Tuesday, August 3, 2021

Open Credit Enablement Network to make lending market more inclusive, expansive and secure: Lalit Mehta

The lending market in India is going through a major transformation with digital lending taking centre stage as FinTech companies integrate new-age technologies like Artificial Intelligence (AI), Machine Learning, Big Data, open API into the landscape.

According to Lalit Mehta, co-founder and CEO of Decimal Technologies, next-generation technologies can play a crucial role in making sense out of large amounts of unstructured data that the BFSI sector has to handle.

In an exclusive with Observer’s Shalini Shukla, he said: “The lending market is only going to get more inclusive, expansive and secure, especially with the announcement of Open Credit Enablement Network (OCEN), which will provide a public infrastructure to build the marketplace upon.”

Edited Excerpts:

How do you look at the lending market in India? 

The lending market in India is going through a major transformation with digital lending taking centre stage as FinTech companies integrate new-age technologies like Artificial Intelligence (AI), Machine Learning, Big Data, open API into the landscape. These technologies have not only made the lending process paperless, quick and transparent but have also made them more accessible, thereby, addressing a major challenge in the formal credit space.

Partnerships with FinTechs to enable digital lending has reduced the need for human intervention and expanded the banks’ reach to previously largely underbanked MSMEs who found access to credit difficult. I believe the lending market is only going to get more inclusive, expansive and secure, especially with the announcement of the Open Credit Enablement Network (OCEN), which will provide a public infrastructure to build the marketplace upon.

From a technology perspective, how can next-generation technology such as AI and ML boost growth and operational efficiency?

Next-generation technologies can play a crucial role in making sense of large amounts of unstructured data that the BFSI sector has to handle. Hence, they are useful in data-heavy processes. AI and ML can make an assessment of a consumer’s credit-worthiness more accurate, unbiased and free of human errors. They can collate and study data from multiple sources, identify inconsistencies and detect fraud, forgery and any other suspicious transactions.

AI and ML can further reduce the time taken to complete certain processes and eliminate the need for human intervention in tasks such as tracking customer transactions, profile verification and data-driven decision making, making the overall operations more efficient.

With digital becoming the new world order, banks are also embracing AI and ML in various applications such as customer authentication, assistance through Chabot’s, fraud detection, data-driven personalized insights and more. The workflow in financial institutions is being automated and customers are getting used to the faster service. Continuous adoption of next-generation technology will keep the institutions at par with their competition, ensuring scalable growth.

What are your views on the benefits of modelling digital loan origination channels on cloud-computing?

Cloud-based lending technology allows financial institutions to expand their customer base and reach them where they are. Just like other technologies, the cloud helps handle large amounts of data that could possibly slow down the processes. Moving the loan origination channels to the cloud can streamline the entire lending process and make it easier for all parties involved. This would allow easier user authentication, more secure document management, reduced implementation time and increased efficiency as compared to legacy loan origination channels.

In the current scenario, where demand for consumer loans is rising, cloud-based loan origination channels can also provide the benefit of improved in a highly competitive market where customer retention is a constant struggle.

Cybersecurity and outage have been a huge challenge for bankers. In your views, how can this be mitigated?

Covid-19 accelerated the technology-enabled offerings and services by banks and other financial players to customers. This rise has also resulted in cybersecurity and outages becoming major concerns, and the industry witnessed some challenges around this as digitization had to be fast-tracked in 2020.

Financial institutions need to hire cybersecurity professionals that can help mitigate risks by building secure digital channels. Encrypted communication channels should be built and these should go through thorough risk management analysis and security vulnerability analysis periodically. The cybersecurity landscape is dynamic and therefore, enterprises must keep their cybersecurity infrastructure updated to handle new threat vectors.

Mitigation of outages too requires the banks to predict the number of transactions and accordingly build a technology framework. The legacy systems that banks have been using for years are not capable of handling the significant increase in volumes of transactions and data inflow that was witnessed this past year.

Banks need to adopt technologies such as AI, ML and cloud computing to streamline the data and minimize outages. Many banks have attempted to implement new-age technologies on top of their legacy systems, which leads to problems. They need to reinvent and build new products that can deal with their increasing operations and customer-base.

How has the business growth been for Decimal Technologies during a pandemic and what are your plans for the next financial year (FY 21-22)?

Ironic to the Covid situation, what we do became critical than ever before for our customers. Banks and NBFCs have taken to digitalisation like never before. This has led to increased demand and accelerated growth.

We’ve made significant progress over the last year; we worked closely with banks during the lockdown and supported them with technologies that suit the new digital needs. We fast-tracked technology adoption among financial institutions with products such as digital KYC and deployed solutions for banks that had earlier been on hold.

We moved swiftly and launched new products – Saarathi (an AI-based digital lending marketplace that brings DSAs and Lenders on the same platform) and VahanaHub (an API Aggregation platform for anyone building digital journeys) – which are serving as a great saviour in today’s situation.

We have grown much faster than our previous years on all critical parameters – number of customers, team size and revenue.

In the next financial year, we plan to scale, expand our reach to new financial institutions and continue adding new products. We also plan to strengthen Saarathi, to include loans, insurance and credit cards and reach pan-India. We will be working on building a SaaS-based loan origination system for banks, developing a blockchain for invoice generation, minimising the complexity of loan approvals, and much more. Once in a lifetime opportunity and very exciting times ahead.

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