By Neel Juriasingani, CEO and co-founder, Datacultr
The Digital India campaign, launched by the Government of India in 2015 aimed at making the country digitally empowered, has seen many successes. Digital India has a lot of potential which can only be achieved when every adult has access to the internet and a smartphone. In a country with over a billion connected devices and more than 450 million smartphones, affordable devices and low-cost high-speed internet connection are critical.
While telecom infrastructure is continuously evolving and bringing down the overall cost of access, several e-commerce companies such as Flipkart and Amazon as well as brick-and-mortar retailers are presenting consumers with various discount and easy financing options on smartphones through campaigns like the Amazon Great Indian Festival and Flipkart Big Billion Day. To encourage people to buy these aspirational devices, smartphone financing companies are also increasingly coming out with exciting loan deals during this time.
While such financing deals have been a great boon for thousands of Indians who could not have bought their favourite smartphone otherwise, there are always some inherent risks. The overtly competitive financing options often expose financing companies to the risk of higher defaults or delayed EMI payments.
To offer competitive yet secure smartphone financing deals, NBFCs and banks need to have a technology-driven approach. NBFCs and banks, for starters, can deploy a smart digital platform that integrates end-to-end with the lent-out device on one side and the Lender’s Loan Management System on the other. It also connects with device buyback, insurance, and repair companies, putting together the entire ecosystem to execute a secure smartphone financing deal. Here is how it can be done:
Smartphone as a virtual collateral
The lender can subscribe to smart digital platforms that allow them to access the borrower’s device, with due consent, effectively making it into a virtual collateral. In case of any delays in EMI repayments, a lender can gradually impair the user experience on the device and in cases of default, the device can be locked. The borrower, therefore, has a strong reason for paying the EMIs on time, making the loans significantly less risky.
Predictive fraud management
There are several usage patterns that indicate the potential of fraud. For example, frequently delayed EMI payments or devices going off the grid. Using machine learning and data analytics, the platform could model changes in the usage patterns and pre-empt several fraud attempts. As a result, lenders can reduce the burden of non-performing assets (NPAs) and improve their bottom line. Predictive fraud management also imbibes a sense of confidence among lenders and they can go aggressive about the growth of their smartphone financing portfolio.
Digitized EMI collection
There is an over-dependence in collections teams to reach out to borrowers’ doorsteps for EMI collection. With digitized outreach, lenders can significantly reduce their operational costs. Through an innovative over the air communication protocol, they can reach the borrower even when he is offline, out of cellular coverage area or unwilling to pick up calls. This eliminates the need for sending SMSs or setting up a huge call centre for outreach. With significant improvement in the digital payment’s infrastructure, repayment could be facilitated using several options including credit and debit cards, net-banking, digital wallets, UPI, and so on.
In India, smartphones cover an entire spectrum of needs, from ‘utility’ to ‘aspiration’. Therefore, any solution that makes smartphone purchase affordable, has tremendous value. However, lenders trying to make big in this game, need to move over the ‘deals’-based approach to ‘tech’ based approach.