Biz2Credit, an ex­clu­sive fi­nance plat­form for SMEs

Plans to be a global plat­form for SMEs:

Banking Frontiers - - Contents - Mo­han@bank­ingfron­tiers.com

Plans to be a global plat­form for SMEs

With more than 1.1 mil­lion users, mostly SMEs, Biz2Credit, founded in 2007, is counted as one of the most trusted on­line credit re­sources in the US hav­ing ar­ranged fund­ing of more than $2 bil­lion. It is de­scribed as a hub that con­nects small busi­ness own­ers with lenders and ser­vice providers and its net­work to­day con­sists of 1.6 mil­lion users, credit rat­ing agen­cies and small busi­ness ser­vice providers in­clud­ing CPAs and lawyers. It has raised fund­ing of over $1.4 bil­lion in fi­nanc­ing. The com­pany had launched its In­dia oper­a­tions specif­i­cally tar­get­ing SMEs.

Biz2Credit is founded by 2 In­di­ans, Ro­hit Arora and Ramit Arora.

FUND­ING-TECH­NOL­OGY

“What re­ally makes Biz2Credit so dif­fer­ent is that we’re an end-to-end fund­ing and tech­nol­ogy provider,” says Ramit Arora, who is pres­i­dent and co-founder. “Un­like many fi­nanc­ing com­pa­nies, we’re truly built to cover every as­pect of the fund­ing process from orig­i­na­tion to un­der­writ­ing to clos­ing to ser­vic­ing and mon­i­tor­ing. Even more im­pres­sively, we’ve man­aged to au­to­mate a huge amount of the process at every step along the way. Busi­ness own­ers are find­ing us or­gan­i­cally or through our large ecosys­tem of part­ner prod­ucts and ser­vices. They’re fill­ing out a sim­ple ap­pli­ca­tion form which gives them a re­sult in min­utes, not weeks. Our un­der­writ­ing process is without equal - we have de­vel­oped such a level of ex­per­tise in as­sess­ing risk through our al­go­rith­mic un­der­writ­ing stan­dards that we have ma­jor banks now com­ing to us and ask­ing us if we can im­ple­ment the same tech­nol­ogy for them as well. Com­pared to our com­peti­tors, we have the low­est de­fault rates in the in­dus­try. Whereas most fun­ders in al­ter­na­tive fi­nance see de­faults around 8% of gross, we av­er­age a 2% de­fault rate on un­se­cured lend­ing prod­ucts,” he adds.

An­other thing that makes the com­pany so unique, ac­cord­ing to Arora, is that it has al­ways been highly fo­cused on build­ing the prod­uct and ser­vice ecosys­tem around the core of­fer­ing. “We work very closely with com­pa­nies - like Tally So­lu­tions in In­dia - and this gives us an un­par­al­leled kind of in­sight into when our cus­tomers need fi­nanc­ing. AI and ma­chine learn­ing are at our core, and our ecosys­tem of part­ners is what en­ables us to have such ef­fec­tive au­to­mated tools at our dis­posal,” he adds.

CUS­TOMER NEED-FO­CUSED

Arora ex­plains that the whole strat­egy is built around one sin­gle plat­form that can flex­i­bly serve many dif­fer­ent mar­kets. That means the com­pany al­ways start its prod­uct de­vel­op­ment process by in­ves­ti­gat­ing the cus­tomer’s need and whether it can be repli­cated across dif­fer­ent coun­tries and sce­nar­ios. “We call this our global core strat­egy. But, the way we have been so adapt­able across mar­kets is all down to our tech­ni­cal ex­per­tise at build­ing to­wards the lo­cal ecosys­tem. Busi­ness own­ers in the US use Quick­books or an ac­count­ing firm, but in In­dia there’s a whole other set of so­lu­tions that small busi­nesses are used to. That’s why we’ve built a dif­fer­en­ti­ated API struc­ture so that we can be flex­i­ble to fit within the norms of each mar­ket. This is what we call our lo­cal ecosys­tem strat­egy,” says he.

The fo­cus is on two core stan­dards as the com­pany de­signs lend­ing so­lu­tions. Arora elab­o­rates: “We aim to build rad­i­cally sim­ple and use­ful dig­i­tal tools and we aim to al­ways make things as au­to­mated as pos­si­ble within these so­lu­tions. Our world­class de­vel­op­ment op­er­a­tion in New Delhi and Mum­bai gives our clients all around the world new and in­no­va­tive so­lu­tions on a weekly ba­sis. Un­like other lenders in the small busi­ness space, we have in­vested in be­ing tech­no­log­i­cally su­pe­rior to every other loan process on the mar­ket. Not only that, we have an ex­cel­lent DevOps func­tion in ad­di­tion to our core prod­uct de­vel­op­ment team that en­sures ev­ery­thing we build meets se­cu­rity and scal­a­bil­ity stan­dards - be­cause no mat­ter where our clients are they need to feel con­fi­dent that their data is pro­tected and that they can get the fund­ing they need when­ever they need, 24x7 every day of the year.”

TECH TO HELP CUS­TOMERS

There is also a dif­fer­ence in the way Biz2Credit makes use of tech­nol­ogy. Arora says tech­nol­ogy is sec­ondary to the ex­pe­ri­ence the com­pany’s clients and stake­hold­ers will have. If the tech­nol­ogy says one thing and the com­pany knows its clients need some­thing dif­fer­ent, it works to change the tech­nol­ogy to match that need. “Whether a client wants to work with us from his smart­phone or he wants to browse at home, we’re built to give them the best

ex­pe­ri­ence pos­si­ble no mat­ter what. We also know that tech­nol­ogy by it­self won’t win the day. Every client has a re­la­tion­ship man­ager who is with them every step of the way, guid­ing the client through the lend­ing process. Our so­phis­ti­cated pro­pri­etary CRM sys­tem equips our re­la­tion­ship man­agers to ad­vise the cus­tomer at every point. We in­te­grate all kinds of data lay­ers to­gether to give our re­la­tion­ship man­agers a holis­tic view of the cus­tomer’s sit­u­a­tion, and that means they can ad­vise them in real-time as the client is try­ing to make a de­ci­sion about fund­ing,” he says.

Hav­ing said that the tech­nol­ogy on its own is still pow­er­ful - in fact, the most pow­er­ful in the in­dus­try, ac­cord­ing to Arora. “The whole sys­tem is self-ser­vice for clients. We in­te­grate pric­ing en­gines with the ex­ter­nal data lay­ers (like CIBIL or FICO) to build a fully per­son­al­ized score­card for each cus­tomer. This is all trans­par­ent to the cus­tomer, also. They can see their score­cards and how they’ve been cal­cu­lated - even down to what el­e­ments might be hold­ing their scores back and keep­ing them from get­ting the deal that they want. This is quite dif­fer­ent from the other of­fer­ings you’ll see in the in­dus­try - no one else is that self-ser­vice and trans­par­ent. It comes from our fo­cus on ser­vice to the cus­tomer,” he ex­plains.

MITIGATING RISKS

How is risk mit­i­ga­tion taken care of?

Port­fo­lio risk, says Arora, is mit­i­gated through a very de­tailed un­der­writ­ing process. The com­pany col­lects bank data, fi­nan­cial per­for­mance data and it even has in­te­gra­tions to GST data and ac­count­ing plat­forms to val­i­date all of that in­for­ma­tion. All these are into the pro­pri­etary ma­chine learn­ing sys­tem, which pro­duces a per­sonal score­card for each ap­pli­cant. Not only does that help re­duce risk from the out­set, it stan­dard­izes the process of eval­u­at­ing dif­fer­ent fac­tors – like a credit score only smarter.

Sim­i­larly, if a case goes into col­lec­tion, there is a pro­pri­etary le­gal col­lec­tions plat­form that al­lows to ad­min­is­ter the whole le­gal process for a case. This CRM for the le­gal team and case man­agers al­lows them to re­spond to risk sig­nals much more quickly and gives them a dash­board view of where in their in­di­vid­ual case pool they need to pay at­ten­tion.

“All of this re­sults in our un­matched per­for­mance in terms of NPAs. On to­tal loans of $3 bil­lion, we are only see­ing a de­fault rate of 2.5% - 3 times lower than most al­ter­na­tive lenders in the SMB mar­ket,” claims Arora.

A SOLID BUSI­NESS MODEL

Arora is of the firm opin­ion that the com­pany’s busi­ness model is very sus­tain­able. “We feel that we’re build­ing on a foun­da­tion that is rock-solid, in fact. Small busi­nesses are the foun­da­tion of thriv­ing economies - and those small busi­nesses need work­ing cap­i­tal to keep the lights on and the wheel turn­ing. In In­dia alone, the SMB mar­ket pro­duces close to 40% of GDP. That’s a mas­sive con­trib­u­tor to the econ­omy, and we ex­pect that num­ber to re­main strong for years ahead. With 30 mil­lion SMEs in In­dia, pol­i­cy­mak­ers are pay­ing at­ten­tion to the mar­ket and do­ing ev­ery­thing they can to open up ac­cess to fi­nanc­ing for so many of those busi­nesses. We are per­fectly po­si­tioned to be right in the mid­dle of that growth for the long-run,” says he.

This foun­da­tion in the SME mar­ket is al­ready al­low­ing the com­pany to ex­pand oper­a­tions into new mar­ket spa­ces. In the sec­ond half of 2018, it is launch­ing a con­sumer lend­ing plat­form in the In­dian mar­ket in con­junc­tion with the largest DSA in the coun­try. It feels that self-em­ployed busi­ness own­ers who are us­ing their own per­sonal credit to bor­row on be­half of their busi­nesses is a ma­jor rea­son this is needed. Arora feels this will bring more sim­plic­ity and in­tel­li­gence to that con­vo­luted process and help con­sumers who want to be in busi­ness for them­selves take ad­van­tage of the fi­nan­cial tools that will help them suc­ceed.

Arora ex­plains the chal­lenges he faced as a startup: “Hav­ing been a small busi­ness/ startup it­self, we felt that we were the per­fect com­pany to pro­vide fi­nanc­ing to small busi­nesses. In the early days, cred­i­bil­ity was a ma­jor chal­lenge for us, like it is for just about any small busi­ness. Cus­tomers are al­ways wary about some­thing new, and they don’t al­ways take you se­ri­ously when you’re just start­ing out. In our case, it cer­tainly didn’t help that the space of dig­i­tal lend­ing was in its in­fancy and that peo­ple re­ally didn’t un­der­stand how it com­pared to tra­di­tional fi­nanc­ing meth­ods. Not only did con­sumers not un­der­stand it, but even tech­nol­ogy providers were mys­ti­fied. There were not the same kinds of in­te­gra­tion and ecosys­tem op­por­tu­ni­ties as we’ve been able to de­velop re­cently. Com­pa­nies sim­ply hadn’t caught up yet.”

GO-TO-PLAT­FORM FOR SMB

Arora is con­fi­dent that by 2023 Biz2Credit will be the go-to plat­form for SMB lend­ing across the global mar­ket. “Our plans are al­ready un­der­way. We are dou­bling our in­vest­ment in tech­nol­ogy at ex­actly the right time. Ar­ti­fi­cial in­tel­li­gence and ma­chine learn­ing are at the fore­front of our de­vel­op­ment plans. Our goal is to trans­form what cus­tomers ex­pect from their lend­ing plat­form, with a ma­jor em­pha­sis on creat­ing pre­dic­tive so­lu­tions within the plat­form. In ad­di­tion, mul­ti­ple new prod­uct of­fer­ings are just over the hori­zon for us. Our ecosys­tem-ori­ented ap­proach is get­ting stronger and will con­tinue to be a dif­fer­en­tia­tor for us. This will bring even more in­tel­li­gence into the risk man­age­ment process, and we ex­pect our al­ready in­dus­try-lead­ing de­fault rates to move even lower with our enhanced pre­dic­tive tools,” he re­veals.

Ramit Arora high­lights the in­ten­tion to make Biz2Credit the go to plat­form for SMEs glob­ally

Oper­a­tions team at a Biz2Credit of­fice

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