How IT can help in dealing with iffy debt and clunky lending models?

In a world mad about Unicorns, is it easy or worth one’s time to look for Narwhals? Can SMEs be the new mystical creature that our economy and innovation-engines need? Can IT find and pet them faster and better with loans that do not make one hold one’s breath forever?

Here is a company that is using technology to accelerate the pursuit of a dream opportunity that is as big as $300 billion but is strewn about in a space where bad loans, liquidity bottlenecks, credit-worthiness blind spots and myopia are actual nightmares.

Sunit Vakharia, CIO at UGRO Capital tells us where and how IT can help in dealing with iffy debt and clunky lending models. We swim through many areas in this interview – new-age APIs, fraud-control, robotics, score-cards, long-sighted capital, touch-less finance and deep-analytics. Dive in!

DQ: How important is technology to your business model? How does it enable you to differentiate from others in the industry?

Sunit Vakharia: UGRO Capital is a highly specialized, technology-enabled SME lending organization. The company has shortlisted 8 sectors which cover 38 subsectors representing a $300 billion business opportunity in SME lending. Before the company became operationally ready, a robust technology backbone was set up to ensure effective functioning and smooth execution of the company’s business strategy.

Our customer acquisition plan includes customer verification, data collection and credit eligibility assessment through digitised sectoral scorecards called ‘GRO Score’. The same has been implemented through a fully digital technology stack.

We have a multi-pronged distribution strategy some of which are branch-led, eco-system-led and partnership-led. We have launched an industry-first ‘Gro+’ Partner Mobile App for our offline distribution partners (GRO Partners) with an objective to help them adopt digitization. We also launched our direct-to-customer platform (which is being piloted currently) to facilitate business loan approval digitally within 60 minutes.

DQ: How much of the customisation part happens through technology?

Sunit Vakharia: We take pride in ourselves as an SME-lending platform with deep sector and sub-sector specialisation powered by technology and data analytics. Our indigenously-developed and customised tech-based lending platform has helped us to achieve flexibility and innovation in our functioning and loan-product offerings. Technology has played a crucial role in making our business profitable in our very first year of operation.

DQ: Where exactly do you use technology - any recent and imminent investments you can share here?

Sunit Vakharia: UGRO Capital has been able to achieve an in-principal loan approval to customer in less than 60 minutes. This has been possible due to our technology and analytics capability. We have invested heavily in API-integration partnership with new-age companies. Through those companies, we collect a variety of customer data covering business as well as individual information.

We leverage more than 25 APIs enabling sourcing of variety of customer data from bureaus, GST portal, banks, social media and many other sources. We are also investing in data analytics and machine learning to further improve our customer acquisition process and develop a better understanding of the customer behaviour. In addition, we are investing in robotic process automation to fully digitize our backend processes.

Protecting customer information as well as strengthening our company infrastructure to withstand ever-growing cyber threats has been a key investment for us. We have partnered with one of the leading tech infrastructure company to provide us state-of-the-art network and cloud-based infrastructure solutions.

DQ: Technology for addressing the bad loan problem - how did you arrive at this idea and how was it executed?

Sunit Vakharia: We believe in pro-active customer learning by continuous analysis of customer behaviour.

We have also devised a risk-based pricing model after analysing more than eight million loan records and 850 parameters per loan to develop sectoral scorecards to get rid of bad loans. Our 8 sectoral scorecards, 38 sub sectoral scorecards coupled with strong underwriting ensure that we develop sharper predictability on our customer behaviour. The ongoing continuous data collection helps in keeping us ahead in this business.

During the Covid-19 situation, we have been at the forefront and probably the first company to provide a default option of moratorium to all our customers. We also allowed those customers who were able to pay their instalments to opt out of the moratorium program. This was achieved through various customers surveys and feedback and being emphatic to our customers.

DQ: How does co-origination work with other big players? Does tech come into play here?

Sunit Vakharia: Co-origination product is part of ‘GRO Xstream’ proposition, which is an innovation-driven approach for BFSI partnerships. We have strengthened our position in the co-origination space by collaborating with three large public and private sector banks.

The key to success in the co-lending space is built on defining a unique partnership with a co-lender and creating a win-win proposition for the partner and the customer. Technology plays a pivotal role in building a partnership-based platform where both the partners can exchange relevant data.

As per UGRO Capital’s model, we source customers and share the requisite decision-related data with our co-lenders. Based on the data, co-lenders can perform evaluation and make decisions. Smooth integration of the partner platforms is critical in ensuring seamless processing and quick loan disbursals to our customers.

DQ: Any chance for using predictive modelling for ascertaining or helping success of some ventures?

Sunit Vakharia: We use predictive modelling to develop our sectoral score cards – ‘GRO Score’. We also use it for risk mitigation during customer acquisition to loan approval. Our tech-driven data analytics assesses a lot of industry data with the help of credit rating and market research agencies to define the borrowing trends and devise a lending strategy accordingly.

DQ: Can technology help in solving the incidents of frauds, bad performance and losses that have been witnessed in Indian BFSI space recently? How?

Sunit Vakharia: Progressive technologies like machine learning and fraud analytics are of significant importance in pre-empting the customer behaviour and identifying Early Warning Signs (EWS) as such technologies carry incisive analysis about the customers to unearth valuable insights.

BFSI industry is making significant investment in integrating these technologies into the overall ecosystem. Customer behaviour analysis is a continued journey and tech-based innovations help us to keep fraud and portfolio losses to a minimum.

DQ: A lot of notable VCs have shifted gears to invest only in ventures that have long-term sustainability and environmental commitments - what's your take on these shifts?

Sunit Vakharia: Each one of us carries the responsibility of being environment- and energy-friendly for our future generations. Going beyond profit and growth numbers, VCs should also focus on building a sustainable business model with long-term vision and environmental commitments. They must come forward to facilitate sustainable finance. We are fortunate to have developed partnership with companies that have such forward-looking vision.

DQ: Anything else you wish to share - especially on future initiatives?

Sunit Vakharia: To give a perspective, companies that can pre-empt the customer need and fulfil disbursal on a real-time basis riding on digital and a paperless approach shall lead the lending business in future.

As we are also learning from COVID-19 situation, touchless digital products will drive the future in lending business. We are fortunately in the sweet spot as we are already investing to build customer-focussed touchless digital products by leveraging FinTech partnerships, deep data analytics capability and efficient processes automation.

We will continue to focus on ‘Uberizing’ our distribution model and strengthening our banking partnerships to build a strong business pipeline. We are also working towards making our feet-on-street collection-teams more and more technology-equipped. We aspire to be a leader in SME lending business in the sectors we operate in.

• Pratima H