At Perfios, we serve over 200 Indian banks, NBFCs, Fintechs, wealth managers and mutual funds. We extract, categorize, aggregate, and analyze over 2,000 types of (un-)structured data from over 400 banks and financial institutions. Our real-time analysis engine enables lenders to crunch high volumes of financial data in real time to produce credit reports in a few minutes, as opposed to traditional error-prone manual processes consuming days or weeks of effort.

This article describes our learnings from working with customers, regulators, and policy makers. We try to peer around the corner to see what’s coming – opportunities, responsibilities and disruptions – and how lenders should prepare to lead.

Digital lending is now passé

Over the past few years, lenders have built on top of the Perfios data platform to develop sophisticated straight through processing capabilities. Personal loans to first-time borrowers in smaller towns have boomed. Amazon noted that during the recent Diwali sales promotion, three out of every four customers who availed financing options came from tier-II and III cities. Platforms such as PSB Loans in 59 minutes, powered by Perfios, take the capability further by aggregating demand and supply of SME credit in a single, automated marketplace. Given the focus on using credit to drive consumption demand and SME productivity, we expect continued investments in digitization of lending in years to come.

Looking ahead, we see three clear areas where lenders need to focus:

1. Opportunities

Customer experience: Currently, borrowers face friction while accessing and/or sharing their financial data such as bank statements, GST returns, etc. with lenders. Options such as online fetch, pdf uploads, or handing over statements to sales agents involve significant user effort and time.

Account Aggregators (AA) remove friction from data extraction. Borrowers need to sign up once with providers such as Perfios-AA, provide and manage ongoing consent to securely share only necessary data with lenders and other service providers

Data integrity: Account Aggregators fetch financial data directly from a bank’s CBS, encrypt and transmit securely to the lender. This eliminates effort from cleaning the data – either because it came in machine unreadable physical form and/or was tampered with – and allows even quicker, automated decisioning.

Credit monitoring: We are seeing a worrying uptick in NPAs across borrower / lender categories. Apart from challenging external factors, lenders today lack tools to monitor the borrower’s financial health until after a default – by when it’s already too late. AAs offer lenders the tools to continuously and without user effort monitor a borrower’s cash flows and other indicators of solvency. Using these tools, lenders can develop early warning and intervention systems – such as altering repayment schedules to suit a borrower’s cash flow and ensure collection efficiency, or enforcing liens or other rights when they see signals of deteriorating financial health.

Compliance and fraud prevention: In most stressed business loans, funds were used other than for stated purposes. Borrowers’ misuse of funds can negate the best credit, risk, and pricing efforts by lenders. Using the consent and monitoring tools provided by AAs, lenders can continuously monitor cash flows in the borrower’s account, and quickly spot related party transactions or other unexpected behavior.

2. Responsibilities

Data Privacy and security by design: With the imminent passage of the Personal Data Privacy Bill, Indian businesses, especially those in regulated industries that deal with sensitive personal data, will need to:

• Re-write terms and agreements into simpler language, in multiple languages, and perhaps even audio for customers who can’t read
• Re-think how they deal with data across lifecycles: collection, updation, communication, deletion.
• Adopt ‘privacy by design’ principles – privacy cannot be an afterthought
• Invest in anonymization, tokenization and other data management technologies to ensure compliance

Digitization as an imperative

At Perfios, less than 20% of the data we process for lenders comes in digitally. Most data comes in either as statement uploads or physical documents that are scanned and transmitted securely to Perfios. It is well known that physical documents – especially financial statements – handled by human sales agents are vulnerable to copying, impersonation, loss, or misuse. While there are significant industry investments in making digital platforms and transactions secure, we are disappointed to see less than proportionate investments in digitizing financial statements. We hope to see a concerted effort across policy makers, regulators and market participants to push the base level of digitization in financial statements

3. Disruptions

Easy to use, interoperable, scalable and low-cost platforms such as UPI have expanded the playing field to non-regulated entities with deep technology expertise. Amazon, Google, PayTM, PhonePe etc. have grabbed significant market share at the expense of incumbents. The playbook is to focus on customer experience and marketing, while leaving the undifferentiated regulatory and settlement activities to banks. As a result, banks’ share of the payments value chain is shrinking to the point of vanishing. Unless incumbents invest in building great customer experiences, the same experience is almost certain to play out in lending, wealth management, and other currently profitable businesses.

One simple question

Given the significant lead time and investments required to be compliant, agile and competitive, are you ready to start now before it’s too late? We can help! Write to us at info@perfios-aa.com