Consumer Lending To Transform In 2020 With Over-the-Air Smart Device Collateralization

In a time when banks are tightening their lending norms due to rising non-performing assets (NPAs), consumers are constantly looking for alternative routes for borrowing. Therefore, non-banking financial companies (NBFCs) become their first choice. Just like banks, NBFCs also rely on credit history while assessing the loan applications of their customers.

However, this becomes a challenge when it comes to catering to the applications of new-to-credit customers, who do not have any past credit history. While these applicants are a lucrative segment, the business risk, in the absence of any historical data, could be much higher.

Therefore, it becomes important for NBFCs to disrupt while keeping the entire value chain intact for this segment. This can be done by leveraging sophisticated technology that allows them to monitor and control the collateralized assets remotely. Given the importance placed on smartphones these days, it is meaningful collateral to offer, for a new to credit customer. The proliferation of cheap internet services, allows lenders to seek customer’s consent to connect with their smartphone, access data relevant to improve services and control the device remotely if required.

More importantly, all this should be done without changing the customer journey or processes laid down by the NBFC at the retail or elsewhere. Over-The-Air device collateralisation helps the lender to enroll the device as an asset, virtually, without disrupting the customer journey or processes. Technology makes it possible for the lender to innovate and expand its market, without causing any disruption in its processes.

To collateralise a smartphone, the lender does not have to deploy any physical sensor. Instead, the smartphone connects with the data streaming platform that is built on modern cloud-native architecture, to enroll & keep a tab on the device.

This essentially converts the smartphone into virtual collateral. In case the customer delays EMI payments or becomes completely unresponsive, the lender can always track the device, take control, gradually impair the user experience, or lock it.

The OTA-based loan securitisation is a win-win situation for both sides. For customers, it provides instant loans without any additional collateral. For lenders, it is an easy way to significantly reduce their business risk and cost of collections on ‘New to Credit’ customers in the emerging world. The value proposition will make OTA-based loan securitization a preferred way for retail NBFCs in 2020, to onboard the ‘New to Credit’.

The number of smartphone users in India is expected to double to 859 million by 2022 from 468 million users in 2017 growing at a compound annual growth rate (CAGR) of 12.9%, according to an ASSOCHAM-PwC joint study. Therefore, the volume of opportunity for retail lenders looking to provide loans based on smartphone collateral is mammoth. The need of the hour for them is to embrace technology at the earliest to secure their lending to the new to credit customers.

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