In India, the traditional banking system may take a few business days to process and approve loans. However, with the help of digital lending platforms, customers can now get loans approved in minutes by registering and uploading necessary documents through their computers or smartphones. KreditBee is one such FinTech Platform offering an instant personal loan to professionals, where they can avail loans up to Rs. 2 lakhs as per their requirement. With a strong focus on online tech-based and data-centric KYC, KreditBee envisions to solve the financial inclusion gap in the varied demographic segments of the country. At the helm of its affairs is Madhusudan Ekambaram, CEO, who is directly involved in Product, Business Strategy, and Investments at KreditBee. With an overall experience of over 16 years, he has a demonstrated history of working in the financial services, Fintech and NBFC segments. In an interaction with CXO Outlook, Madhusudan Ekambaram talks about the impact of COVID-19 on the digital lending segment, initiatives undertaken by KreditBee for their customer base, the effect of the moratorium on your overall loan book, the role of digital lenders towards financial inclusion, and many more.
Why did you start a platform like KreditBee? How is it different from the other digital lending players?
My relationship with the personal finance industry has been a comprehensive one, having apprehended the sector closely for last two decades and being an active part of the industry for five years before actually venturing with a startup. One facet which distinctively came to my notice is the number of hardships, the customers have to face to avail loans. The process is time and effort consuming and involves rigorous documentation. In contrast, the inefficiency of the processes causes a delay in rendering decisions, with the customers having no form of guarantee of approval or disbursement. Also, a significant gap in the system is the unavailability of urgent loan facility in places where the banking system has not penetrated enough.
So, we started KreditBee to break through this need gap and ascertain a tech platform which could digitally underwrite the consumers based on data points that can be derived from the users through their smartphones.
KreditBee is 100% digital – from loan origination and disbursement to repayment. We have a strong underwriting system which encompasses different aspects of the customers, including but not limited to their personal profiles, social media footprints, expenditure habits etc. This helps in eradicating the prospective fraud customers at the very beginning. With the usage of AI and ML, the system will become better in isolating good customers from the bad. With the quick decision based on alternative data points, it helps consumers avail a loan within ten minutes on their smartphone at any given point of time in the day with no paperwork or bank visits. Also, users who are self-employed or new-to-credit can avail loans from us.
What are the criteria looked at by KreditBee before lending to a new borrower?
KreditBee is an instant personal loan platform for self-employed and salaried professionals, where they can apply for a Personal Loan starting from INR 1,000 up to INR 2 Lakhs as per their requirement. It is a full-stack Digital Lending Platform – with the entire life cycle of the loan being entirely online. With the traits like dexterity and innovation at their centres, the digital lenders are moving away from traditional assessment parameters like income and bureau score, towards using more profound demographic and psychographic parameters like location, employment industry and state, via customer’s digital footprints.
On the origination side, we have an exclusive rule engine which works on over 6,500 data variables assimilated from over 120 data sources. We have 10+ scorecards that are used during the complete user journey – right from customer onboarding to credit line assessments to collections prioritisation. Even on the collections side, we use vernacular languages for a larger relatability to the user. We also use CRM optimisation techniques like the template, send-time and channel optimisation for better overall output by tailoring the user experience on our platform.
What is the impact of COVID-19 on the digital lending segment and initiatives undertaken by KreditBee for their customer base?
Digital lending has been an essential resort for new customers who cannot go to banks as they are more conservative in lending. However, the COVID-19 pandemic has seen a reduced demand, where the responsible customers have refrained from buying while at the same time, another group of customers require the liquidity infusion more than ever, owing to their liquidity crunch. Cumulatively, demand has only increased. This, however, poses a major challenge for the digital lender to then assess their repayment capabilities.
KreditBee looks to its evolved underwriting towards efficient lending process by considering more insightful parameters like location, education and employment details and other proprietary parameters. Best use of customers’ data points and the extraordinary situation is fed back into the credit risk algorithms to make precise disbursal decisions.
For the existing customers who have been presented alternatives like a moratorium, we have followed a two-pronged approach to train them about the pros and cons of availing moratorium. If they want to take it, we are facilitating it. With that, we have also introduced numerous offers like interest waivers and other profit schemes which are the restatement of our vow to stand with customers, who are facing the economic brunt of this pandemic. While we are understanding and empathising with the customers on the cash flow constrictions, we have upgraded our tech platform to enable customers to avail moratorium sensibly with the help of National Automated Clearing House (NACH) based payment scheduling.
What has been the impact of the moratorium on your overall loan book?
Concerning the repayment, initiatives have been and will be taken towards stakeholders’ benefits. However, proper knowledge needs to be imparted to the customers to ensure effective use of the initiatives. It is imperative for the institutions to continually educate the customers, by making them aware of its boons and banes and if they actually require to take it.
While we are largely doing well during COVID times, we need to do away the ‘one-size-fits-all’ strategy. Every entity needs to formulate its own strategy depending on its current situation.
In the last financial year, we disbursed loans upward of INR 7000 crores with outstanding AUM of INR 1,500 crore. This kind of growth was achieved because of continuous equity raising and adding new debt partners on our NBFC. However, we have slowed down on our monthly disbursement, and the focus is to collect money wherever possible to give moratorium to the disadvantaged customers or reorganise the loans in a way that customer is contented to pay. Though we have not taken any moratorium from our lenders, we have given moratorium to ~6.5 lakh customers. We look forward to having a loan book of INR 5,000 crores in the coming three years.
How are you looking at the current assessment model that you have? How are you revising the same in the post-COVID-19 world?
COVID-19 has definitely changed the lifestyle quotient of an average Indian consumer, and the digital lenders need to evolve with this change in terms of their underwriting. It is imperative, now more than ever, to identify parameters and pseudo indicators that suggest the repayment intent and capability of the borrower – both the ones existing in the system as well as the new ones.
Banks focus mostly on the standard parameters like salary and bureau scores, KreditBee, as a digital lender, being more agile and innovative in its approach looks for alternative data points like PIN Code, employment industry, and employment proof recheck to name a few. With this, we are able to identify the prime borrowers from the so-called subprime segment and fill the need gap.
Please share your thoughts on the demand for personal loans going forward.
Given the COVID-19 situation, the personal loan segment will take some time to pick up as, given all the insecurity, people are as cautious as possible. So, instead of revenue, we see how a particular product or service can fit into our customer base or how can a new product help us to retain customers. We try to manage a very balanced portfolio across our products, keeping in mind the customers’ profile and risk associated with them. This is majorly because we acquire a good number of NTC or self-employed customers at this level and then migrate them to our higher loans product.
We also have significant disbursements for Personal Loans for Salaried – a personal loan product with tenure ranging from 3 months to 15 months, and ticket size ranging from INR 10,000 to INR 200,000 – where people who tick all the right boxes can get a higher ticket and higher tenure loan. Further, we also transfer the good number of our customers from Flexi Personal Loan product to this segment once they show good repayment behaviour.
Elaborate on the role of digital lenders towards financial inclusion
An indispensable benchmark for financial inclusion is easy access to ample credit for micro-borrowers who are otherwise doubtful to receive it from formal lending channels. In today’s time, digital lenders have a noteworthy role to play, by creating substitute lending channels for the traditionally underserved population and campaigning the cause of financial inclusion. There is a growing demand for hassle-free credit access among NTC (New to Credit) customers. There are about 300 million NTC customers in India, who find it difficult to access credit from formal financial institutions like banks and NBFCs.
This is where digital lenders can help provide easy access to affordable credit to a large chunk of the population. By leveraging new-age technologies, these lenders can build a financial ecosystem where they can help underserved markets and develop their borrowing capabilities while securing their own interests. Digital lenders can endow NTC borrowers and in due course help them assimilate into India’s formal credit system so that they can be qualified to borrow from banks and traditional lenders. This is because, for large ticket size loans, physical customer touchpoints are mandatory. This is why both offline and digital lenders have to work concurrently to propel financial inclusion in the country.