We treat Digital as God, and it is well intertwined with our business model: Mathews Markose, CEO, Muthoot Capital Services

In an exclusive interaction with Express Computer, Mathews Markose, CEO of Muthoot Capital Services, discusses the company’s remarkable digital transformation journey. From fully digitised loan processing to embracing AI for customer risk profiling, Muthoot Capital is redefining the NBFC playbook. Mathews also sheds light on their strategic partnership with Oracle Cloud, the role of emerging technologies in enhancing customer experience, and how the company is prioritising cybersecurity in an increasingly volatile digital landscape.

Muthoot Capital Services has been making strides in digital transformation. Could you share some of the key initiatives that you have been carrying out, and how they are helping you to meet the strategic business goals?

On digital transformation, I have a very, very interesting anecdote to share with you. I think the year was 2013–14, when digital was not as entrenched in our lives as it is now, and I heard a very prominent industry leader speak on digital.

He said that digital is like God. If you believe in the concept of God and God happens to be there, you’re saved. But if you don’t believe in the concept of God and he happens to be there, you’re doomed. So digital is like that. If you believe in digital and you make the right investments, and it happens to be successful because at that point in time, it was not certain whether it would succeed and then you’re safe.
However, if you don’t believe in digital and it becomes successful, then you’re doomed.

Now, looking back about 10 years, I think we couldn’t have been more right about it. Today, we can’t think of life without digital—it’s so well-entrenched in our lives. Almost every facet of our life has a digital intervention. At Muthoot Capital, we also believe what that gentleman said—we treat digital as God. We treat it as very important. It’s very, very well intertwined with our business model.

Our business happens in some 22 states, spread across some 4,000–5,000 touchpoints, and we operate with only about 30 branches. So, you can understand the complexity of the business, where we have 1,000+ touchpoints, but only 32 offices. And these offices also may not essentially be servicing points for customers—some of them are, but not all.

So our entire journey is digital. The customer walks into a dealership, a two-wheeler dealership, a car dealership, a commercial vehicle dealership, or a broker who’s selling these vehicles. From there on, we have staff who attend to the customer. The customer’s application is filled digitally. The KYC verification happens digitally. Then it goes into a very complex BRE, which is a business rule engine. The credit decisioning happens there—whether to give the loan or not—that happens.

The entire process is digital. Once the loan is sanctioned, the customer gets a sanction letter, that is also digitally accepted via OTP verification. The customer then decides whether the terms are acceptable. Once they give the go-ahead, the agreement is signed digitally again. Gone are the days when we got a booklet signed, it’s all digital now.

Then the application moves forward to operations. The operations team checks everything and finally, it moves into disbursement and the payment goes to the dealer. So, the entire journey is digital; there’s no paper involved.

Within the organisation, all our departments are today fully digital.

Starting from HR, where our recruitment starts when we hire people, the process starts digitally, the interviews are done mostly online, and the documents are uploaded digitally. Till the offer stage, the inductions today happen across the country digitally. So, digital is well entrenched into our life.

At Muthoot Capital, over the last two years, we have made a huge amount of investments in making this entire process digital. While the journey would have started some four or five years back, over the last two years we have really invested time, effort, and money into digitising the processes. And today, I think we can proudly say that we are almost 90% digital. Yes, we still have some way to go.

But I think, as you keep digitising more and more, there are more and more new technologies coming in. So you can never say that you’re 100% there. 100% will be when the world becomes stagnant, when innovations become stagnant. But I think that’s never the case.

Today, AI is at the stage where digital was when that gentleman made the comment about comparing it with God. Technology is constantly evolving and we are also catching up with that. But there is a firm commitment on our behalf to make all the processes digital.

In fact, we have ten strategic objectives as an organisation. One of them is digital-first, data-driven, and customer-centric. So that’s ingrained as part of our strategic objectives. It’s not just a good-to-have thing—it’s a must-have.

You rightly mentioned that digital transformation or being digital is a continuous process—it’s a journey and it can’t be achieved overnight. Now, coming to your recent collaborations, tell us about your recent collaboration with Oracle that has garnered attention. Could you elaborate on the partnership and how it is fostering innovation within your operation?

As I mentioned, while the digital journey started about four or five years back, we actually seriously got into digitising our entire processes about two years ago. That is when we had a new team coming into Muthoot Capital and we had a clear intent to get digitalised.

That’s when we started looking at serious players who could assist us in our journey to go completely digital. When digital was just a part of it, maybe the players we were working with could not take us where we wanted to go in terms of becoming fully digital. So we started looking at serious players who could assist us in our journey.

We looked at the challenges we were facing in meeting our objectives. Our entire IT infrastructure was on-prem at that point, and there are challenges associated with an on-prem model. It has a very high upfront capital expenditure, and you often need to over-provision, which more often than not leads to under-utilisation. All those challenges come with an on-prem model.

We were looking for partners who could help us achieve our objective. That’s when we met with the Oracle team. I can say that the entire association has been extremely wonderful. The movement from on-prem to the Oracle Cloud has been absolutely smooth, we’ve never faced any issues.

With moving to Oracle, we got a lot of advantages. We have scalability, and there is a lot of flexibility in operations. Contrary to very limited scalability in the on-prem model, we now have huge scalability. They have the ability to respond quickly to our demand. Whenever we have wanted extra infrastructure, they’ve been able to respond very quickly.

Earlier, a time lag in expanding our infrastructure might have been a week to 10 days. Now it happens in minutes. So, to that extent, they are as agile as we want them to be. This matches the pace at which we want to grow. That has been a great support from Oracle.

Also, on cost optimisation, since we are a relatively smaller but growing NBFC, a ₹3,000 crore AUM company, cost is a very critical factor before we decide anything. The pay-as-you-go model that Oracle offered us was a great help. It helped us calibrate and plan according to our expansion plans. It’s not like you have to make a huge investment initially and then try to catch up. This model helped us plan our IT infra cost as we grow.

That has helped us a great deal. Also, there’s a lot of predictability in pricing, and therefore, cost management has become much more efficient for us. There’s also a lot of elasticity in the way we can plan our infrastructure requirements. OCI’s full-stack disaster recovery is there, so we are always comfortable that our data is secure and won’t get lost, because data is the most important thing in our business.

 I believe Oracle brought along with it a huge amount of technological prowess, as well as a cost structure that gelled very well with our business model.

And as we speak, a lot of advancements are happening in fintech and evolving customer expectations. I think at this moment, all organisations have a single motto of delivering higher customer experience. There are so many emerging technologies that are coming up. You also mentioned AI. Along with AI, there are data analytics and ML. How are you using these technologies to deliver a better customer experience? Are there any trends you foresee shaping the finance industry over the next few years?

In fact, a lot of technology has already come into the finance space. Today, technology and finance have become so well intertwined that you can’t think of running an NBFC or a bank without the use of technology. We have invested significantly in technology within our company. For instance, starting from the customer onboarding journey, we have an origination scorecard that is completely data-centric. Every time a customer is onboarded, a creditworthiness check is conducted. This origination scorecard is designed to assess the customer’s journey over a period of time, not just at a single point. We examine data, the customer’s digital footprint, and how this customer segment has behaved over, say, 36 to 48 months in the financial landscape. The rule engine then makes an instant decision, typically within one or two minutes. This has greatly enhanced the customer experience. A customer walking into a dealership might expect to submit documents and wait three to four days for approval, but now, they receive instant approval upon data entry.

Once the customer is onboarded, we run various scorecards to analyse behavioural patterns. We need to understand which customers are likely to pay on time and which might default. This analysis helps us define our collection strategy. For customers likely to pay on time, we send a soft nudge via SMS or an IVR call, often through a bot. For those in a more challenging category, we may need to make individual calls, visit their homes or offices, or deploy a collection agency. This differentiation is possible only because of technology, which was unthinkable five or six years ago. It has significantly improved customer service. Without this knowledge, we would have to treat all customers the same, potentially disturbing those who are reliable payers. Now, we can focus our efforts where they are most needed.

Additionally, after the loan is completed, we’ve streamlined the issuance of no-objection certificates (NOCs). Customers can download our app, Muthufin Corp One, to view their loan statements at any time, make payments, and automatically receive their NOC once the loan is settled. This means that at no point during the loan lifecycle does a customer need to visit our offices. That’s why, despite having over 5,000 touchpoints, we operate from only about 30 offices.

Given the latest geopolitical tensions and the cyber threats targeting India’s critical infrastructure, do you have any advise on how to strategise for real-time protection of critical infrastructure? How is your organisation addressing cybersecurity?

In our organisation, we take cybersecurity very seriously. We have an assurance function, a Chief Information Security Officer (CISO) in place, and external IS auditors who audit our company. We recently concluded an audit by KPMG. These measures are taken very seriously. I believe our country is fortunate to have software as a service as a major contributor to GDPR compliance. We have excellent people managing this, and I have no doubt that we will overcome any challenges. As an institution and as a country, I think we are well-placed compared to many others worldwide.

Are there any preparedness measures to stay competitive in a future defined by digital finance, data-driven insights, and increasing regulatory demands?

To remain competitive, as I mentioned, technology is advancing rapidly. New developments are constantly emerging. While it’s challenging to be at the forefront of everything, the key is having the right intent. We’ve demonstrated this intent by making ‘digital first’ a part of our strategic objectives, driven from the board level. This shows our commitment to embracing digital advancements.

We’re currently building our data lake with EY, and we’ve engaged another consultant to guide our entire digital transformation journey. We’re also setting up our own team of data scientists, who are being trained by this consultant. We take technology and data very seriously, and our clear intent ensures that we can embrace any new technology that comes our way.

Is there any one technology that you think will revolutionise the entire industry? As an industry leader, do you have any thoughts on that?

AI is going to be the next big thing. It’s already integrated into various operations. For example, a lot of our collection calls are handled by AI bots, not actual people. AI bots are used for both customer service and soft collections. AI is definitely the next big disruptor in technology, and we’re excited about its far-reaching possibilities.

Finance has always been at the forefront of innovation, and people have been eager to embrace technology. The BFSI industry stands to benefit greatly from AI, with ample scope for its implementation. We’re working with various partners to improve customer experience, portfolio quality, customer selection processes, and financial operations. AI is undoubtedly the next big thing, and we’re enthusiastic about the future.

Some technology leaders suggest that blockchain is another technology with significant potential, especially in the fintech and NBFC space. Are technologies like blockchain or machine learning part of your long-term vision for digital transformation?

We’re already utilising machine learning. The origination and collection scorecards I mentioned are based on machine learning, where past data is input into the system, and it learns to predict customer quality and behaviour.

As for blockchain, we haven’t started working on any use cases yet. However, we’re open to embracing any evolving technology as it becomes relevant.

Are there any future focus areas or tech priorities for the next couple of years? Given the rapid pace of change, perhaps you could share your priorities for this year or the upcoming financial year.

Last year, we crossed ₹3,000 crore in Assets Under Management (AUM). This year, we’re aiming for ₹5,000 crore, and by 2028, our goal is to become a ₹10,000 crore company. That’s a significant jump from our current position.

One of our key focus areas is to get into everything on wheels. We’ve adopted the tagline ‘Turning Wheels, Changing Lives.’ Currently, we’re involved in two-wheelers, used cars, and commercial vehicles. However, there’s potential in areas like tractor finance and construction equipment, which are still untapped. As our GDP grows, we’ve already become the fourth-largest economy in the world; the opportunities in the BFSI space are immense. We’ll certainly tap into any opportunities that arise. Exciting times are ahead, and we’re looking forward to taking the company to greater heights.