The beginning of the COVID-19 pandemic in India meant everything shut down. One of the key financial sectors that suffered was retail lending aka personal loans, credit cards, auto loans and such. The reason? Physical verification by an executive of the consumer is mandatory in the process. While markets and sectors are opening up, it might be key to understand how you can avoid physical contact while availing credit. We caught up with Rahul Bhargava, Chief Product and Technology Officer at InCred, a non-banking financial company focusing on loans, on the future of the non-physical contact verification process for consumers.
How did retail lending get affected on account of lockdown?
There was fear of job losses amongst borrowers and lending operations were hampered. The RBI was quick to announce a moratorium to provide borrowers a relief but lenders worried about its impact on the credit culture and potential risk to repayments in the future. Overall, the situation was quite dynamic and all lenders curtailed lending significantly. Some even stopped their lending activity altogether.
Was the cause only a lack of physical verification?
No. Though the lack of physical verification was surely a factor at play in this scenario, the major cause of concern was still the economic one. The horizontal market entered a strict lockdown with a lot of economic losses incurred by businesses and the workforce at large. The lenders anticipated its impact on loan repayments and the future creditworthiness of individuals and businesses.
Nevertheless, the COVID impact on physical operations was also very high. Lenders conduct physical verifications to avoid fraud. However, during this period, agents couldn’t travel due to obvious reasons. It also affected the lending activities.
What is the alternative to physical verification?
There are a couple of techniques that can prove to be a game-changer in this context. The Video-based Customer Identification Process (V-CIP) that RBI introduced earlier this year is one such alternative. We can take several factors into the account including the geographical location of the verifier, which can help in non-physical contact verification.
Building on such approaches, InCred has built what we call a ‘self-FI process’ using which borrowers can validate their work email address via an OTP, the employer validity can be checked digitally, and proof of residence at an address can be provided by the borrower through the InCred mobile app. The customer captures a few pictures inside her home along with the family and submits them in the InCred app. By correlating the GPS locations of those pictures with the address provided and a few other data points, we can easily validate the borrower’s residence despite the physical constraint.
Does self FI reduce fraud and dependency on external agencies?
Yes, it does. It is a tech-driven process that ascertains the validity of relevant data points. It also extends a prime lending experience to the legitimate customers as they can do it at their convenience. There is no need to set up any appointments and be available in a particular timeframe.
Do you estimate the take up of such technology to elevate lending to retailers?
We expect digital assistance to make more impact in the lending ecosystem, especially facing consumers and small businesses alongside others. It can unlock superior efficiencies throughout the horizontal market.