How Smartcoin Financials is using AI-powered app to disburse loans

SmartCoin Financials Pvt Ltd is an app-based consumer-lending platform based out of Bengaluru. Founded in 2016, the fintech startup has partnered with non-banking financial companies (NBFCs) registered by the Reserve Bank of India (RBI) to offer instant personal loans to self-employed and salaried individuals across India. To address the concerns of the vast under-banked people in the country, the company is evolving from a micro-lending platform to providing a full suite of offerings, including gold savings, insurance, among others. So far, it has more than 1.11 crore registered users and it has disbursed loan amounts worth over Rs1,700 crore, SmartCoin CEO & Co-Founder Rohit Garg told Bizz Buzz in an exclusive interview

How microfinance firms use artificial intelligence (AI) to democratise credit access?

Since 2017, Smartcoin has been at the forefront of facilitating micro-credit through its cutting-edge app and has witnessed rapid growth with over 10 lakh loans disbursed through its AI-powered modules in over 95 per cent of the districts in India. Our app-based credit platform offers instant credit options starting from Rs 1,000 to Rs 50, 000 through 100 per cent automation at a pan-India scale.

These days, the banks and financial organisations across the globe are focusing on one thing most - increased optimisation of AI. Research shows that leveraging AI will enable banking companies to decrease overhead costs by a significant 22 per cent by 2030. It has been estimated that the total savings accrued can reach up to $1 trillion.

Therefore, fintech players are set to go all-out on increased utilisation of AI-systems from sophisticated chatbots to resolve a number of client queries to fraud-detection engines that can ascertain the authenticity of KYC documents, to other new-age features that can exponentially increase efficiency, productivity as well as the customer experience at the same time.

Every business needs a significant financial push to advance its day-to-day operations. For companies and individuals, who are applying for a loan and still facing rejections, we provide them some effective tips to gain that elusive loan package. We suggest the borrowers improve their overall credit score as it is one of the most essential parameters used by all financial institutions to verify loan eligibility.

We also recommend the borrowers not to file multiple loan applications as it will not only impede the loan sanctioning process, but also create a bad impression on the bank. We also help them to add a loan guarantor in case of a poor credit score as a co-applicant can help in gaining a lower credit rate and also stabilise the loan-sanctioning process.

How much the NBFCs are contributing to the GDP growth in FY 2022-23?

As per a report, the bank credit to the NBFCs rose to double digit figures in FY 2021-22 with outstanding bank credit to them rising by 10.4 per cent to Rs 10.5 lakh crore on the back of improvement in overall economic activities and banks' renewed focus on the NBFC sector following improvement in their balance sheet. This highlights the extensive contribution of the NBFCs in strengthening the nation's GDP in FY 2022-23.

How NBFCs are uplifting the fintech sector in India?

The NBFCs like Smartcoin Financials are truly uplifting the fintech sector by meeting the credit requirements of innumerous self-employed micro-entrepreneurs, micro-merchants and middle/lower-income salaried individuals by leveraging advanced data science and machine language algorithms. Present-day NBFCs are emerging as flag bearers of the financial inclusion revolution in the country.

These are serving the extant under-served customers through state-of-the-art and comprehensive digital interfaces across the country. They are enabling a newly-found access to formal credit for the hitherto under-banked sections of society. This, in turn, is slated to benefit over 300 million people from the lower end of the socio-economic spectrum by providing them with a slew of empowering prospects.

Our fintech platform is enhancing the lives of many individuals via financial inclusion and access to credit. SmartCoin has more than 1.11 crore registered users and it has so far disbursed over Rs 1,700 crore worth loans. People can get loan amounts up to Rs 70,000 for a term of 91-270 days at an interest rate of 20-36 per cent.

Will the RBI's recent guidelines have an adverse impact on Indian fintech businesses?

With the RBI planning to set up a fintech department to facilitate innovation in India's fintech sector, the fintech ecosystem has been witnessing some difficulties every now and then with a slew of updates and mandates in the guidelines concerning prepaid payment instruments (PPIs), payments bank, digital lending, credit cards or crypto.

There are various instances of losses that occurred on account of the RBI's sanctions. For example, the rolling out of the Unified Payments Interface (UPI) and implementation of stringent obligations to ensure Know Your Customer (KYC) compliance in 2017 led to the loss of appeal in offering wallet services and the scrutiny in digital lending, prepaid payments instruments and buy now pay later (BNPL).

This has raised concerns and affected the entry of international firms. Similarly, in June, the RBI issued another notification wherein non-bank PPIs are not allowed to load credit lines on prepaid instruments. This diktat by the bank is considered to be an attempt to shut down card-based fintech and firms that operate as neo-banks and have merged with banks to give credit cards.

After the RBI's notification in June barred loading of PPI from credit line, fintech associations and startups held a meeting with the central bank officials, seeking an extension of six-months to implement the recent PPI mandate. As per sources, the RBI is skeptical about the possibility of people falling into the trap of cards and issuance of credit to the undeserving middle-income or less-income population.

How the MSME lending market is helping to close the credit gap for small businesses?

The rapidly growing MSME (micro, small & medium enterprises) lending market is proving instrumental in closing the credit gap for small businesses in India by advancing the financial inclusion process across the country. The fintech businesses and digital NBFCs also provide last-mile connectivity to MSMEs by enabling banks to scale out operations without incurring the high costs of opening physical locations.

The fintech businesses' digital skills and improved understanding of underwriting and collections for these sectors boost operational efficiency while decreasing the cost of obtaining small-ticket consumers, allowing for lower interest rates on funds. Moreover, they are customising creditworthiness assessments based on their digital lending methodology.

They collate vast pools of data from numerous sources which is aggregated via analysis using AI and other technologies with continually growing algorithms and a comprehensive grasp of each specialty market. Additionally, fintech firms also provide risk-based interest rates with the use of AI-enabled technologies thus helping close the lending gap for small businesses.

What are the measures taken by the company while collecting back the loan/interest amount?

SmartCoin Financials ensures timely EMI reminders to the borrowers, and they are disseminated only through select official communication channels. It never indulges in any loan recovery practice that may be deemed as undue harassment. It also refrains from sending fake government documents such as tax notices, police FIRs, among others and the usage of fake stamps of government bodies like the RBI.