Our Mission To Change The Lives Of Channel Partners & Borrowers Through Technology: Lucas Bianchi, Namaste Credit
In an interview with BW Businessworld, Lucas Bianchi, CEO & Co-founder, Namaste Credit, talks about key challenges and entry barriers in setting up an online loan marketplace for SMEs
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Tell us a little bit about your business model. How do you compete against your peers in the SME lending space?
Namaste Credit is India’s first tech-enabled business loan marketplace. We’re using technology to bring efficiency to the entire business credit process – for secured as well as unsecured loans - making it more productive and lucrative for all constituencies.
Problem statement - Business loans (unlike consumer loans) are complex products and securing a business loan is a tedious and long drawn process. This is due to the two major factors. First, business loan sanction decisions are based on a large number of data points (think 100+ pages of information) and these data points are constantly changing based on the priorities and needs of the lending institution. Second, each bank and NBFC has a unique set of preferences on which business loans are sanctioned i.e. there is no standard industry-wide process, risk appetite or commercials. These two factors result in the business loan market being supported by value adding intermediaries, whom borrowers reach out to help them navigate the process. These trusted CAs, loan agents, wealth managers, financial advisors, etc (referred as ‘Channel Partners’ in our discussion) often complete the loan process on behalf the borrowers, trying to get their customers the best deal in the process. Though these channel partners are more productive than the borrowers when it comes to loan applications, there are also limited by the fact that the existing process with lenders as well as their own operations is largely manual and inefficient.
A few serious issues faced by channel partners include:
Limited reach – An individual channel partner can at best reach 2 – 3 financial institutions, which often results in a sub-optimal set of choices for the borrower
Manual Process – From documentation to application to sanction, the entire loan process is manual and requires a channel partner to do a lot of back and forth from the lender to the borrower. This, coupled with efforts to check the status of loan application, makes the entire affair highly time-consuming and frustrating
Non-Trivial Credit Assessment & Matching – There is no industry-wide standard for credit assessment when it comes to business loans. The sheer scale of data points required, lender preference and manual assessment make it impossible for channel partners to evaluate borrowers accurately and quickly and efficiently match them with the most appropriate lenders. This translates into a lot of wasted effort for the channel partner
The Solution – NC has leveraged patented AI and ML tech to solve these problems. Here is how we’ve done it –
* We’ve on-boarded a large number (40+) banks and NBFCs on our platform as lenders. Each loan application reaches all relevant lenders through an auto-matching algorithm. This algorithm compares the lender preferences with application data points ensuring that all potential lenders get the right applications to make an offer, improving the efficiency for both borrowers and lenders alike.
* Our platform lets channel partners upload documents to create a digital loan application. This allows one docket to reach multiple lenders for multiple loan products across the credit lifecycle of borrower improving the efficiency and earnings of channel partners. These documents are securely maintained in a digital repository accessible to channel partners any time they are required in the future.
* CAM Technology – Credit Assessment Memo, aka CAM, is a patented tech which allows NC to process scanned financial documents into a credit assessment report. This enables lenders to significantly speed up their assessment processes and make better and faster decisions. This technology not only drastically reduces the time taken in sanction decisions but also gives a single, organized window of engagement to lender and channel partner (NC portal). This translates into real-time updates on the status of loan applications for channel partners, NC and lenders. Through our CAM tech, NC has allowed all parties in the credit value chain to have transparent interaction with minimum user investment.
Due to the efficiency and ease of doing business, more and more channel partners process loan cases through NC, which creates a significant business volume for lenders. Our lending partners are more than happy to compensate NC for the high-quality (high volume, low risk) credit business.
What are the key challenges and entry barriers in setting up an online loan marketplace for SME’s in the current environment?
Given the complexities in processing and evaluating an SME loan requirement (described above), a few key challenges to setting up a competitive platform include:
* Need to process lots of data. For SME loans, basic contact information is not sufficient. Typically 10+ documents and 100+ pages are needed in any SME loan evaluation. In order to facilitate these loans, a new platform would need to be able to understand and process this data in a cost-effective and timely manner.
* Need for reading paper-based documents. Many documents required for each loan are available only in paper format. In order to properly understand the data related to each borrower, a new platform would need the ability to gather the information from these documents - either manually or from scans provided by channel partners or borrowers.
* Need for a network of local channel partners. Channel partners provide several valuable services in the loan process, including collecting and organizing all the relevant documents and guiding the borrower throughout the process, including helping them understand various loan options. Signing up a large number of small, local channel partners across India is a time consuming and costly process.
* Need to constantly update lender preferences. Lenders are constantly changing their credit policies and they do this without informing anyone. This results in a real challenge in knowing who is doing what in the market and being able to match borrowers and lenders properly. The only way to overcome this is to do large enough volumes with each lender that the platform is constantly up-to-date.
Tell us a bit about the current state of SME credit in India. Have the PSU bank fiascos impacted this space in any way?
SME credit is still the least understood, most complicated and most lucrative loan markets in India. It still represents approximately half of all lending in the country and is highly fragmented across many players. Traditionally PSU banks had provided CC limits to many SMEs, so the financial challenges faced by these lenders have had a meaningful impact on the SME loan market for some time. This has resulted in many SMEs engaging private banks and NBFCs initially for unsecured loans, and now increasingly for secured ones as well. This has all happened at a time when working capital requirements of many SMEs has increased substantially due to the roll-out of GST and a generally growing working capital cycle across many industries.
All being said, the SME credit market is still the most profitable segment for many lenders due to relatively higher interest rates being charged and still muted NPAs. Lenders who are able to efficiently tap this market tend to be among the most successful lenders (including Bajaj, Capital First, Kotak Bank, etc.). SMEs tend to use credit in a productive manner to expand their business, so they are typically a bit less interest rate sensitive than salaried consumers, who tend to have fixed salaries, or than large corporates, who have access to the public credit markets as well.
Tell us a bit about the AI based video capture tool that your company has recently introduced. Is it a first of its kind or are there global or local parallels?
The AI Video CAM is first of its kind and there is no global and local parallel that we know of. Organizations are still solving for extracting high-quality data from static scanning while we’ve upped the game by allowing users to capture data dynamically.
AI Video CAM is a machine learning driven, easy-to-use, video capture tool which converts paper-based documents to digital data and massively improves credit assessment efficiency.
The solution is highly unique, as it combines the use of Video to grab more frames (image per shot) and the use of a neural network trained algorithm, which cherry-picks the best frames and best image in order for OCR to give the best output.
Tell us a bit about your credit assessment process. How is it different from those offered by other SME marketplaces?
We don’t know of any other marketplace that conducts any meaningful credit assessment on SME borrowers. The closest that anyone else has come to doing any credit assessment is to pull the CIBIL report of SME promoters and do some basic filtration on this report.
In stark contrast, we tend to do 70-80% of the credit assessment that the final lenders do before they are given any information. This involves gathering data on, reviewing, and analyzing KYC documents, Bank Statements, Financial Statements, and Tax Returns, among others.
Lastly, what’s your revenue model? What are some of your key metrics and business goals for the next fiscal?
Our business goals for next fiscal are aligned with our mission to change the lives of channel partners and borrowers through technology. These goals are following -
* Helping 5000+ channel partners adopt NC portal for all their loan processing needs, thus increasing their efficiency and earning
* Helping thousands of borrowers by offering the most suitable credit solutions and disbursing B2B loans worth Rs 2000 Cr
In Addition, using AI and Machine Learning we are automating loan process for top Lenders in the country resulting in faster loan disbursements & better credit decisions.
We Truly believe in improving the credit loan market ecosystem and bringing all the constituents of the loan market onto a unified platform.