APAC - building a best-in-class financial services
It is a new age NBFC with the DNA of a fintech
Imagine a financial services company, which sees a highly compelling opportunity to deliver better outcomes for underserved customers and businesses by leveraging digital technologies and data in combination with best-in-class execution and risk management! That is what APAC Financial Services, founded by Gunit Chadha, ex CEO of Deutsche Bank AsiaPacific, is all about.
The lean organization being built relies on the rapid innovations in digital technologies and data proliferation to generate superior outcomes in financial services. The man managing digital and technology is Sanjay Sharma, a 25-year veteran in banking technology, who is now chief digital & innovation officer at APAC Financial Services. Prior to APAC, he was heading technology and innovation functions at RBL Bank and IDBI Bank.
“The main thought that prevailed our decisions when we started conceptualizing a technology platform for us was that we are not a technology company and should not build a technology infrastructure from the ground zero. Instead we should leverage the existing technology partner ecosystem. This really worked well for us and we could roll out an entire lending system in about 8 weeks in collaboration with partners.” says Sharma.
He says the underlying aim was to create a very lean organization relying heavily on technology. “When we began our journey, objective was to build a lean, asset lite, agile and cloud empowered technology platform which does not require upfront capital investment. Idea was not to overspend at the beginning but build an infrastructure that can scale up with our business growth. During the initial days, you don’t need a big team to manage technology and digital initiatives and so I just manage it with our partners and business user teams. You need to apply lean and partnership principles in everything you do!” explains Sharma.
The company has already launched its retail mortgages and SME lending verticals. It is about to introduce MSME lending in the near future. Final aim is to build a multiplatform financial services firm that serves any market where it feels it can deliver superior outcomes through combining digital technologies with best-in-class execution / risk management. One of the prime propositions is affordable housing loans to the under-banked/unbanked segment of the population who may have the income to service loans but lack the documentation that traditional banking channels require for credit underwriting and risk assessment.
ROLLOUT IN 8 WEEKS
Sharma says “Unlike in other enterprises where it takes months to roll out a technology platform, our tab enabled mobility platform with an integrated loan origination, loan management and collection system was implemented in a short span of 10 weeks. Success key was not to overengineer the processes and very little relevant and meaningful customization.”
Sharma claims it is one of the quickest implementations of building a digital platform in the financial services space, especially in the home loan segment. APAC has a technology platform to onboard customers using tab, initiate on-line credit scores verification from bureaus, design customized credit underwriting models and same has been hosted on cloud without any substantial technology asset within the company. It has also ensured that payouts to technology partners are linked to its business growth rather than fixed upfront cost.
“We wanted to keep the employee experience very simple so that their communication with our target customers is crisp and clear. Strategy was to design a simple light lending application which is accessible through a mobile or can be accessed on a laptop using mobile hotspots,” says Sharma.
TAB IS THE TOOL
He also points out that simple customized tools are required for relationship officers to enable them to capture a lead while talking to the clients using the tab. It is important that the relationship officer could record the basic details into the LOS from any location. This is required so that loan processing can be done faster and in a seamless manner.
What differentiates affordable home loan from a consumer loan is that in former there is a need for detailed documentation, verification of documents, property valuation and legal assessment, all of which need time to complete and so it is difficult to achieve the service level TATs of consumer loan process. What APAC is trying to do
is to give an in-principle approval in few hours and the final sanction and disbursal within a week.
“No doubt, all these have to be done very quickly. The time taken to process and sanction a home loan at this moment varies depending on the customer profile. However, our target would be to disburse the loan in a week’s time,” says Sharma.
‘NEW TO CREDIT SEGMENT’
What happens when a person does not have a bureau score?
Responds Sharma: “We are essentially targeting ‘the new to credit’ segment. The bureau score is a challenge for this segment. Secondly, this segment may not have documented income as much of their transactions would be in cash. It is therefore very important for us to do a personal discussion and ascertain the payment capacity of the customer, his credit worthiness, etc. We have created a pre-defined questionnaire forw credit assessment. Depending on the inputs we get, we decide whether the customer is eligible for the loan. Going forward, we will build a predictive analytical model around the data captured during the personal discussions using AI and ML to ascertain the credit worthiness of the customers. So, by the time the personal discussion with a potential customer is over, we should be able to convey our decision on the eligibility of the customer.”
In this regard, the company is also exploring alternatives to bureau scores. It has been in discussions with a startup to create a psychometric model whereby it can analyze and assess an applicant. Sharma says the objective is to understand the applicant’s ability to pay and also his intent to pay. The psychometric tests can give insights on these aspects.
On partnership, Sharma says: “I firmly believe that in today’s networked world, while setting up a new business, one should not try to create / build everything in-house but should leverage the strengths of existing partners. There is no point in creating a big distribution network or develop entire technology stack or set up big processing hubs when you can leverage the strength of existing players in the space. “
He goes on to add: “APAC believes that one needs to have a perfect balance between physical and digital models for extending products and services to the clients. It is important to build a distribution network, which is digitally empowered. Accordingly, we have opened 2 branches - one in Kalyan and another in Virar - to have a deep understanding of the affordable market and customer segment. However, our market is not exactly in these two locations, but in the areas within the radius of 30-40 kms. At the moment, these branches are reaching to potential customers and builders to understand their needs and the market potential and these have also sourced substantial business. We will of course roll out branches in other places, especially in tier 3 and 4 towns.”
ATTENDING TO SME
The other segment APAC is targeting is SMEs. APAC’s wholesale & commercial finance vertical provides fully collateralized loans to SMEs and their promoters. These are typically highly customized solutions that traditional banking providers cannot match due to lack of business flexibility.
On building the digital model, Sharma says: “We are trying to build models using receivables / sales data available with the GST Network, financial data from ITR, company information available with the ministry of company affairs or registrar of companies and few more data sources. The idea is to use the open APIs or consent framework to extract data and build intelligence around it and process and sanction SME loan applications almost instantaneously. We will digitize the process using bots, imaging and workflow technologies to improve TATs and enhance the client experience”
WORKING WITH STARTUPS
APAC believes in leveraging the strong startup ecosystem in India, which got developed over the last few years. It is in discussions with many startups to develop innovative stuff. For example, one of the startup has the technology, data and algorithm to process the geo-tagged mobile usage data to identify the profile and location of people present in a specific location and send targeted product / service messages.
“An interesting use case could be to send customized messages to offer home loans to people visiting home loan or property melas in the targeted market. Can I offer tailor-made offers? You can achieve hyper localization only by blending Physical and Digital models.” says Sharma.
Sanjay Sharma claims he has been able to develop a system which is accessible through a mobile or on a device through hotspots
Signboard of a branch office of APAC Financial Services