financial services firm but rather as a successful Enterprise Mobile Application development firm and we were one of the first companies to deliver Enterprise-class applications on feature phones in India.

Due to our expertise in technological integrations, we noticed the potential of digitisation of financial and banking services before the fintech acceleration in India began in earnest. So, in 2014, the path to the current form of Decimal emerged where we shifted our focus to the BFSI sector. Since then, Decimal has crossed many milestones such as being one of the first in India to enable assisted Aadhaar based account opening and self-service instant account opening. We have activated more than 7 million accounts, disbursed loans worth more than 100 million dollars, managed more than 13 million leads and onboarded more than a million application users – all with our AI-enabled no-code platform, Vahana.

Owing in part to the national lockdown increasing the demand for digital solutions, Decimal had a 40% year-on-year growth in revenue in FY21.

2. Tell us about your products/services? How are these distinctive from any other product in the market? Also, which is your best-selling product so far?

Decimal offers solutions in three key areas - customer onboarding, digital lending and incentive and payout management. Our solutions are all powered by our low-code, no-code platform called ‘Vahana’. Two of our leading products are Saarathi, a cloud-based lending marketplace, and Vahana Hub, an APIs marketplace transforming banking journeys.

Saarathi enables digital transformation of loan files in under 30 minutes. The foundation of Vahana platform fosters scale and security, differentiating it from the other products in the market. With Saarathi, Decimal offers seamless online matching of customer and lender. Saarathi’s AI and ML components allow the loan approvals to be 5 times faster than the industry standard.

Vahana Hub is distinctive from other products as it addresses the major issue of financial institutions having to manage multiple API vendors by offering all fintech APIs in one place. Vahana Hub has over 200 API services listed such as for digital KYC and OCR, fraud management, financial analysis, risk assessment, e-workflows and more, reducing the time and effort our clients would have had to expend on reaching out to several different vendors.

Digital Customer Onboarding for Saving/Current Accounts and Loan products have been our best selling products so far. Digital was always on the rise and the pandemic, due to no contact engagements, has expedited the need for Banks and NBFCs to digitize customer onboarding.

3. How does Decimal Technologies work & how do you make the lending process easier for your client?

Decimal Technologies’ business solutions are powered by Vahana that defines front end journeys, customises workflow, configures intelligent decision-making and integrates with core systems and external eco-systems. We digitise entire customer journeys swiftly. The team at Decimal Technologies identified the need for marketplace platforms early and is leveraging the benefits of organised information, data aggregation, trust and security through Saarathi and Vahana Hub.

Saarathi makes it easier for lenders to source quality credit applications by connecting direct selling agents (DSAs) to lenders directly through an end-to-end digital platform. The lockdown meant that DSAs were unable to travel and share credit applications with lenders, leading to a critical gap in the credit supply chain. Saarathi, keeping in line with its aim to close the credit gap, enabled DSAs to source files digitally through a mobile app, perform the required data checks and share the verified credit applications with the lenders without any restrictions.

4. How has Covid19 pandemic hit digital lending platforms?

Banks partnered with fintech at a rapid pace as the pandemic hit the country to address the growing need for digital financial services. Hence, digital lending platforms also saw a rise in popularity. Due to issues like unemployment and deductions in paychecks, the lending industry also witnessed an increase in default rates but the digital lenders with stable principles will survive. These digital lending platforms are learning from the borrower behaviour seen during the pandemic and will be able to upgrade their underwriting processes to account for the trends they expect post-pandemic.

We disbursed loans worth $200 million during the fiscal year 2020-21, through our digital lending platform. We also aided the activation of 1.5 million end customers across the country during the pandemic last year, working with banks, NBFCs and Direct Selling Agents (DSAs). The majority of loans disbursed were MSMEs, Loan Against Property and Home Loans. DSAs accounted for 65-75% of the total sourcing of loans on the platform last year.

Saarathi allowed lenders to continue running their businesses even when we all were under a lockdown. Our lending partners who use Saarathi for customer sourcing were able to continue near 90-100% operations with the help of Saarathi. In their words, “Saarathi came to their rescue during the pandemic”.

5. What is the state of SME digital lending in India? How is it going to look like in future?

SME digital lending still has a long way to go but fintechs are rapidly addressing the lack of formal credit access to this sector. Technology, as seen in other avenues, is expanding the reach to underbanked and unbanked corners of India and bringing advancements in SME lending too by transforming the laggard traditional underwriting processes to be more inclusive. The integration of Artificial Intelligence and Machine Learning has introduced the ability to assess creditworthiness through alternative data such as utility bills, rent payments and other similar sources, rather than relying solely on credit history or other documents that people living in semi-urban and rural areas do not always have. I believe these developments will only continue to get tailored to the specific needs of SMEs and offerings such as micro-credit loans and varying tenors and repayment schedules will become a norm.

6. What is the major differentiation between traditional lending platforms and digital lending platforms?

Traditional lending and digital lending differ greatly with regards to convenience and inclusivity. Digital lending platforms allow borrowers to easily register online from their computers or smartphones, complete the application and upload the required documents in a few minutes. Due to the automation of the digital lending platforms, the process of assessing and approving loans is quick and seamless too.

On the other hand, applying and getting a loan traditionally will take days, if not longer. The documents needed for a traditional lending procedure are also numerous and a hassle while digital lending, due to automation and e-KYC processes, usually only requires a few fundamental documents.

The difference between digital and traditional lending largely boils down to the degree of ease and flexibility they provide, with digital lending providing both. While traditional lending is still going strong, digital lending, in my opinion, is the future of inclusive finance.

7. What about the new innovations that will help accelerate credit access to MSMEs in India?

One of the most promising innovations in the lending space with the ability to accelerate credit access to MSMEs is the Open Credit Enablement Network (OCEN). OCEN forms the foundation of a credit marketplace where fintechs, lenders such as banks and NBFCs, loan service providers and account aggregators can interact seamlessly. OCEN can be utilised by account aggregator applications to act as a mediator between lenders and marketplaces and expand the reach of credit to the traditionally underbanked MSMEs. OCEN can democratise and disrupt the lending industry, much like Unified Payment Interface’s (UPI) significant impact on the payments industry.

8. How can AI and ML solve the major problems of ‘loan application dropouts’ in the Indian lending ecosystem?

Cumbersome and time-consuming loan application processes is one of the major causes of loan applicants dropping out. In this increasingly digital world, consumers expect a quick application experience that can provide them credit access with ease. The use of AI and ML can fulfil this expectation and, consequently, reduce the number of loan application dropouts.

Loan assessment is a data-heavy process and AI and ML technologies are adept at streamlining the data and extracting the necessary information to determine someone’s creditworthiness in a short amount of time. These technologies will not only speed up the decision-making process but also reduce risks and boost revenue by retaining applicants.

9. On what projects Decimal Technologies is currently working on and why?

We are continuing to focus on expanding our flagship products -- Saarathi and Vahana -- to further accelerate the digitisation of loan journeys. Digital Lending and Customer Acquisition via digital platforms will continue to flourish in the coming months as well, as we see more customers opting for a faster, more reliable and secure means of lending and borrowing. We are channelising our resources in onboarding new customers and working in new geographies to bridge the digital divide.

We are working on a few other interesting and path-breaking projects for our clients. One project aims to transform the entire future of banking to video banking. With this, we are trying to reduce the need for brick-and-mortar branches and for customers and salespersons to be physically present to complete banking processes.

The other one is a co-lending platform. Co-lending between small and large lenders, fintechs and lenders is the upcoming trend with a lot of potentials. We are designing a co-lending platform where the lenders’ Product Managers can configure a new partner by themselves while taking care of the specifics, policies, exceptions without having to rely on the tech team or partners.



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