Diversifying the digital lending landscape for SMEs
In an interview with BW Businessworld, Arvind Nahata, CBO and Co-Founder, Decimal Technologies shares his thoughts on the future of banking, financial services, cloud lending market, fintech industry, tech AI and ML and more. Extracts:
1. What was the idea behind the launch of Decimal Technologies? How was the trip so far?
Decimal Technologies started in 2009 when the appetite for the digitalization of industries was still in its infancy. Decimal’s start was not as a banking and financial services company, but rather as a successful enterprise mobile app development company and we were one of the first companies to deliver classy apps. business on multifunction phones in India.
Due to our expertise in technology integrations, we noticed the potential of the digitalization of financial and banking services before the acceleration of fintech in India really began. So in 2014 the path to the current form of Decimal emerged where we focused on the BFSI sector. Since then, Decimal has taken many milestones, including being one of the first in India to enable Aadhaar-based assisted account opening and instant self-service account opening. We’ve activated over 7 million accounts, disbursed over $ 100 million in loans, managed over 13 million leads, and integrated over one million app users, all with our AI-compatible code-less platform, Vahana.
Partly due to the nationwide lockdown increasing demand for digital solutions, Decimal saw 40% year-over-year revenue growth in fiscal year 21.
2. Tell us about your products / services? How do these products differ from any other product on the market? Also, what is your best-selling product so far?
Decimal offers solutions in three key areas: customer onboarding, digital lending, and incentive and payment management. Our solutions are all powered by our low-code, no-code platform called âVahanaâ. Two of our flagship products are Saarathi, a cloud-based lending marketplace, and Vahana Hub, an API marketplace that transforms banking journeys.
Saarathi enables the digital transformation of loan files in less than 30 minutes. The basis of the Vahana platform promotes scalability and security, differentiating it from other products in the market. With Saarathi, Decimal offers seamless online correspondence between client and lender. Saarathi’s AI and ML components allow loan approvals to be 5 times faster than the industry standard.
Vahana Hub sets itself apart from other products because it solves the major problem of financial institutions having to manage multiple API providers by offering all fintech APIs in one place. Vahana Hub offers over 200 listed API services, such as digital KYC and OCR, fraud management, financial analysis, risk assessment, electronic workflows, etc., reducing your time and the effort that our customers should have spent contacting several different suppliers. .
Digital customer integration for savings / checking accounts and loan products has been our best-selling products so far. Digital was always on the rise and the pandemic, due to the lack of contact engagements, accelerated the need for banks and NBFCs to digitize customer onboarding.
3. How does Decimal Technologies work and how do you make the loan process easier for your client?
Decimal Technologies’ business solutions are powered by Vahana which defines front-end journeys, personalizes workflow, configures intelligent decision-making, and integrates with core systems and external ecosystems. We quickly digitize the entire customer journey. The Decimal Technologies team identified the need for market platforms early on and leverages the benefits of organized information, data aggregation, trust and security through Saarathi and Vahana Hub.
Saarathi makes it easier for lenders to find quality credit applications by connecting Direct Selling Agents (DSAs) to lenders directly through an end-to-end digital platform. The lockdown meant DSAs were unable to travel and share loan applications with lenders, resulting in a critical gap in the credit supply chain. True to its goal of closing the credit gap, Saarathi has enabled DSAs to search files digitally through a mobile app, perform required data checks, and share verified credit applications with lenders without any restrictions.
4. How has the Covid19 pandemic affected digital lending platforms?
Banks have partnered with fintech at a rapid pace as the pandemic hit the country to meet the growing need for digital financial services. Hence, digital lending platforms have also seen their popularity increase. Due to issues like unemployment and paycheck deductions, the lending industry has also seen a rise in default rates, but steadfast digital lenders will survive. These digital lending platforms learn from observed borrower behavior during the pandemic and will be able to upgrade their underwriting processes to reflect the trends they expect after the pandemic.
We disbursed loans worth $ 200 million in fiscal year 2020-2021, through our digital lending platform. We also helped activate 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, property loans and mortgage loans. Last year, DSAs accounted for 65-75% of the total loan supply on the platform.
Saarathi made it possible for lenders to continue running their businesses even when we were all in foreclosure. Our lending partners who use Saarathi for client research have been able to continue operations almost 90-100% with help from Saarathi. In their words, “Saarathi came to their aid during the pandemic”.
5. What is the state of digital lending to SMEs in India? How is it going to look in the future?
Digital lending to SMEs still has a long way to go, but fintechs are quickly tackling the lack of formal access to credit in this sector. The technology, as seen in other avenues, extends the reach to the underbanked and unbanked corners of India and also brings advancements in SME lending by transforming the traditional backward underwriting processes so that ‘they are 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 rely only on credit history or other documents that people living in semi-urban and rural areas do not always have. I believe that these developments will only continue to be tailored to the specific needs of SMEs and that offers such as micro-credit loans and varying terms and repayment schedules will become the norm.
6. What is the main difference between traditional lending platforms and digital lending platforms?
Traditional loans and digital loans differ greatly in terms of convenience and inclusiveness. Digital lending platforms make it easy for borrowers to register online from their computer or smartphone, complete the application and upload the required documents in minutes. Due to the automation of digital lending platforms, the loan appraisal and approval process is also fast and transparent.
On the other hand, applying for and getting a loan traditionally takes days or more. The documents required for a traditional lending process are also numerous and tedious while digital lending, due to automation and e-KYC processes, usually only requires a few basic documents.
Much of the difference between digital and traditional loans comes down to the degree of ease and flexibility they offer, with digital loans offering both. While traditional lending is still going strong, digital lending, in my opinion, is the future of inclusive finance.
7. What about new innovations that will help accelerate access to credit for MSMEs in India?
The Open Credit Enablement Network (OCEN) is one of the most promising innovations in lending, capable of accelerating access to credit for MSMEs. The OCEN forms the basis of a credit market where fintechs, lenders such as banks and NBFCs, loan service providers and account aggregators can seamlessly interact. The OCEN can be used by account aggregation applications to mediate between lenders and markets and extend the reach of credit to traditionally underbanked MSMEs. The OCEN can democratize and disrupt the lending industry, as can the significant impact of the Unified Payment Interface (UPI) on the payments industry.
8. How can AI and ML address the major issues of âloan abandonmentâ in the Indian lending ecosystem?
Cumbersome and time-consuming loan application processes are one of the main causes of abandonment of loan applicants. In this increasingly digital world, consumers expect a fast app experience that gives them easy access to credit. The use of AI and ML can meet this expectation and, as a result, reduce the number of loan abandonments.
Loan appraisal is a data-intensive process and AI and ML technologies are adept at rationalizing data and extracting the information needed to determine a person’s creditworthiness in a short period of time. These technologies will not only speed up the decision-making process, but also reduce risk and increase revenue by retaining candidates.
9. What projects is Decimal Technologies currently working on and why?
We continue to focus on expanding our flagship products – Saarathi and Vahana – to further accelerate the digitization of lending pathways. Digital lending and customer acquisition through digital platforms will also continue to thrive in the coming months, as we see more and more customers opting for faster, more reliable and more secure ways of lending and borrowing. . We are channeling our resources to onboard new clients and work in new geographies to bridge the digital divide.
We are working on a few other interesting and innovative projects for our clients. A project aims to transform the entire future of banking into a video bank. With this, we try to reduce the need for physical branches and the physical presence of customers and sellers to complete banking processes.
The other is a co-loan platform. Co-lending between small and large lenders, fintechs and lenders is the trend to come with a lot of potential. We design a co-lending platform where lender product managers can set up a new partner themselves while taking care of specifics, policies, exceptions without having to rely on the technical team or partners.