There’s more to fintech than just tech
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Technology and related innovations in banking and financial services is all the rage right now. It’s rare to have a week without events and discussions on payments and their impact on cashless India, digital lending and how fintechs are challenging banking models. And while, without doubt, smarter use of technology will make a huge impact in delivering financial services better and deeper, a couple of personal experiences suggest that there are several ‘low-hanging fruit’ opportunities where information and existing technologies can be used better.
A month ago, I completed a home loan process from a prominent housing finance company (HFC). I had to go with this company and not lenders of my choice because the property developer from whom we are buying the apartment from has a tie-up with this particular HFC. The process was nothing short of a horror story. And, in today’s day and age, it was frustrating to see almost no progress in the use of technology where it really mattered, while using it extensively for superficial customer benefits. Starting with the digital application and SMS alerts to track loan status in real time along with the app to know where the loan application stood, lulled me into believing that financial services was finally putting technology to great use. But that’s as far as we got. For one, despite the ability to pull a bank statement, they needed me to download it and give it to them. Not satisfied by this as a proof of income and cash flows, I needed to produce additional documentation in the form of a payslip. More cross-confirmations were needed, despite my credit report showing my current work and residential addresses, not to mention various other proofs like Aadhaar showing the same. While this might still be understandable from a risk-management framework, what shocked me was that the three most important numbers in a credit decision—credit score, loan-to-value ratio and debt-to-income burden—were barely used for pricing or process decisions. Whether you have a 700 or an 820 score, the price and process remains the same. One doesn’t need innovation or new technologies to use these verified data points to be smarter in customer acquisition and service.
As a customer of a mortgage loan product, these things matter to me, not just a digital application process or multiple SMS alerts—these are useful but hardly earth shattering.
A while ago, I visited a high tech centre for a bank that, among other things, had a huge screen to help simulate equated monthly instalments (EMIs) for different loan products and calculate one’s final corpus over a period of time, depending upon different rates of return. It struck me as odd that so much tech was used for something that a spreadsheet application could do just as well. But it was definitely impressive so I asked the person manning the centre how I could go about creating different simulations for an auto loan product. To my amusement, he asked me to figure out how to do that since there was so much hi-tech machinery around that he barely knew how half of them worked. He mentioned that instead of the gizmos in use, if they just allowed for an end-to-end online application process instead of wet signatures, they and the customers would be better off.
One of my personal favourite examples is a lender to mass market consumers, which created an app to help customers know details of their loan accounts, such as balance outstanding, next instalment date, other products available, break-up of EMIs, and more. Most borrowers didn’t quite understand what was going on and ended up going to the branches asking what the app was for and if there was anything that they had done wrong like miss a payment. What they needed was a message telling them when an EMI was due, when it was paid and other basic information like loan outstanding, if required. Anything more was just too much information that confused more than it helped.
I use these disparate examples to underline my belief that while we keep chasing the shiny, new silver bullets for all of our problems, there might be a much larger pay-off in making better use of what we already have. I am not against constantly innovating. It’s more about putting these to better use than we currently do.
Manish A. Shah is head of digital bank at Nainital Bank Ltd.