The core principles leading to increased automation and self-service integrations will drive the mortgage loan journey in the post-COVID period as customers’ inclination towards digital, hassle-free, and paperless loan applications has habitually increased, writes Rachit Gehani, Chief Technology Officer, IIFL Home Finance Limited, in an exclusive interaction with Shruti Jain of Elets News Network (ENN).
How has technology changed the banking and finance industry in recent years, and what do you see as the most significant trends and developments going forward?
The BFSI industry has been significantly impacted by technology in recent years. The housing finance industry has also been able to assimilate technological solutions in their use cases for improving existing operating workflows. We have seen a rise in digitised lending through fintech integrations in recent years. It has transformed the landscape of credit disbursement, making it faster to process based on a swift turnaround time of loan application approval through automated credit checks that form the basis of digital underwriting systems.
The advent of mobile banking has allowed borrowers to manage their loans and make repayments using their mobile devices. Open banking has enabled sharing of financial information of a borrower among different institutions. It has formed the basis of an account aggregator that allows lenders to leverage borrowers’ data to formulate customised loan value and tenure through a rules-based engine.
Moving forward, we feel that the role of artificial intelligence and machine learning will enhance as most technology firms are continuously innovating to churn out better solutions in this field. We are witnessing an increase in the traction of generative AI tools that have the potential to power the upcoming wave of growth within the fintech ecosystem by further improving user experience, efficiency, and productivity. It can lead to improvement in existing workflows of processes like credit risk assessment, customer service, and compliance with statutory and regulatory frameworks.
AI reasoning engines shall provide personalised loan products based on analysing customer data. At the same time, we see the role of information and cyber security increase as the adoption of digital technologies rises to secure critical business and customer data.
How is IIFL Home Finance leveraging technology to better serve its customers and stay ahead of the competition?
IIFL Home Finance is a leading housing finance company serving vast segments of the audience in the affordable housing space. The push towards digitisation through technological advancements and policy changes by the government has been reflected in the growth of the digital footprint of the target segment with the ubiquity of mobile phones and ease of access to the internet.
We have created an award-winning customer onboarding platform with an embedded business rule engine that instantly provides a decision on a loan application based on an individual’s risk assessment through validated data. Once the application gets approved, it moves into an in-house loan origination system in real time for property valuation. We are also ensuring that underwriting gets assisted by integrating AI and ML tools which use deep learning algorithms to arrive at customised commercial metrics for loan sanction. The customer’s journey towards disbursement is digitised through the e-docketing of the loan agreement, in line with the overall organisational ESG goals. Customer service ecosystems have been integrated with do it-yourself and omni-channel workflow to enhance customer experience and delight.
As a result, our customers have experienced increased transparency, minimal documentation, swifter closure, and more affordable interest rates for mortgage lending, enabling us to stay ahead of the competition.
How has the COVID-19 pandemic impacted the banking and finance industry, and what steps has your organisation taken to adapt to these changes?
The COVID-19 pandemic indirectly affected the BFSI sector due to its impact on goods-oriented sectors of the economy. It resulted in a rapid economic slowdown in a force majeure environment. Business activities across various industry sectors saw a steep decline during the peak of the pandemic. Decisive regulatory measures to contain the downward spiral of the banking and finance industry were promptly taken by the government even though the dynamics of the situation were unparalleled and normalisation efforts didn’t have a precedent in this case.
The housing finance sector faced challenges in equal measures, and we were no different in facing hurdles to keep up the growth in our loan books due to a highly uncertain environment during various stages of the pandemic. We followed the government directives during the peak of the pandemic to provide relief to our customers by providing moratorium and loan restructuring options that led to either deferring or lowering of EMI repayments.
The central bank’s decision to slash repo rates provided an impetus to the affordability of home loans. However, a new paradigm unfolded with changes enforced in consumer behaviour compared to the pre-COVID period. The new digital way of life minimises manual interventions for processing loan applications. It led us to swiftly churn out novel digitised solutions to automate loan applications further. Self-service integrations within lending platforms saw an increase, simplifying disbursal workflows. We have introduced e-signing and e-docketing of loan applications to ensure that customers do not have to visit the branches for signing or receiving sanctioned loan documents. Similarly, for customer management, self-service workflows helped ensure that customers could get the relevant information at a click of a button.
We also continue to observe that core principles leading to increased automation and self-service drive the mortgage loan journey in the post-COVID period as customers’ inclination towards digital, hassle free, and paperless loan applications has habitually increased.
Financial inclusion is a critical issue in many parts of the world. As a CTO what developments were made to improve access to financial services for underserved communities?
We realise that financial inclusion is a critical barometer for our organisation as we serve vast segments of society, including marginalised or underserved communities. The organisation’s vision revolves around facilitating credit requirements for economically weaker sections and lower-income group segments by providing affordable housing loans. We have introduced new loan products that are tailor-made for communities that do not have a well-documented source of income and credit repayment history. These people often live in rural areas or are urban poor with a lesser understanding of the financial ecosystem. They are either part of the gig economy or are small shop owners with wafer-thin margins. We have also reached out to such sections of society by imparting financial literacy through NGOs and otherwise so that they know the financial services they can avail to achieve their financial goals.
Our award-winning customer onboarding platform has enabled us to open branches in rural and semi-urban areas to provide underserved communities with easier access to credit. Our customer service do-it-yourself workflows are integrated with vernacular communications for such people to address most of their support queries. It helps them get instant closure on lingering issues without the need to visit a branch.
The organisation has also collaborated on government programs such as Pradhan Mantri Awas Yojana (PMAY) to provide affordable housing loans to eligible beneficiaries who may not be able to afford home loans otherwise. In this regard, we are also focusing on providing a platform for sustainable and energy-efficient affordable housing by incentivising the introduction of green technology in real estate development.
How does your organisation visualise the future of do-it-yourself platforms in the home loans industry? Can it completely replace manual interventions going forward?
Compared to a decade ago, when home loan applications were majorly driven by a physical approach for most of the customer centric process, the mortgage lending industry has seen a transition to a higher degree of digitisation as the target audience is better skilled with digital means. Due to the COVID-19 fallout, efforts to augment digitisation and roll out of do-it-yourself workflow have been normalised. Hence, we are witnessing a phygital approach in home loans with incremental changes in the digital aspect of lending. It has begun to replace manual or in-person interventions wherever feasible.
At IIFL Home Finance, we have introduced do-it-yourself measures in customer onboarding and customer service workflows. However, we have observed that some tasks still need to be done in a manual environment for housing finance for which a digital or do-it-yourself journey hasn’t matured enough. Processes like mortgage property valuation and field investigations still retain a physical outlook. Thus, eliminating the manual touch to the home loan disbursal process may take time to manifest.
We also visualise that the do-it-yourself journey will take prominence in the phygital mix. The share of the physical channel will decline in the coming future with improvements in technological frameworks of loan processing and strategic digital transformation initiatives from the government.
With the rise of fintech companies and digital banking, how do you see traditional banking institutions adapting to meet the changing needs and preferences of customers?
There is an observation of a transition towards change in broader demographics and consumer behaviour. The young generation and consumers with adequate digital literacy now constitute the majority of the customers who choose to shun the brick-and-mortar presence of traditional banks for transactional requirements and adopt technology-based services. As a result, traditional banking institutions have embraced technology to provide a push toward digitisation.
The rise in consumer adoption rate for digital workflows increases the propensity of digital banking solutions being provided by such banks for end-to-end banking requirements of the customers. The digital payments ecosystem has seen significant growth in the past few years. It has transformed the manner of monetary transactions. The fintech ecosystem is helping customers make monetary transactions from traditional banks without the need for cash withdrawals.
Traditional banks have undertaken large-scale investments in digital banking infrastructure without compromising the legacy infrastructure to allow customers to avail hassle-free banking services for most of their requirements. They are also competing with neo-banking institutions that have been significant beneficiaries of the fintech revolution. Traditional banks are consistently working towards improving their existing workflows of financial systems to enable customer retention and stay competitive in the financial services industry.
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