Fintech firms and traditional lenders, including non-banking financial companies (NBFCs) and banks, are seeking greater visibility of customer data, as more Indians turn to online credit purchases.
At Nasscom’s product conclave in Bengaluru, representatives of banks, insurance companies, NBFCs and fintech firms sought more granular data on customers, considering that both online and offline platforms have started partnering with lenders to offer direct credit purchases to customers.
With the economy growing at the slowest pace in six years, both Flipkart and Amazon have banked heavily on EMIs, and other forms of pre-approved credit purchases. For instance, in the run-up to the Diwali sales, Flipkart said in a statement that it had “massively ramped up distribution" of its online credit offers. And, the key to drive this strategy is having access to customer data, including credit spending history and bank statement, besides data gleaned from social media platforms.
Smrithi Ravichandran, business head, payments, insurance and commercial lending, Flipkart, said the e-commerce platform kicked off the process to bring affordable loans to customers in early 2016. Initially, it started partnering with banks and NBFCs to directly list credit and EMI products online, although this rollout was open to customers of partner banks and NBFCs only.
A year later, Flipkart turned to pre-approved EMI loans through partnerships with lenders, for which it had created a white-list of its ‘premium’ customers, she said at the Nasscom conclave. However, as data sets on customers began to expand, in 2019, Flipkart has started looking at even those customers without a formal credit score.
Flipkart isn’t the only one who is banking on new sets of customer data to expand the scope of its lending services. Sonny George, chief general manager, State Bank of India, said that its latest credit product targeted at the agriculture segment required a fintech partner to get greater visibility on loan applicants. “We have pre-approved loans for the agriculture sector…for this, we are working with a fintech firm that uses blockchain for getting some (user) data," he added.
Anuj Singhal, senior vice-president and head, risk management, Swiss Re, said several insurers were also working with fintech firms to improve the risk profiling of its customers, which can be equated with loan underwriting.
“Every year-end insurers get a spike in the number of renewals across the motor segment, and there hasn’t really been a way to determine the profitability of those different clients (policyholders) because we used to treat each renewal at the same level (financially). Now with fintechs in insurance, we applied data analytics to determine the top 20 clients, undertake revenue forecasting, and then seamlessly figure out my most profitable clients," added Singhal.
However, a single financial technology model cannot be emulated across all banks and insurers, since each entity has its own market and product focus.
“There are different use cases for a loan. It could be a short-term 30-day loan, or a 12-month loan, for high-ticket products. There is a way to look at each use case to understand the behaviour of the customer, and the demographics of the customer, to come up with a predictive score…Maybe five years from now, we will be able to come up with an alternative score by ourselves for our own customers (on Flipkart)," said Ravichandran.