Everyone is talking about it!
API is like the buzzword in the lending sector!
API stands for Application Programming Interface. They have been around for many years and have now turned more mainstream for their unique abilities.
In layman terms, APIs include a series of protocols that allow a software solution to call on functions from other sources and systems. In lending, APIs enable the lender to acquire critical information that is essential for decision making.
When the quantity and quality of data available with the lender is accurate and extensive, it turns into a competitive advantage for the borrower. However, the lender must be able to gather that kind of information in a cost-effective and secure manner.
When the information in hand is validated through relevant sources, decision making becomes easier, and the lender is better positioned to assess loan requests from a whole array of customers.
This is where, APIs join the game!
With the pandemic catalysing the need for digital lending and the percentage of bad loans increasing, APIs are here to stay and become the future of efficient and safe lending!
How important is efficient loan decision making?
The RBI has reported a whopping Rs 660 thousand crores of bad loans for Indian banks since 2014.
A popular opinion behind the downfall of the 94-year long Lakshmi Vilas Bank is its unwarranted shift of focus to larger loans.
Clearly, bad loans can bring down any organization irrespective of its legacy and calibre.
Apart from above mentioned benefits of API, there are for compelling reasons for borrowers to embrace an API-driven structure. They are:
The Loan Origination Software includes multiple APIs that can be categorized as follows.
1. Identity verification: This includes APIs for PAN card, driving license, voter ID, passport and AADHAR verification. Techniques like OCR are used by the APIs and no customer data is stored in them at any point. Therefore, the privacy data remains unaffected.
2. Address verification: Generally, two important checks are made under this category and they are electricity bill validation and LPG verification.
3. Vehicle verification: The RC number of a borrower is all that it takes for this verification, using which, certain personal details, like address, age and name of the owner can be identified easily. This type of check can also be called asset verification.
4. Financial verification: Financial data is hard to acquire, can be complex and yet is important to make a valid decision in the loan origination system. Tools like data scrapping and penny drop API are used for financial checks like bank account verification, bank statement analysis, ITR extraction and GST details (GST details are also collected for merchant verification). Again, the data is 100% secure during the process.
5. Utilities API: Face crop API, Face match API, Name match API and Face Liveness are some of the APIs used in this category.
6. Digital contracting: When the loan has been approved the borrower needs to initiate the E-sign transaction. APIs can be used for this purpose too.
7. OCR service: OCR stands for Optical Character Recognition. It is used to convert text from images into machine-coded text. For example, OCR API can be used to read a scanned copy of a document and the data obtained from the image can be repurposed for use by the borrower.
A deeper look into the range of APIs available for the lending industry follows…
Note: Alternatively, an API to verify the GST number alone is also available.
The Final Word
Get API-fied with CloudBankin!
APIs are like the superpower needed by any lending organization.
Incorporated with all the above APIs, is the robust digital loan origination software solution, CloudBankin, from Habile Technologies.
This signature product addresses three main issues that banks and other lenders face while moving into the digital mode.
In a nutshell, if API is the fuel to your lending business, then CloudBankin is the powerful engine that will deliver the best essence of the APIs.
A robust Loan Origination System (LOS) that can establish strong
What is Loan Origination System? Loan origination is the term
In a fast-paced, competitive world of the lending industry, financial
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(Formerly known as Habile Technologies)
After smartphone penetration, people are not watching their SMS at all. They use SMS only for OTP related transactions. That’s it.
But What can a Lender see in your SMS after you consent to them?
Lender can see income, expenses, and any other Fixed Obligation like (EMIs/Credit Card).
1) Income – Parameters like Average Salary Credited, Stable Monthly inflows like Rent
2) Expenses – Average monthly debit card transactions, UPI Transactions, Monthly ATM Withdrawal Amount etc
3) Fixed Obligations – Loan payments have been made for the past few months, Credit card transactions.
It also tells the Lender the adverse incidents like
1) Missed Loan payments
2) Cheque bounces
3) Missed Bill Payments like EB, LPG gas bills.
4) POS transaction declines due to insufficient funds.
A massive chunk of data is available in our SMS (more than 700 data points), which helps Lender to make a credit decision.
An interesting insight on vehicle loans for lenders.
A trend we are seeing today – the first-hand vehicle ownership is decreasing with time. Why? People are upgrading their vehicles in every few years because of technological advances. And, this can be seen more with the millennial generation.
So, what should a lender do in terms of financing?
– Estimating the residual value of the vehicle at the start of the financing period.
– Charging a borrower only for the residual value (which is the difference between the value after a few years and the current value)
Example: A bike currently is INR 1 lakh. You want to buy the vehicle for 2 years. A lender will estimate the residual value of that bike today and what it would be after 2 years. If the estimated residual value = INR 45,000, the lender will charge you only that (say, INR 55,000 with interest for this instance) during your tenure.
At the end of 2-year period, you have 3 choices:
1. Return the bike and upgrade to a new one without going through the struggle of selling it.
2. Pay the lump sum remaining amount to own the vehicle outright.
3. Extend the financing and own it by keep paying the EMIs for the remaining amount of the vehicle for the next 12 or 18 months.
Benefits for the borrowers?
– Flexibility to use a vehicle and upgrade to a new one.
– Affordability to not pay for the complete value of the vehicle with the intention to use for a lesser amount of time.
– Convenience in owning the vehicle.
Say goodbye to the old lending option and embrace the new way of financing for vehicle by lenders!
How many of us know this?
1) Tiktok does Lending ( is it an entertainment company or social media company or a fintech company?
2) Youtube China does Lending
3) Top 100 internet companies in China(no matter what business they are in) do Lending
The team which was heading Lending in Tiktok was the Advertisement team. If we do Ads, we do X no of revenue. But if we do lending, we’ll get X+30% more revenue. This is on the same Ad spot.
Ad team has transformed into a lending team, and in today’s world, it’s possible because the subject matter expertise can be put in as an API and given to you.
Embedded Lending as a service is becoming popular in India too, and I am happy to be part of this ecosystem.
The answer is No. Only the top 10 crore people have access to many credit products in India. Almost all Banks focus on this market.
Once you go beyond that, the credit access rate has dropped significantly due to multiple factors.
1) Customers who are having low income(30-40K per month)
2) Not earning from an employer who belongs to Category A or B
3) Not from Tier 1 or 2 cities
NBFCs and Fintechs focus on the above segment, pushing another 10 crores of people.
But in India, 70 crores more people are formally or informally employed, which still needs to be tapped.