LoanAdda Revolutionizing the Indian Digital lending landscape with AI
LOANADDA REVOLUTIONIZING THE INDIAN DIGITAL LENDING
LANDSCAPE WITH AI
Anshuman Mishra is out there to change the way under-served consumers seek a loan with his fintech firm, LoanAdda. He is constantly ripping the traditional rule book to emerge with newer innovations and unique offerings providing customized financial requirements for those locked up with limited banking access.
As it is answering newer challenges every day, technology has become the ‘fuel’ powering a multitude of industries and continues to gain momentum. Within the lending industry, emerging fintech companies are already luring a huge chunk of a long under-served audience. The market is ripening for disruption; lending fintech start-ups are making financial inclusion possible, which hardly caught light of the day till a few years back. While most fintech players were still brainstorming and were trying to lead the lending bandwagon, they missed out the core requirement of customization. Loans, albeit improving with more options, still pose challenges for certain demographics. And that’s why the script of Fintech firm LoanAdda was penned down back in 2014 by Anshuman Mishra.
Doing it on its terms and pushing changes while growing with the technology, LoanAdda swooped in to cater to the loan requirements of creditworthy borrowers and bridge the country’s massive credit gap.
UPPING THE GAME
LoanAdda is an AI-Powered Consumer Lending Brand making inroads into digital lending by harnessing advanced analytics and non-traditional data using LoanSwift its inhouse software which automates and finetunes underwriting processes. The sourcing and operations costs are 22 – 40% lower due to AI. Unsecured consumer lending has had growing appeal to banking providers, and more of it may be executed through fintech partnerships. The under-writing for subprime borrowers is quite different from that of new to credit borrowers but in both cases the credit limits have to be monitored more tightly to fine-tune credit quality. As a Fintech, it balances the aggressive customer acquisition with digital underwriting to ensure that the default rates are minimal. A multivariate regression analysis is done by LoanAdda’s software considering a number of variables starting from loan origination to third party sources. The regression analysis is done for credit sanctioning decisions and finds out if any prohibitive factoring was used to ascertain the success rate of a loan and its pricing. LoanAdda being a Co lender has the pricing authority. It originates customers through its app and evaluates creditworthy applicants from the pre-approved segmentation of customers. A percentage variation from the tool’s expected pricing or lending rate from what the customer demands is plotted. The software also finds out why certain applications were denied or were priced higher or lower than the tool’s predictions.
FEATURES OF LOANADDA APP
LOANADDA ELIGIBILITY CHECKER
Confused about your loan eligibility, just punch in your monthly income and current EMI’s and outstanding and get to know about your loan amount eligibility from our LoanAdda Eligibility Checker.
LOANADDA EXPENSE TRACKER
Enables you to track all your accounts and spends, keeping you updated in real time on all your transactions.
Get details about various options on your monthly EMI payments using our online EMI calculator to choose an affordable repayment option for your loans.
HASSLE FREE PROCESS
Update your profile with just some basic information, and upload minimal documentation, and get the e-approval within few minutes.
Loans has traditionally been a cumbersome process- approach banks for loans, drown yourself in time consuming paperwork and then the nail biting wait for weeks or sometimes months to get the same processed. And when you finally get the approval, you have to adjust with the terms of the loan decided by the bank! The customer is never the king in the loan industry. Something dramatic is happening in the lending landscape of India to a category of borrowers who are new-to-credit (NTC). Naya India customers seek convenience and accessibility above all, which the traditional lenders are finding difficult to keep up with let alone cater to. And that’s where LoanAdda comes in to the picture – making loan a convenient and customized affair. Initiating its journey in 2014, LoanAdda is in full bloom. In full swing with 4 consecutive years of profitable growth and a team size of 200 Data scientists, PHP developers, Sales and Credit Managers, LoanAdda is marching ahead to build a system that integrates customer origination, credit underwriting on pre agreed common parameters and minimizes IT infrastructure to have a sustainable and profitable growth. The brand capacitates NBFCs to focus on their core lending business, with access to latest acquisition, underwriting technologies, ready-made loan servicing software and portfolio collections and recovery undertaking, thereby giving them a clean portfolio. LoanAdda is built on scalable technology and modular infrastructure as a turnkey solution for NBFCs.
“Loanadda has built entirely inhouse from scratch our CRM, underwriting software and app under single integrated software program and we constantly upgrade it based on consumer insights. The problem we solve is of 456M Indians without any access to formal sources of credit. People don’t want to postpone their consumption or their plans to start a business, there is limited access to credit for unbanked customers and poor guidance in facilitating loans. With high entry barriers to formal banking and lack of education adding to their woes, these customers remain outside the periphery, pushing them deeper into poverty. This problem is further aggravated by the fact that customers usually do not know that though some lenders have rejected them there are others who may fund them. Loanadda is the mentor to the erstwhile non creditworthy borrower, who has something unique to be able to lend to, and the software finds it” Anshuman reads the plot to us during our recent conversation with him.
The mind behind the launch of first Gold loan Securitization product in India for ICICI, Anshuman Mishra draws out the best in the people around him. With over 17 years of professional experience across banking, consulting, retail and venture capital sector, he decided to embark into the sphere of online loan market and ideated LoanAdda. The concept for this unique venture was incited by his acute observation of prevalent conditions in India’s financial inclusion process. In a bid to improve and augment this undertaking, he created an organized online loan origination and segmentation software completely inhouse.
In the following interview, Anshuman gives us insight into what the future has in store for LoanAdda.
Tell us about how you came up with the idea for LoanAdda and the problem you were aiming to solve.
I was a part of the ICICI Bank’s Rural Micro-Banking & Agri-Business team when I did the first gold loan securitization and Priority Sector Lending Securitisations like Microfinance. Since then social impact has been a life goal. As a fund manager at Aavishkaar, an impact fund, I saw that the total outreach was limited to a few funds/banks reaching out to the same set of companies/customers. There was no platform to help an underbanked customer to reach the existing lenders by inputting his data points and juxtaposing with each lender’s parameters and then taking that customer to the lender. The idea was, how I would create a platform where I take all parameters of all lenders and find the underserved customers and match the two to know which of those customers can get a loan from existing channels. Taking this solution further, I planned to become a lender myself, as an NBFC, to all those who’re not being lent by the system. I created a hybrid model where the goal is to facilitate the best credit advice, putting the power in the customers hands.
The problem which we aimed to solve is that the bottom of the Pyramid customer, both underbanked and unbanked, have no access to formal sources of credit and hence they depend on informal sources with ROI as high as 120% which pushes them deeper into the vicious cycle of debt. A poor/moderate income person doesn’t have an Income tax return, is mostly illiterate, and has no access to formal sources of credit. We cater to them by finding the right lender under whose parameters he/she can fit. Our proprietary algorithm intgrates the credit parameters of all major banks/ NBFC’s with the customer’s credit profile to arrive at the best fit option.
Is Fintech actually different? We’ve always been consumers and developers of technology in financial services.
Traditional financial institutions have been built on their brand recognition, scale and the trust that they bring in. They have access to a huge consumer base but have been held back by legacy systems. Fintech companies like ours have a better outreach to the customer because of our agility, our customer centric focus and an infrastructure purely built for digital. Improved data analytics, extensive mobile connectivity and last mile highly personalised service are the key differentiators in how we work. In the Fintech ecosystem no one is currently solving the problem of serving the under banked. What we do differently is take the parameters of various banks and input a technology by which we take parameters of these lenders and see which customer will get a loan from which lender, and this is done through artificial intelligence machine learning platforms which we’re constantly evolving to increase our probability of finding a lender to the customer. LoanSwift doubles itself as a CRM, front end face of website and app, credit underwriting algorithm to enhance the probability of a cutomer landing on its site for a loan enquiry. Because of this process, we greatly increase the probability of raw lead to disbursal conversion thereby reducing the cost of acquisition substantially from the competition. My insight has been to connect the dots and create a simple solution for existing lenders and existing non-funded customers. Till now we have disbursed in 493 locations Pan India.
Why LoanAdda chose under banked customers as its market?
India has the second largest unbanked population in the world, but the supply of credit is disproportionate. More than 40% of the population are not connected to any banks and 87% of transactions are still cash based. The majority of the population is still hungry for credit, but have no way how to go about it. LoanAdda started by helping raise financial awareness, because that is still the biggest gap in the system- transparency. Being a financial technology company, we enhance the probability of loan for under banked consumers in India by filtering customer data points to enable and enhance their credit worthiness, all this in a completely transparent manner. We use big data analytics and artificial intelligence to bring together the right borrowers and lenders. These automated processes ensure quick customer turnaround and minimal paperwork. As a lender, we facilitate the customized financial requirements for businesses and individuals with limited banking access. Based in New Delhi, the company’s mission is to improve financial inclusion services in India and promote hassle-free access to loans.
What’s on ground zero for India’s largest PSL online loan aggregator portal?
By being the largest PSL online loan aggregator portal in India competing with the complete spectrum of loan origination to disbursal, LoanAdda uses alternative data to provide credit scoring and verification to economically empower the poor sections of society. We believe in truly transformed lives not by charity but by credit access. Our team has actual online experience of loan origination, structuring of the case and discussion with the lender to do the actual case sanction and disbursal. Team product knowledge includes collection, analysis and processing of multiple data points, which are fed to the development track team that constantly upgrades the software to ensure perfect track record for all our lending partners.
What are the biggest trends to watch for over the next 12 months?
We’ve processed 50,000 applications at 2,000 data points and we measure impact by the ability of someone accessing credit. A majority of our customers are unbanked and these are our own sourced leads and not as a CRM aggregator or white label to a Bank / NBFC. By 2021, LoanAdda expects to be able to facilitate disbursals of loans worth INR 8K crore (the US $ 1.17B), thereby catering to approximately 1% of the total market size. We plan to be a member of GIIN and have a social impact metrics evaluation done periodically; having done that as an impact investor it gives me a head start into impact evaluation. Our primary goal will be to measure people outside the formal lending network being added to the same.
As a Founder and CEO, Anshuman takes charge over the sales and operations of the company. His vast skill set includes financial modelling & valuation, business strategy development and asset management. He completed his MBA – Finance from IIFT and later earned a one-year general management degree from INSEAD, Paris.
Prior to establishing LoanAdda, he gained valuable experience in the loan disbursement sector through stints at major financial institutions. He began his professional journey as a Product Manager with ICICI, where he was responsible for managing the organization’s Priority Sector Lending model. Over there, he also launched the first Gold loan Securitization product for the company. He has worked with Deloitte’s Intangible assets Valuation team, as the Chief Financial Officer with ColorPlus where he managed to maximize the company’s profit by a large margin in just over a year and also as a Fund Manager with Aavishkaar Social Impact Fund. He is a voracious reader and enjoys playing Table Tennis in his free time.
ON THE DECK: THE PERSONAL GLIMPSE
Are you a risk taker?
Some amount of risk is inevitable in life. But I believe in taking calculated risks. The outcome might differ, but till date most of them have been instrumental in putting me onto the path I am on today.
What do you like to do the most when you are not executing your business operation?
I try to read daily before I sleep. There is always a book which I carry around in flights. Finding the time to sit and read exclusively is a rarity most days, but whatever free time I can manage to squeeze in, I like to get a few pages finished. I set up a personal reading challenge at the start of the year and manage to follow that schedule religiously.
Describe the most memorable incident of your professional life.
There have been many memorable incidents in my professional life. But the major incident which I cherish is my transition from being salaried to being self-employed. This has been the best part of my professional life. I always had a vision for setting a firm in line with financial technology. Our goal is to be recognized as India’s No.1 leading Fintech Company for PSL.
What are the forthcoming plans for the company?
Since, when we started, we had a team of 3 members, but now we are expanding our team size and we are now a 200-member team. Our main agenda has always been to Grow with people, and eventually, the business will grow.
What are your plans on retiring?
I would love to explore an alternative career in academics post retirement. I serve as the Member of Governing Council of VIPS.
If you had to choose one thing, what do you think you’re the best in the world at?
At Colorplus when I joined as CFO it was having losses of 14 Cr on a Rs. 163 Cr Turnover, we turned it around to a Rs. 15 Cr profit with 173 Cr revenue in exactly one year. More so cashflow management is key to any business- traditional or start-up, as burning cash without a clear goal of profitability is not a good idea. Commercial viability of the business model balanced with ramping up for scale is key to having a longer runway in today’s hyper competitive consumer’s mindspace. I believe that my strength lies in driving the profitability metrics in any organisation, LoanAdda is the only Fintech company with straight profits since inception.