A few weeks back, a friend, who was setting up his new apartment, was trying to buy furniture online. He implicitly trusted the brand, the products, and the website through which he was trying to buy the products. The transaction, well over Rs. 50000 ($800+), was in the checkout process flow and a “Buy on EMI” option caught his attention. Instead of paying the entire amount upfront, given all his other expenses on home renovation, he decided to avail this option. Once he selected that option, he was taken to a different page, possibly managed by a financial institution (NBFC), which gave him one of the following possible reminders –
It will take 24-48 hours for the digital loan to get approved. Yes, the transaction has become a formal personal/ consumer durable loan.
To complete the process, a set of documents will be required
Oh wait, we need to do your detailed credit risk assessment first. We need to create your ‘file’.
- and so on and so forth.
So, what did he do?
He opted out of that option, and completed his transaction using another funding method. Now, this gentleman is someone who probably earns more than Rs. 25-30 Lakh per annum, has a solid credit history, and is overall, a good customer for almost all e-commerce guys.
Should the NBFC be blamed? Only partly
A process is a process is a process. If risk & compliance are not given the importance they deserve, businesses sink faster than they can be built again. Yet, the new world of Digital Finance requires a Digital Mindset to Financing powered by the all-new alternative data.
And therein, lies an opportunity.
What if –
a platform could do the credit assessment of this gentleman faster (maybe in less than 10 seconds) by leveraging the person’s history, available paid and public databases, additional social and network data, and good old fashioned risk management?
a platform could be plugged into and tuned for a merchant or the digital lenders – NBFC tag team depending on its customer profile, without a fuss, and with minimal effort?
a platform could replicate/ proxy almost every offline metric that an NBFC lending process uses, but simplifies it for the digital customer?
a platform could help built the transaction and credit history for the 60%+ underbanked and unbanked of a country like India and brought them to mainstream credit ecosystem?
a platform helped extend “transaction credit” before rolling it up to “consumer credit”. After all, the nearby mom-and-pop store has been doing that for decades, right? Even the nearby fruit seller does that!
Additionally, factor this – 70%+ of the transactions in the e-commerce space in India use “cash on delivery” as the preferred payment method. While the proportion is similar to or in line with the penetration of credit cards in India (This is where Algo360 comes into play. Our solution will aim to revolutionize B2C credit in the online world by making Digital Finance truly digital. Furthermore, it also plans to improve underwriting processes along with credit underwriting process in banks)