Understanding How To Ramp Up Business Offerings Through Digital Lending

In India, access to affordable formal credit has been a tough spot for many years, due to the lack of digital awareness among many sectors, especially, small businesses, sole proprietors, and smaller entrepreneurs.

However, in recent times the situation is improving and a lot of businesses are ramping up through digital lending. 

In an interview with BW Businessworld, Lalit Mehta, Co-founder and Chief Executive Officer (CEO) of Decimal Technologies talked about how Decimal Technologies is ramping up its business offerings through Saarathi and more.

Q. How Decimal Technologies is ramping up its business offerings through its digital lending marketplace, Saarathi?

Ans- With Saarathi, our aim is to make a larger contribution in bridging the credit gap by taking the channel to an efficient digital platform for operational efficiencies, larger reach to lenders, next level of customer experience along with their personalized connect, identify the best lender and the product for the customer need and transparent revenue management.   

On the other side, Saarathi is delivering impact for lenders by providing ‘First Time Right’ loan files, single window to reach out to a large number of channels, providing files that match the lender policy, and weeding out files that are not expected to get disbursement from the lender and much better channel experience through visibility and transparent auditable payouts.   

Q. How is Decimal Technologies empowering the last mile channel with new-age technologies and access to formal lending?

Ans- Due to lack of technology and ability to invest, the channel struggles for efficiency and growth. Decimal’s Saarathi enables the channels to adopt the best of the digital platform similar to what large banks use for their internal teams after investing millions of dollars. The platform offers enterprise-grade scalability and security. 

Saarathi offers features for managing loan files for multiple lenders through a single app and allows management of their teams and operations.  It provides the channel an opportunity to offer their customers an experience similar to what best in the industry digital systems offer. Its AI-based Matchmaking recommendation engine helps channels make an informed decision about the lender product that best suits the customer needs.

Q. Do you think that alternative data sources will lead to bridge credit access in SMEs and small entrepreneurs?

Ans- Like all sectors, digital solutions are bringing changes here too by transforming the slow and old traditional underwriting processes to become more inclusive by removing the preconceived biases. Artificial Intelligence and Machine Learning have given us the ability to find creditworthiness through alternative data such as utility bills, rent payments, and other similar sources, rather than relying solely on previous credit scores which people living in semi-urban and rural areas most often don't have. SMEs will soon get these services tailored and made as per their requirements. Other alternative data sources such as social media, online buying, Phone usage, etc. are taken into consideration while assessing the credit behaviour and risk of borrowers. This is not possible through traditional scoring methods, where the lender has to depend on the documents submitted by the loan applicant for risk assessment.

Structured and unstructured data is collected by the lender and applying data analytics can help to get insightful information for the first verification process. Customer segmentation helps to provide specific products for the customers according to their needs. Data analysis can also help in geographical segmentation allowing lending businesses to serve people living in rural areas better.

Q. How the marketplace platform is reducing hassles for the banks and the end users by integrating data into one place?

Ans- Banks have suffered many cases of defaulters and frauds. There is also a credit gap of over USD 300Bn that our system is currently dealing with, further aggravated by the pandemic-induced lockdown. Saarathi helps banks create a less expensive and better lender ecosystem to secure the loan files and make the approval process faster. AI-enabled services distribution platform will help lending businesses to decrease their operational costs as they can now gather and analyze the loan files from their own comfort on the app.

Lending is an important space in a country like India and we have seen interest from both small and large banks. We are offering end-to-end digital processes for personal, business, gold, home, and auto loans. The coming of Open Credit Enablement Network or OCEN will boost digitalisation of credit to a large extent. 

Q. How are banks adopting technologies such as AI and ML to streamline the data and minimize outages? 

Ans- Through AI and ML, banks are able to offer technologically smart solutions and decrease their operational costs as they can now procure and process loan files from anywhere with just a click on the app. It also helps banks with automated portfolio management and personalized product recommendations with little or no human supervision. With AI and ML, banks are able to reduce risks and speed up their decision-making processes from weeks to days.

Q. How can public-private partnerships help bridge the gap of credit access?

Ans- There has been a lot of push by the government for providing credit to the MSME sector through various schemes and benefits. Although it is a step in the right direction, bulky and time-consuming loan application processes cause many loan applications to drop out. And this is where private FinTech firms can step in to provide tailor-made solutions for decreasing the number of applications dropping out.

Loan assessment causes the lender to assess a large amount of data and AI & ML algorithms can streamline the data and extract the necessary information to determine creditworthiness in a short amount of time. This new-age tech will help to fasten up the decision-making process and reduce risks and increase revenue by retaining applicants. This helps the MSME sector to grow and fulfill our government's objectives of a strong economy with the support of MSMEs. 

Q. What do the upcoming time stores for SMEs in terms of digital lending?

Ans-Through digital lending, we can solve hindrances like high operational inefficiency, high customer acquisition costs, lack of credit knowledge, and limited lender options for our channel partners. On the other hand, for lending partners, we aim to reduce their direct sales team cost, increasing their geographical reach and options and trust in direct sales agents.

Open Credit Enablement Network (OCEN) is one of the most promising innovations in the lending space with the ability to accelerate credit access to MSMEs. OCEN can form the basic foundation of a credit marketplace where fintech service providers, Capital lenders such as banks and NBFCs, loan service providers, and account aggregators can interact without any hassle. OCEN can democratise and disrupt the lending industry in a good way and create a significant impact in giving credit access to SMEs. 

With this, we are trying to reduce the need for brick-and-mortar branches and the need for customers and salespersons to be physically present to complete banking processes.

In the next financial year, we want to constantly add new products for our customers. We also plan to strengthen and add more features to Saarathi. We want to work on making a SaaS-based loan system for banks and to develop blockchain for invoice generation, reducing the difficulties of loan approvals, and much more. Very exciting times ahead for Decimal and Lending space!