Did you know that credit behaviour and gaming apps are correlated? Alternative Credit Data, a credit assessment model, can indicate the possibility of bad credit behaviour in people who have more than three gaming apps on their phone.
That was one of the many fascinating insights Souparno Bagchi, COO of Balancehero India, shared in a fireside chat at TechSparks Bengaluru with Shivani Muthanna, Director – Strategic Partnerships & Content, YourStory.
Bagchi shed light on how location as a metric had replaced socio-economic metrics of creditworthiness with improvement in Indian digital infrastructure. As more and more digital highways came into the picture, mobile penetration and customers’ awareness towards digital transactions in terms of opportunities had emerged as two frontline indicators of the scale of financial inclusion, he said.
On the scale of opportunities in the Indian landscape at present, Bagchi said, “Financial inclusion is going beyond UPI payments and lending today. Even if we take a pragmatic approach, the lending is going to grow 3x to a figure of around $300 billion in the next three years – primarily from Tier II and plus cities.”
Balancehero India has created an impact on the fintech industry in recent years and its numbers do the talking. A whopping 87% of Balancehero India’s business comes from India’s Tier 2 and plus cities while the remaining 13% comes from the top eight cities. Its serviceability includes a staggering 97% of the total 90,100 pincodes in India. It disburses more than 12,000 fresh loans on a daily basis while more than 30 lakh customers apply for the loan on the app every month.
The conversation then moved to how Digital Payment Infrastructure (DPI) and India stack (Aadhaar, eKYC, UPI, Account Aggregators, etc.) have created a launchpad for Indian fintech solutions.
“We are fortunate as a country because we don’t need to create demand, we just need to tap the qualified demand. DPI is the backbone of what we do, day in and day out. From customer onboarding and identification to the level of underwriting, DPI helps us in everything. The adoption of account aggregators has also increased exponentially in the last few years,” Bagchi said. He added that DPI has evolved since inception and now helps fintech companies to not just know, but deeply understand customers.
The Balancehero COO credited First Loss Default Guarantee (FLDG) Guidelines for reducing the trust deficit among consumers, the ecosystem, and the players. Before these guidelines, banks and NBFCs were unsure about the degree of risk, he said.
“For me, the main premise of the digital lending space is FLDG Guidelines. It is a way to provide some level of guarantee to capital providers and channelise retail lending. In fact, India has inspired many other countries to adopt FLDG guidelines. Every country where there is a trust deficit is adopting these guidelines,” he said.
Bagchi also addressed the challenges fintech companies face due to constant changes in the regulatory system. “We need to understand that regulations are not speed bumps but guardrails,” he said. The more guardrails there are, the more safe space there will be for fintech players and consumers.
On how BalanceHero India is leveraging modern technologies like AI and ML, he called them “our bread and butter”.
He outlined the three stages: the first is verticalisation, delving deep into leveraging modern technologies. For example, in the case of lending, it’s underwriting. “Second, you start applying these technologies as per the use case. The third is responsible use of any other front-end technologies,” he said.
In a country as diverse as India, where the target audience of any fintech company can range from a person living in a rural area to a GenZ consumer, and consumption patterns are constantly shifting, it is a challenge to ensure responsible lending.
Bagchi feels lending can only be responsible when companies are 100% sure about their product and asset class from the very beginning. “We are very clear that we are in the non-discretionary space. Our focus is on people who need working capital, money for exigencies, for life events, festivities, etc. We are not in the business of consumer durable loans or giving loans to people for their next iPhone,” he said.
He emphasised the importance of collaboration when partnering with banks to enable more payments. “I strongly feel that collaboration expands the whole pie. You can collaborate on the scale of FLDG or co-lending. As a business, you know who can provide the capital, who can provide the guardrails of regulation, and who can be originators from the customer perspective,” Bagchi concluded.
