India’s loan market is about $500 bn, with a growth rate of 20% CAGR, however if we look at digital lending to SMEs and individuals, it’s not even close to 2% as compared to manual lending. While fintech companies in India have been attempting to bring agility, innovation, and accuracy to bear upon India’s complex financial challenges, not many have been focusing on fixing the problems faced by lenders or borrowers. While, a customer could use online aggregators to view the various options, there is a lack of an all-encompassing end to end solution for the customer.
Challenges Business face while looking for loans
Indian Small and Mid-Sized Enterprise industry has outpaced the overall GDP growth rate for quite a while now. According to MasterCard’s Micro Merchant Market Sizing and Profiling Report, MSME sector contributes 45% to the country’s total GDP. Despite this, the credit inflow in this surprisingly under-utilized segment has been extremely inadequate. According to International Finance Corporation, 78% of the SME/MSME debt demand is either met by self-financing or through alternative lending channels, whereas a mere 22% comes through formal lending sources.
Traditional lending systems in India have been largely driven by constraints such as elaborate procedures and compliance checks—mostly rigid and inaccurate—which prevents credit growth, delayed credit disbursement, leaving credit seekers in a lurch. Options for unsecured loans through institutional lenders are also extremely limited for SMEs – as most banks either offer only secured loans to SMEs or offer unsecured loans selectively to their own liability customers.
“We wanted to create an ecosystem where customers could have a one-stop solution to their financial needs, and a platform for financial institutions to reach out to and evaluate borrowers and distribute credit and other financial products using technology. Rubique was thus formed to engage with both ends of these problems—to create a convenient and advanced technology-driven credit marketplace to enhance access, increase predictability and discoverability, along with bringing efficiency for both lenders and borrowers. Rather than limiting the usage of such advanced technology to “Lead Gen/Self-promoting model”, Rubique developed the “Online PLUS” model which uses artificial intelligence-driven technology to lower turnaround time, improve risk-assessment and KYC processes and at the same time, to deal with regulatory requirement of document collection, provides support through its tech-enabled distribution force of Business Associates and provide the end to end fulfillment services to customers. We started operations in 2014 and till date we have facilitated loan disbursement worth INR 2,500 crores and over 75,000 credit card setups through our platform,” said Manav Jeet, MD & CEO Rubique.
How Rubique Helps SMEs
While individual’s borrowing needs can be satisfied with online options, the story is a tad bit different for a SME. Most of the entrepreneurs do not go online looking for loans. Awareness on the banking processes and financial product is one of the major hindrance in India today. SME, by definition, across financial institutions vary and even the risk appetite to underwrite the SME loan vary; adding to hurdles in facilitating the finances to them.
SMEs are considered suboptimal borrowers due to their small size, information asymmetries and cost of credit delivery. India has more than 50 mn SMEs with an unmet debt demand of USD 198 bn. Since lending is very subjective for SMEs, they have difficulty in finding the right loan product which suits their requirements based on need-based assessment. They might not understand the multiple products available to them only the requirement and may apply for incorrect products leading to high discovery timelines. The applications are often rejected due to improper paperwork, credit history evaluation and incorrect credit profile.
To help bridge these gaps, Rubique launched the TAB (Tech Assisted Business Solution) solution which addresses the above-mentioned concerns effectively as a one-stop transaction platform which handles the lead from origination till disbursement for SMEs. Considering the subjective assessment in SME lending, this solution is made need-based assessment tool for correct product fit recommendation. The TAB solution not only offers a wide product portfolio, but they also cover low to high risk capital requirements. The platform offers solutions across five broad level product categories of two secured products – Loan Against Property, MEL (medical equipment leasing), three unsecured products – micro business loan (less 5 lakh), unsecured business loan and commercial vehicle finance. The platform also incorporates technology propositions like eligibility check through matchmaking algorithm, bank statement analysis, MCA integration, real time credit bureau check and real-time status tracking by integrating with financial institutions’ systems.
Additionally, the TAB solution also includes advanced technology features like IRIS scan for Aadhar authentication, and generation of credit assessment memo (CAM) along with deviations enabling the credit underwriter to take quick decisions and reduce the processing time further. The advanced technologies used by Rubique analyses multiple data points to assess the creditworthiness of the customers and provide them the offers they are eligible for, thereby removing the manual efforts in the loan processing system.
How consumers get benefit out of Proprietary AI Based Matchmaking algorithm
According to Jeet, Rubique has leveraged its rich customer data and bank credit policies to build a proprietary AI Based Matchmaking and Ranking algorithm that provides a customized list to each consumer based on his need and profile. This offers manifold advantages in terms of higher approval rates, better customer satisfaction and improved sourcing to our financial partners. This coupled with real time status tracking takes away the lack of transparency in the overall process and keeps the customer informed about the progress of his/her application. Thus, they in combination offer a win-win ecosystem by solving for customer experience on the demand side and issue of quality on the supply side. As Rubique continues to expand its customer base and financial tie-ups, the self-learning algorithm continues to improve and drive higher values.
He concluded by saying “our platform has been integrated with more than 90 financial institutions and offer over 267 products, ranging from Credit Card, Home Loan, Personal Loan, Car Loan, Two-Wheeler Loan, Education Loan, Insurance, Travel Loan, Business Loan, Loan Against Property, Vehicle Loan and many more.”