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Lendingkart: Technology first approach for financial resiliency

Lendingkart's technology first approach has helped the company cover a diverse range of customers, providing loans to 17,000+ MSMEs during the pandemic induced lockdown period. Manish Bhatia, President – Technology, Analytics & Capabilities, Lendingkart shares that the fintech startup has provided loans in 1800+ towns during this time, thereby contributing to the recovery of small businesses across India

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What kind of growth in business have you witnessed in the last 15 months and how has technology ensured business continuity for your organisation?

Manish Bhatia, President – Technology, Analytics & Capabilities, Lendingkart

The past year has been one of significant distress due to the pandemic. Everyone was impacted. Majority of our customers and their businesses have had negative impact and they naturally shifted focused first on survival. We too focused on having an accommodative approach with our customers. We have used technology to ensure that our customers were taken care of during the challenging times. Consequently, we have seen significant demand increase over the last quarter as compared to the subdued demand due to the pandemic during both lockdown phases.
With the economy recovering, small businesses are some of the first to get on the bandwagon of growth. They are laying a high impetus on going back to pre-pandemic levels. The upcoming festive season has provided an additional spur in the demand cycle, and with it the demand for credit has increased. Access to right and timely credit is critical to speed up this process and Lendingkart has been at the forefront of it. We have already reached pre-Covid levels in terms of inflow of demand in the number of loan applications and the no. of people visiting our webpage. We have grown to have a well-diversified book size of INR 2500 crore as of FY 21.

We have provided loans to 17,000+MSMEs during the pandemic induced lockdown period. Moreover, Lendingkart has provided loans in 1800+ towns during this time and thereby contributing to the recovery of small businesses across India. The company withstood the impact of the pandemic as it clocked over INR 500 cr of revenues in FY21. This was due to a strong portfolio and high performing metrics. A positive result was that Lendingkart secured an upgrade in Credit rating to A-/ Stable Outlook from Infomerics credit rating agency during peak pandemic situation.
The financial resilience shown by Lendingkart and the business growth has been possible solely due to the technology first approach that we always had. We have used cloud-based data solutions, proprietary in-built platforms and tools, and a paperless approach to lending from the very start. This helped us to not only seamlessly transition during the lockdown phases but also to provide a sustained and best in class service to our customers. Needless to say, technology first approach has also helped us cover a diverse landscape with customers spread across all states and Union Territories of India.

Have you introduced any innovative solutions during the pandemic times?
Lendingkart, with its technology first approach, has long recognized the importance of innovation. The pandemic, in a way, acted as a catalyst to drive further innovation. Even before the pandemic, Lendingkart had paved the ‘digital’ way forward by being the enabler of a comprehensive financial ecosystem collaboration. This way forward got sped up as the pandemic invoked the need of a common platform to enable collaboration.
Various financial institutions have long been competing in terms of products, delivery methods, technological features etc. This was detrimental to long-term growth … fortunately, the ecosystem has moved from intrinsic competition, to a collaborative approach for jointly addressing the challenges and resolving issues. Lendingkart is playing a major role in strengthening this collaborative approach. Having evaluated over a million applications by MSMEs, Lendingkart has built one of the largest MSME databases in the country with 3.5 billion data points for over 500K MSMEs. This has helped Lendingkart initiate collaboration across the financial services ecosystem using a digital tech-driven framework that integrates all the stakeholders via a common platform. The tech developments based on this platform-based strategy have only gathered pace during the pandemic.
Lendingkart has invested in technological advancements to enable E2E digital experience in MSME lending by productizing all aspects of lending – origination, evaluation, onboarding, and collections.
Lendingkart ‘2gthr’ platform is going to power entire ecosystem through its E2E capabilities of:
● ‘2gthr’ – key aspects of 2gthe are: i) provides end-to-end asset servicing journeys for financial institutions, ii) ensures a seamless and friction free onboarding capabilities for banks and NBFCs to scale their lending operations to MSMEs across the country and, iii) leverages Lendingkart enhanced loan management capabilities with following platforms
● ‘xlr8’ – This platform is an origination engine enabling real time sourcing, approval, and instant payouts. xlr8 provides a single window access to monitor service status
● ‘Cred8’ – This is a credit intelligence platform providing MSME credit score based on LK proprietary underwriting model. This further helps create a collaborative digital ecosystem that extends financing across industries, geographies, and customer segments
● ‘Atom’/Zero Touch’: Entire customer journey is modularised via micro-processes for providing a seamless customer experience. This reduces the turnaround time and increases the coverage of MSMEs being served.
Lendingkart is well placed to act as the “perfect bridge” between the Internet companies having scores of B2B MSME customers and lenders with large reserves looking to penetrate this segment. Lendingkart is among the very few FinTech’s globally to provide E2E capabilities from customer acquisition to collections via its digital platform products.

How are you using big data analytics to verify the credit worthiness of borrowers, in particular small businesses?
Lendingkart’s objective has been to enable the financial institutions to support young and educated digitally savvy entrepreneurs who are based in non-metro cities and have growing micro enterprises, across a wide range of industries. The traditional data sourcing methodologies for conducting analytics have been mostly focused on underwriting using an expert scorecard or score cards based on logistic regression. Traditional scorecards are based on bureau data and demographics superimposed with policy rules. While explainability is very high in traditional scorecards, techniques like logistic regression are not able to capture non-linear relationships in data. This ultimately results in a large segment of credit-worthy customers getting denied capital access. Alternate data, including cash flows, social media footprint, transactions analysis, industry analysis, and proximity to economic activity hotspots, can help assess customers’ creditworthiness.
Lendingkart uses AI-ML tools to analyse the bank statements in a very advanced way to get trends around credit, debits, balances, and cheque returns. Access to non-traditional data sources such as SMS data, location information, platform interaction information along with bureau variables enables better profiling of the customer. Effectively, we have evolved from traditional logistic regression to models such as random forest or gradient boosting methods. This has enabled us to capture the non-linear relationship between predictive variables. Non-linear correlation of alternate datapoints allows us to identify profiles of customers that are potentially high performing but otherwise would have got missed in traditional methods.

Lendingkart’s algorithms allow evaluation of New to Credit (NTC) customers. A layer of interpretability has been created using shapely values so that ML algorithms are no longer the black boxes they used to be. Advanced AI-ML techniques have strengthened risk assessment capabilities along with developing hyper customised products for its customers. Lendingkart has identified various proxies for determining the customer’s capability, intent, and habit to pay back a loan. Additionally, AI tools are leveraged across the lending funnel to evaluate the quality of the borrwer’s product/service, financial health of the borrower’s business, and the ability to survive against competition. Thus, Lendingkart uses data analytics to build a holistic view of the customer.

How have you enabled remote working for your employees and your focus on cybersecurity?
Lendingkart being a technology first company has always created an agile work environment wherein significant effort and investment has gone into development of proprietary platforms, cloud-based data storage, cloud hosted ecosystems, and digital working culture.
Lendingkart gives utmost importance to cybersecurity and InfoSec policies, that are continuously tracked, and upgraded to mitigate any risk. Vulnerability assessment and penetration testing is performed on regular basis to identify any anomaly.
* The company follows the RBI master direction for IT framework applicable to NBFC sector which includes, IT Operations, IS Audit, Business Continuity Planning, IT Service Outsourcing.
* It takes the best practices guidelines references from ISO/IEC 27001 – Information security management systems and ISO 22301 – Business continuity management systems
* Lendingkart’s IT security team ensures that employee security awareness training and regular security audits are also conducted to check the effectiveness of security controls.
In the year 2020, the primary focus shifted from being work productive to being healthy, and ensuring employees do not get infected with the deadly virus. We also tried to ensure that employees have the right social and economic conditions to deal with Covid-19. We are in now in FY 2022 and we can now look back and evaluate how the last year changed our course of action. For most organisations, people’s strategy for the next five years had to be re-thought and they had to adapt to the most urgent and important challenge in hand. While we hope that the worst is in the past now, we are still very cautious about the fact that while employees have accepted the new normal their expectations from the organisation are to make current people policies more employee-friendly and flexible. The latest trends that we see post-covid are:
● Hiring trends: Personalising your roles and responsibilities
● Enhancing employee experience: Tools and apps
● Reimagine reskilling: Look for critical skills as against critical roles
● Being driven by data: Acing analytics

Overall, 2021 provides a unique opportunity to develop your HR systems and teams further. Putting people first and humanising the workplace will continue to pay dividends. The culture created by focusing on people and their needs will produce long-term upticks in productivity and perhaps improved market perception.

What kind of interesting new tech trends are emerging in the fintech sector in the current times? Which technologies are set to revolutionise the industry in times to come?
Account Aggregators (AA) are the latest and much awaited addition to India’s digital infrastructure, The AA will allow banks to access consented data flows and verified data. This will help financial institutions to have access to digital format data and reduce transaction costs, enabling them to offer tailored financial products and services to the customers. It will also help reduce frauds and comply with upcoming privacy laws. Going ahead many SMEs can be reached out without physical branches. This will transform credit penetration across the country. As we go deeper into this, open banking works wonderfully as India is underserved when it comes to credit and other financial products. The AA ecosystem will fast track Lendingkart’s mission to score each and every MSME in the country through cash-flow / alternate data models.
Embedded finance ecosystem is starting to gain pace with increasing collaboration between businesses and financial service providers. For Lendingkart, the role is two-fold as it provides financial services, and is strongly positioned to manage regulatory, compliance, and credit risk. The company uses its digital reach to deliver and service financial products requests from the embedded finance ecosystem.

Any other significant factor?
As India marches towards becoming a 5 trillion dollar economy, MSMEs are set to increase their share of the GDP. This share currently stands at 30 per cent of a US $2.7 trillion GDP. So, the MSME economy is probably over US$ 800 billion already if considered in isolation. The requirement of working capital for MSME players is already huge and will only get bigger. At Lendingkart, we believe that a platform-based collaborative financial ecosystem is the best way forward to address this growing market. Lendingkart will continue on its tech driven journey to create a major impact of its own.

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