6-months EMI moratorium: As borrowing gets difficult, digital lending solutions come to the rescue

In the current scenario, lenders are largely looking to lend to existing customers with a good track record.

When it comes to meeting short-term funding options, In the absence of an emergency fund,  one often finds oneself hard-pressed for funds. A possible solution left is to go for a personal loan, which is typically collateral-free in nature. Personal loans should, however, be the last option if one is looking for funding options and that too after carefully looking at the cost, including the charges and interest rate.

The whole idea of opting for a personal loan is to get the loan amount at minimal documentation and at a short notice. In an email interview with FE Online, Naveen Kukreja- CEO and Co-Founder, Paisabazaar.com, which has recently come out with Digitization Stack, an end-to-end digital process for loans, talks about its unique features and how it aims to help borrowers.

You have recently come up with a Digitization Stack. What it is and how would it help borrowers?

The pandemic has made the ability to avail products and services from inside your home a fundamental consumer need today. And in the absence of digitized processes, businesses and industries have suffered.

If you look at the lending industry, there has always been a reliance on offline processes. The regulations too have been designed in a way that there has to be at least one physical meeting between the borrower and the lender before the loan is approved and disbursed. As a result, from the last week of March, the entire lending industry came to an almost standstill.

The pandemic and the lockdown was a wake-up call for the entire industry, indicating a grave and immediate need for digitization of lending. The good news is that most players, including large banks, have started giving special focus and emphasis on digitizing processes.

At Paisabazaar.com, we have used the last 4 months to build our digital capabilities to offer completely digital lending solutions to customers visiting our platform, through Paisabazaar Stack.

This Digitization Stack enables completely digital solutions for KYC verification, income and employment validation, repayment set-up and consent on the loan agreement. What this means is that we have a complete end-to-end digital process for loans, from application to disbursal.

We have already begun work with some of our key bank and NBFC partners to integrate our stack that would not just help customers, but also add to the lenders’ efficiency.

The stack makes lending digital, which enables customers on the Paisabazaar platform to get loans and credit cards. What earlier used to take at least a week, customers would now be able to get a personal loan on Paisabazaar within 24 hours from a large bank. And this, from the comfort of their homes, with zero physical interaction and no paper-heavy documentation.

Who all are eligible and who is your prime target borrower?

With widespread disruptions in incomes and the overall slowdown of the economy, most lenders today are conservative in issuing new loans. The 6-month moratorium has added to this cautious approach from banks and other players.

In the current scenario, lenders are largely looking to lend to existing customers with a good track-record or to Prime Customers – those with an annual income of over Rs 4-5 lakh and strong credit history. Also, to a great extent for the next few months, lending may be restricted to salaried employees working in industries that are less impacted by the pandemic.

However, as the situation improves and we  get a range of partners on board with our Paisabazaar Stack, we would be able to offer a wider choice and cater to an even larger section of our customers with completely digitized loans.

How do you determine the eligibility and creditworthiness of the borrower?

Paisabazaar.com works with 70+ lenders, ranging from the large banks to the new-age digital lenders, offering consumers a wide choice. However, conversations with customers in the past had indicated there was a lack of awareness around eligibility and most borrowers would struggle to understand which lender they should apply to.

To help them choose the most suited lender and offer, Paisabazaar developed a ‘Chance of Approval’ model. It is an industry-first innovation, which, basis the borrower’s income, credit score, past record, employer etc., tells him the chances of getting their loan application approved – Excellent, Good, Fair, Poor – against each lender.

It’s an advanced predictive algorithm that matches the creditworthiness of each borrower with the lending criteria, history of each lender bank and NBFC.

Is the process of KYC online? In what ways it can be conducted?

Earlier, a bank official would have to meet the borrower and verify his KYC documents and get his signature for KYC verification. This was one of the biggest hindrances towards making the lending process digital. Now, through the Paisabazaar stack, we have now replaced the physical Original Seen and Verified KYC process with an O-KYC and video KYC process, where the borrower does not need to meet any bank official physically.

In the O-KYC module, through automated XML parsing, Paisabazaar digitally extracts and matches customer information like Name, Mobile No., Date of Birth etc. This is followed by a Video KYC with a bank official where a liveliness test and location tagging is conducted.

What we are hoping for is that in the near future, the regulator allows fintechs and other players to implement the Aadhaar-based eKYC which really is the fastest and the best way to do the KYC verification. Currently, it’s restricted to banks and that too for small-ticket loans.

As a borrower, from which lenders does the borrowing happens? How much is the rate of interest? And, how to apply for the loan?

Currently, a completely digital process for issuing Credit Cards from IndusInd Bank is already live on Paisabazaar. We are also working with a large bank to offer unsecured loans, and are in the process of integrating the Stack with other 2-3 lenders in the next few weeks.

Eligible applicants would be able to see the digital loan offers from the lender once they apply for a product. Also, a section of existing customers who check their monthly credit score from Paisabazaar can also see these under pre-approved offers.