CXO of the week: Nageen Kommu, CEO, Digitap

DIGITAP empowers financial institutions(FI) through its extensive, alternate data based risk management stack and high tech advanced AI/ML solutions to new age internet driven businesses for reliable, fast and 100% compliant Customer Onboarding, Automated Risk Management along with Big Data enabled services like Risk Analytics and Customized Scorecards. The company’s proprietary Machine Learning Algorithms and Modules provide one of the best success rates in the market.

Nageen Kommu, CEO, Digitap comes with over 15 years of work experience as a leader in Product management, Business strategy, Go-to-market strategy, Digital strategy, Growth and margin improvement across Telecom and IT sectors as well as around 6 years of strategy consulting experience in Telecom / IT sector spanning geographies such as India, NZ, Middle East, South East Asia. He is currently CEO of a tech startup (> 1.5 years) that develops API based solutions for Fintechs and Banks using AI – ML technologies. Prior to Digitap, Nageen co-founded a sports-based tech startup Dribl where he was responsible for product management and technology. Also, he has been associated with  Ernst & Young LLP, Value Partners Management Consulting and Alcatel-Lucent Technologies India Ltd.

Recently we have engaged in an interview with Nageen Kommu, CEO, Digitap. He talks about Digitap’s distinctive product stack for financial institutions and also share his journey so far.

Introduction.

Digitap is an early-stage tech start-up dedicated to developing cutting-edge Artificial Intelligence (AI), Machine Learning (ML), and compliance-related digital solutions for organizations in the BFSI industry. We assist BFSI firms to employ AI/ML-powered big data to deliver a seamless and fully compliant client experience. This helps companies in both improving their risk management as well as reducing fraud. We provide BFSI businesses with solutions for credit underwriting and digital customer onboarding.

Tell us more about Digitap’s distinctive product stack for financial institutions.

The BFSI sector currently focuses primarily on Bureau data to underwrite customers. However, nearly 400 million people in India lack proper access to credit because of low bureau scores. We provide BFSI companies with alternative data sources and scoring models so they may underwrite these clients and reduce their Non-Performing Assets (NPAs). We have market-leading AI/ML-based alternate data solutions to assist our clients to reduce risk and increase user life-cycle value. We look at multiple data sources such as bank statements, telecom, social media, e-commerce, employment, device data and location among others. Our differentiation in underwriting solutions comes from the unique data sources we have identified that will have a significant impact on the credit profile of the customer. Also, once the data sources are identified, our USP is in the scoring models and enabling clients in building bespoke scoring models that will be more accurate for their customer segment.

How has Covid-19 accelerated the transition to digital for the traditional financial industry? What will be the new normal in the industry?

Covid-19 has put an end to any remaining skepticism about the importance of digital transformation for the survival of businesses. The outbreak of the pandemic created new financial needs, where customers were forced to adapt their ways of life, both at home and at work. For that reason, having a digital banking experience that is accessible around the clock gave them more flexibility and agility. This digital mandate wasn’t new; a paradigm shift towards digitization of the economy was already underway. Its process was just accelerated and brought into sharp focus, thanks to the pandemic.

This shift would have taken roughly two to three years — or possibly longer — under normal circumstances, but it is apparent that the pandemic expedited the digitalization of the financial industry. As more and more individuals began opting for mobile banking and other online banking solutions, the amount of online shopping, digital payments, and digital bank transfers started rising. This potential digital revolution that the pandemic has brought is helping banks to deal with the more challenging operational environment. In the new normal, it will be a crucial step in increasing the sector's profitability and returns.

What, as per you, are the five essential things that fintech should be looking at today?

Fintechs have established themselves as essential proponents of financial inclusion. Further, these companies are posed with a dynamic environment, with evolving consumer needs as well as other stakeholders’ requirements. Here are the five essential things, fintechs should heed to:

Efficient onboarding and KYC processes: Fintechs need to have efficient onboarding processes. KYC is a crucial regulatory and compliance factor in fintech product development. A recent research by Moody’s Analytics found that 76% of organisations assess the digital sophistication of their own KYC approach as either poor (29%) or mediocre (47%). Enhancing its efficiency, while ensuring appropriate security will be a focus for fintechs.

Collaborative approach: In terms of enhancing credit reach, co-lending and collaborative approach has demonstrated tremendous potential.   Regulators have also pushed for the adoption of the model, with an intention to reduce systematic risk by limiting the size of NBFCs where banks directly participate in the credit of underlying customers.

Risk management: We have now entered a very volatile business environment, posing higher risks with respect to operations and other aspects. Hence, it has become important for fintechs to reassess their risk management strategies and leverage effective tools as well as technology and analytics. It will boost their Early Warning Signal (EWS) capabilities, while enabling them to stay compliant.

Fair Practice Code: It has also become crucial for fintechs to align their operations with the guidelines on Fair Practice Code as prescribed by RBI. It states that a lender should disclose necessary information (which affects the interest of the borrower) in a transparent and upfront manner so that the borrower can make informed decisions. There have been instances wherein unscrupulous lending apps have not provided loan documentation or failed to provide necessary information as mandated by RBI. Adhering to the Fair Practice Code will certainly stimulate a healthy financial environment.

Emerging Technologies: Further, fintechs will need to stay at the forefront with respect to adopting emerging technologies, as their operations hinge upon it. In recent times, we have witnessed a rise of revolutionary technologies Embedded Finance, Alternative Financing, Robotic process automation, among others. It hence becomes essential for fintechs, to constantly reassess their operations with respect to technology integration, to cater to their consumers in the most effective manner.

How can small financial players overcome the challenges faced while adopting technology into their businesses?

The best advice to small financial players can be to keep on challenging themselves and strive to keep up with the digital environment at large. This entails overcoming implementation bottlenecks and incorporating more cutting-edge technologies to automate and safeguard the digital customer experience. The customer is prepared and the solutions are out there. It’s just time to make quick progress.

Tell us about the need for a nuanced data-driven approach for the BFSI segment at various stages.

India is working hard to achieve financial inclusion, which means providing all of its citizens with access to financial products. In order to serve such a large population, the BFSI sector needs automation to accomplish the same. And a data-driven approach makes it possible for automation to function successfully and efficiently, thereby allowing the financial institution to easily service a large population. Financial organizations may make decisions at scale and reduce the processing time by using a data-driven approach.

Elaborate on the emerging account aggregation ecosystem and how it triggers a UPI-like movement in the financial service space.

The next significant development would be information exchange through Account Aggregator (AA) platforms following the implementation of UPI in India's BFSI industry. Thanks to the AA ecosystem, users will find it easier to swiftly, safely, and consistently exchange their financial information. The process is user-friendly, and the users will have total discretion over the information they choose to provide. Moreover, the AA ecosystem will be embraced more quickly than UPI because the entire flow and process are modeled after the UPI payment flow to offer the user some familiarity.

What is the way forward for the BFSI segment – evolving integration of data and analytics?

Prior to the dawn of the digital age, financial institutions relied on manual data processing to make decisions on whether to grant customers access to financial instruments. With the advent of the digital age, financial institutions (FIs) began to rely on data and analytics to make the same decisions with greater precision and processing speed. FIs are currently attempting to use data to cross-sell or up-sell users on other instruments in addition to making decisions in providing access to financial instruments. They are able to do this at scale and provide personalized solutions to customers based on their particular needs by employing data and analytics. It is now evident that the FIs that have access to data and can analyze it effectively will be able to satisfy the majority of a customer's financial needs.