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This Pan-India Lending Major Is Transforming The Lending Landscape With Its Hybrid Approach

There is no one-size-fits-all solution to financial inclusion, and a combination of digital and physical channels is necessary to cater to the diverse credit needs of Bharat.

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In today’s rapidly changing world, the Indian financial scenario has undergone a significant transformation. The traditional incumbent banks, due to their scale and manual processes, are struggling to keep up with the growth of digital penetration in India. 

The shift from cash to cashless transactions, along with the introduction of UPI and with fintechs flourishing, has given rise to a tech-driven approach in multiple aspects of finance, and India is well ahead of its curve. India's digital payments transactions last year exceeded those of the combined digital payments of United States, United Kingdom, Germany and France. As per the Worldline report, UPI clocked over 74.05 billion transactions in volume and ₹126 trillion in terms of value. 

By 2025, 71% of all of the country’s transactions are expected to be digital, with 800 million unique mobile payment users. The growth of India's fintech industry is closely linked to the limitations in the traditional banking system. Banks found it difficult to onboard customers from different parts of the country due to their limited reach and infrastructure.

Additionally, customers faced significant challenges while trying to get loans due to the extensive paperwork and long waiting times required for sanctioning. In contrast, fintechs have leveraged technology and digitalization to provide customers with a more accessible and convenient experience. 

They have used mobile apps, online platforms, and other digital tools to offer a variety of financial services, from payments and transfers to loans and insurance. As a result, fintechs have become a popular choice among customers who are looking for faster, more efficient, and personalized financial solutions. This trend has been further fueled by India's robust tech ecosystem, which is home to a vast pool of engineering talent and a supportive start-up culture. With over 86,000 start-ups and 2,200 fintech start-ups, India has emerged as a leading destination for tech innovation and entrepreneurship. Investors have also taken notice of this trend, with a growing number of them funding these start-ups. 

However, there are still sections of society that may not have access to technological privileges. The Internet in India Report 2022 by Internet and Mobile Association of India (IAMAI) reveals that 52% of the total population or 759 million people have active internet access in India, which means almost half of the population is without internet access. 

Therefore, there will always be a need to have a physical presence to ensure the fulfilment of both needs on both sides. We call this the Bharat, where opportunities have not yet reached out, and this is where the importance of establishing a hybrid distribution network in fintech comes in. While digital channels have opened up a new world of financial inclusion, having physical touchpoints for customers remains equally important. We need to build an ecosystem where we sell our services digitally while catering to the last-mile customer physically, covering as much ground as possible.

It helps in expanding the geographical footprint, improving customer relations, and providing a post-disbursal service for tailored customer servicing & collections efforts. Especially for lending companies, when they have multiple loan products to cater to the different cohorts of customers in India can be a challenge. The issues of software entropy and limitations with the current LOS have made it difficult for companies to have a platform that allows them to run multiple products. 

To address this, Protium employs an engineering-driven, risk-focussed approach to fuel the ambitions of small businesses and consumers across India. Founded in 2019, the company strives to employ a cohesive collaboration between technology, risk, and data analytics to ascertain specific customer requirements through data analytics, build best-in-class risk models and create innovative products using cutting-edge technology. 

The company's proprietary in-house tech platform, Turiya, plays a pivotal role in enabling its versatility in offerings and its ability to cater to a diverse range of customers. With over 25 million transactions processed, loan book crossing INR 2900 crore and disbursements exceeding INR 5,300 crore, Turiya empowers Protium to support products with tenures ranging from 15 days to 10 years. The platform's exceptional capabilities in risk management and lending have bridged the gap in existing financial solutions on the market, solidifying Protium's position as the leading lending major in the country. 

The inspiration behind the creation of Turiya was to build a platform that could serve as a multiproduct, omnichannel LOS (loan origination system) to enable Protium to be a full-stack lender to MSMEs and consumers. Turiya is a new software and analytics development paradigm, where the amount of coding can be anywhere between 0% and 100% depending on the use case. The platform’s primary contribution lies in its ability to create efficient and flexible engineering operations that can support multiple products, geographies, and channels. This versatility enables quick innovation and the rapid launch of new products, allowing for MSME lending through secured and unsecured loans, platform lending, and consumer lending with a short goto-market time. Traditional LOS systems have significant software entropy, which can lead to unexpected problems. 

A multi-product omnichannel platform requires an LOS that can be customized for risk, channel, and product with distinct user experiences and risk parameters. Turiya represents a step towards an anti-entropy state, enabling the platform to cater to distinct customer journeys while maintaining consistency, stability, and strength.

To put this into perspective, consider a scenario in which an enterprise named ABC Ltd. applies for a secured business loan of INR 1 crore, while an individual named “N” is seeking a small-ticket loan of INR 10 lakh. Both customers have unique journeys based on their loan types, repayment timelines, and loan terms, which can complicate a software system. 

Additionally, if both customers come from different tier cities, the level of product customization required for nonmetro customers can raise the complexity of the system’s configuration. However, a platform like Turiya can handle differentiated journeys while maintaining stability and consistency. 

“Through its offline and digital lending model, Protium is committed to fortifying the lending landscape and addressing the needs of millions of credit-seekers, all while maintaining a high focus on risk and growth. The organization’s distinguishing factor lies in its ability to seamlessly integrate the principles of financing with cutting-edge technology, evident in its DNA of engineering finance. In addition to its commitment to be present wherever its customers are, Protium stays true to its digital roots by building out a versatile tech stack and pioneering innovative financing solutions,” says Yogendra Singh, Partner, Protium.

As we look towards the future, technology will remain the core driver behind transforming the plumbing of Indian financial system. The fintech industry is expected to reach $1.5 trillion in annual revenue by 2030, constituting almost 25% of all banking valuations worldwide. This ever-evolving industry is now poised to enter a new era, B2B (serving small businesses) and B2B2X (B2B to any user) services ready to take charge in disrupting the financial services industry, particularly when it comes to serving small businesses. 

Companies that serve small to mid-sized enterprises (SMEs) will have the potential to address the estimated $5 trillion in annual unmet credit needs. As incumbents struggle to keep pace with innovation and more businesses offer financial services, B2B2X services, including embedded finance, are expected to become increasingly relevant, especially with the growing regulatory requirements for lenders to be accountable for customer-facing activities. One key development that is set to be the next big thing in Indian lending landscape is the introduction of Account Aggregators (AAs). The most crucial aspect of this framework is how it will aid financial institutions simplify documentation, fight bad debt and non-performing assets, and stabilize the Indian economy. 

A year after its official release, India’s Account Aggregator ecosystem boasts of 1.1 billion AA-enabled accounts and has already seen 2.05 million users voluntarily share their financial data with banks and financial institutions to avail loans, etc. This makes it necessary for lenders to keep in touch with the latest trends and adopt new technologies. 

To cite an example, we have seen significant improvement in turnaround time after the introduction of AA in Protium app. What would have been a 72-hour process will now be done in a few clicks within 15-20 mins. In short, AAs are expected to drive technological innovation and policy reform that will enable lenders to attract, analyse, and approve creditworthy borrowers with greater speed and accuracy than ever before.

Furthermore, with the diverse linguistic regions of the country, vernacular services have become a critical factor in establishing trust with customers. With the growing number of internet users in India, the demand for vernacular services has increased, and it is becoming essential for finance companies to offer services in regional languages. 

Moreover, vernacular services can help in reducing communication barriers, simplifying customer onboarding and engagement, and improving customer satisfaction. Turiya's integration with many vernacular languages is a crucial aspect of its ability to cater to diverse linguistic regions in India and provide tailored solutions to meet the specific needs of customers. 

While technology will undoubtedly remain a crucial driver of financial inclusion in India, physical presence still plays a vital role in reaching underserved communities. As per a recent report titled ‘State of Indian Fintech Ecosystem Q3 2022, by 2030, digital lending is set to account for 60% of the total Indian fintech market, highlighting the potential for technology to drive financial inclusion even further.

However, there is no one-size-fits-all solution to financial inclusion, and a combination of digital and physical channels is necessary to cater to the diverse credit needs of Bharat. As per a report by Avendus Capital, out of over 64 million MSMEs in India, the report said only 14 per cent have access to credit, creating an astounding credit gap of over INR 69.3 trillion. 

By leveraging technology to enhance efficiency and reach, while also maintaining a physical presence to build trust and provide personalized services, financial institutions can bridge the gap and ensure that all Indians have access to the credit they need to thrive.

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