Most lenders are hesitant to lend to first-time borrowers because of the increased risk of default, which would further increase the level of NPAs.
At the time of mounting problem of alarmingly high Non-Performing Assets (NPAs) that hit the risk appetite of lenders hard, only a few players in India are willing to disburse loans to people without any credit rating references, while most lenders are hesitant to lend to first-time borrowers because of the increased risk of default, which would further increase the level of NPAs.
A recent report by RBI indicates that the defaults in consumer lending space have been a matter of concern for years, and the total amount in bank frauds rose 74 per cent to Rs 71,543 crore in FY19.
While the reduced risk appetite due to mounting NPAs resulted into a liquidity crisis that hit performance many sectors and cramped the economic growth, the rise of Machine Learning (ML) can prove to be a game-changer for banks, Non-banking financial companies (NBFCs), and fintechs.
In fact, with its ML capabilities, Datacultr, a Platform-as-a-Service(PaaS) player, has been able to significantly reduce the magnitude of damage for some of India’s leading consumer lending companies when it comes to default in payments.
This is because the first-of-its-kind platform of Datacultr helps in managing vast amounts of structured and unstructured in a short time, a task that would take too much time for a human to do.
Datacultr is helping consumer lending companies in the following ways:
- Study of User Behaviour: In today’s world, data holds the ability to define an individual, community and even a country. Every day, users generate tremendous digital information with identifiable patterns on their digital devices. Datacultr leverages this data to chalk out changes in customer behaviour which might hint at a potential fraud.
- Actionable Insights: By providing actionable insights and setting up triggers that can alert them against potential frauds and asset resale, the platform allows the lender to block some features of the device user-interface, in case there is continuous delay in payment by the customer.
- Educating the borrowers: Datacultr’s technology makes borrowers aware that timely repayment helps build their credit score, which in turn can get them access to big-ticket size in the future, and acts as an added incentive for users to repay their loans.