Fintechs are now being closely watched by regulatory bodies as the products are more customised for wider use. Earlier it was more of being specific to a certain set
of customers. So, Fintechs need to ensure the privacy of the data accessed on their platforms by multiple regulated entities. To know more about the development of
the financial sector, Satyam Kumar, CEO & Co-Founder, LoanTap, had an interaction with Srajan Agarwal of Elets News Network (ENN).
How is the company’s innovative program supporting the fintech sector in today’s world?
LoanTap has been serving the needs of the millennials for over siX years. We realised that the lending sector is growing, however, there were a few gaps in how efficiently the processes are generally designed. Over the last siX years, we have tried to fill these gaps and were able to optimise our technology stack to be more efficient. We tested it on our own products and then we decided to open this up for the market. We believe that the industry and the players will benefit from this cumulative intelligence. This is how LTFLoW was born.
Also Read: Fintech industry seeing new techniques of assessing credit story
LTFLoW is a purely technology-focused division of LoanTap. This platform aims to provide businesses with customised, end to end, modular solutions using various resources like Account Aggregator, AI-enabled profiling, and social scoring to bridge the operational gaps. LTFLoW helps to resolve discrepancies in sourcing, credit decisioning, underwriting, and portfolio management allowing entities to source, enrich, underwrite and manage portfolios. It also reduces TAT with extremely automated workflow and API-supported infrastructure. With the help of LTFLoW, entities can easily start digital KYC, eNACH, and agreements, following AI-powered credit decisioning. This would allow NBFCs to immediately start driving business through digital channels instead of building another platform which might take months to set up.
Whenever a lead or application is received, it goes through our AI-enabled sourcing and underwriting process. From the information and the consent provided by the customer, the system pulls out the applicant’s details using account aggregators and other sources. This means from onboarding to decisioning, the system captures multiple data points to predict the propensity and risk behavior of the customer helping the credit managers to make weighted decisions and lowering the default rate.
Based on the credit decisioning the AI model also creates a user persona that helps to identify similar applications in the future. Similarly, it creates a positive user persona that is very likely to get loans and are what we call as ideal loan customers. The positive user persona created by the AI model then helps us modify our lead-sourcing campaigns. This helps in designing more precise customer targeting improving the quality of leads. The AI model continues to update the positive user persona as it works on more and more applications and based on that the targeting is improved.
Overall, the AI model assists credit managers to make fast and correct credit decisions. It allows them to cater to more applications on a daily basis while being able to correctly make decisions. We have been able to make more than one million better decisions for our customers to date using our AI system.
You are developing various financial applications, especially in Fintech. What are the challenges you see in Fintech vs traditional development? Is Cloud helping this transition and how?
A major challenge in any application development project is the availability of technical resources with a product mindset. In recent times, development has become more agile due to changing norms and market expectations. Then, to add to this is the ever- growing competition. Another important factor for this shift is the need for data security and privacy, which has now become the core of Fintech development. Traditionally, the requirement used to run more on servicing a certain set of customer base with a limited set of expectations and behaviour patterns.
Fintechs are now being closely watched by regulatory bodies as the products are more customised for wider use. Earlier it was more of being specific to a certain set of customers. So, Fintechs need to ensure the privacy of the data accessed on their platforms by multiple regulated entities. Now, it’s not just about developing an app or a platform, in fact, it’s very important to be compatible with the guidelines and policies. Apart from these, the user experience (UX) plays a major role in providing a completely automated and digitised process to the customers. Every day the bar of expectation of the customers is being pushed higher with more seamless and convenient experiences being offered by different apps. Every Fintech has to keep up with the standards and expectations.
When we speak about the difference that Cloud has brought, we have to highlight the convenience that has come with it. Maintaining a code base, server and infrastructure are now much easier because of the cloud. It has given us the flexibility to pay as we go. Scalability is now much more easily achieved and to a greater extent. Cloud services also come with a lot of micro-solutions that make our lives easy.
The financial sector today is facing an extreme liquidity crisis. What steps do you think the government/ regulators need to take to improve it?
Due to accelerated credit offtake, overall financial markets are facing a scarcity of funds. Most of the available liquidity at banks and large financial institutions is consumed towards lending to higher-rated corporates. This results in lower funding for start-ups and smaller businesses which are currently at a lower scale of rating. In my view, start-ups are a promising sector and like certain other schemes announced by the Government (such as credit guarantee, etc.), the Government shall mandate banks and FIs to earmark certain positions of their lendable funds to be provided to start-ups that are either not rated or currently having a lower rating. This will go a long way in ensuring the much- needed flow of funds to the financial sector.
What strategies are you implementing to give the organisation a competitive edge?
Our LTFLoW is revolutionising the lending sector by making the systems more efficient. What we deliver creates differentiation and gives us a competitive advantage:
Higher conversion from Leads to Loans: Credit decisioning becomes faster and more efficient. With better leads to underwrite by using an AI engine, the conversion rate can improve from 75 per cent to 100 per cent. Apart from being able to improve efficiency and optimise the process, the system can also facilitate churning out and converting the old leads to either top-up loans or cross-sell.
Channelising the customer to the right product: We have built the Decile scoring method, which is proving to be a game changer. Using this, the system profiles the customer and also predicts the propensity of repayment, and based on these inputs it is able to identify the best-suited product for every customer. The top deciles can show up to 90 per cent conversion.
AI-based decisioning: With every application moving through the AI engine, the system continues to be more accurate. The AI-based quick and accurate decisioning is one of the most appreciated features of the system. This helps credit managers to predict credit loss and delinquencies helping them make better decisions.
Higher propensity of collection: LT score is able to predict the behavior of the customer. While working on every case, the credit manager gets an idea about whether the customer might default on repayments. With better customers identified, the collection efficiency goes up. We have witnessed a better default prediction with a 95 per cent conviction.
Also Read: How are fintech players leveraging technology to offer better solutions to Indian customers?
AI-enabled media mix: From onboarding the customer to loan disbursal, the AI engine learns the behaviour of the customer throughout the funnel. Based on the final conversions, the system will be able to predict the best media miX to be used for marketing. This will enable the lender to generate maximum returns at optimum spending.
Quick tech-onboarding: Finally, one of the biggest advantages of LTFLoW is that it doesn’t need a very complicated setup. It is modular, can be customised, and can be set up for the client very quickly to start giving results.
What are the prime challenges and opportunities for the Indian Fintech sector?
India has the highest FinTech adoption rate globally at 87 per cent which is significantly higher than the global average rate of 64 per cent. The Indian financial service industry and fintech companies have adopted cutting- edge technology, but the pace of technology adoption has not been proportionate to its potential, which has led to gaps in the penetration of financial services. And as we all know when there is a gap in adoption or whenever there are untapped segments – there is a huge opportunity.
However, this opportunity comes with its own set of challenges. The regulators have been very active and vigilant. They are bringing in a lot of changes to make digital finance more secure and safer. This can lead to the need for major changes in the existing financial products, tech infrastructure, or business models. Ensuring data privacy and security standards also stands as a very big task when dealing with a huge quantity of data.
Another hurdle for Fintech growth in India is the pace of adoption of new technology. For example, India launched the Pradhan Mantri Jan Dhan Yojana to improve financial inclusion in the country. However, after opening a total of 180 billion bank accounts, more than 48 per cent of them remained dormant. Moreover, a large population resides in the rural regions and the penetration of any financial service in the rural region is very low. To be able to reach out and impart basic financial literacy to a major part of the population is not less than a herculean task. That will take time.
And most importantly, being a Fintech, we deal with sensitive customer data. Multiple cybersecurity threats result in massive monetary losses during online transactions. These are entirely unwarranted for customers. The technology that offers convenience also opens up people’s online accounts to fraudsters looking to steal their assets. Every time there is a fraudulent transaction or a fraudulent app used for taking a loan, there is a dent marked in the trust among the public that the Fintechs are trying to build.
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