About the author
Nitin More leads ADVANCE.AI's commercial team in India. His background in digital consulting, business transformation, programme management and business problem solving in the domains of banking and financial services, fintech and retail – coupled with his deep understanding of India's business landscape and changing consumer behaviors – puts Nitin in an ideal position to serve today's fast-growth companies.
India's digital journey is a unique one. If I may go back a little in history, it probably started with the Digital India campaign in 2015 which aimed to promote greater financial inclusion – India's population has since grown to over 1.4 billion and major steps have been taken towards digitisation.
The government-initiatiated campaign had three main components: Digital Infrastructure Creation, Digital Delivery of Services, and Digital Literacy. To a large degree, the campaign empowered the people and continues to have a positive impact on the country's growth. Today, we have the Aadhaar ID system, Unified Payments Interface (UPI), enhanced internet connectivity, a nation with a large portion of digital natives, plus some of the fastest-growing and successful fintech startups including Paytm.
With the digital revolution that has been happening, people are getting greater and easier access to financial services, and this fundamentally changes consumers' financial behavior from a preference for cash to e-wallets and UPI. UPI is one of the big driving factors in India that has gotten consumers to use payment services on their mobile phones.
Changing payment habits are driving change in banking and financial services in India
As e-commerce took off in India with companies like Amazon and other e-commerce players entering the market, consumers transitioned to digital payments like Google Pay, Paytm, QR payments, etc.
They also became habituated to using digital authentication methods from Aadhaar XML, full format Know Your Customer (KYC) to the use of one-time password (OTP), two-factor authentication (2FA) – some of these were introduced out of necessity to cater to consumers in cities with varying levels of internet access and mobile penetration.
"As account opening models transition from face-to-face teller transactions towards non-face-to-face remote events, the question of "is this client really who he/she is" becomes harder to answer."
With the growth of digital businesses comes the growth of fraud and risk. So it's key for banks, financial services providers and non-financial banking institutions (NBFCs) to ensure a secure verification process from the point of onboarding. As account opening models transition from face-to-face teller transactions towards non-face-to-face remote events, the question of "is this client really who he/she is" becomes harder to answer. As an example, I want to highlight the recent biometric hacks using cloned fingerprints – with ADVANCE.AI's solution, which extends beyond static document verification, that may have been prevented.
Interestingly, over the last few years, video KYC has revolutionalised the KYC process between banks and consumers whether it happens face-to-face or remotely. Consumers have also become habituated with verification using their smartphones as it becomes part of an account opening process, or on-going banking transactions. I recommend booking a complimentary demo with our team to experience our comprehensive solution covering ID checks, tele status checks, video identification and so forth. We'd also be keen to share on solutions best suited for your digital and business roadmap.
Enabling collaboration and growth
The payments revolution is driving other shifts within the ecosystem too, particuarly in the lending industry as banking and financial services move away from traditional ways of operating. We are seeing more "openness" from overall digitisation of products, services and offerings to API unification across some of the larger banks in India. Banks are also collaborating with fintech startups to bring some of their innovative products to life.
These collaborative projects, along with new initiatives by the government including the open banking drive, have propelled India to forefront. An example is the 75 district banking units (DBU) set up by Reserve Bank of India (RBI) to reach even the smallest of consumers and businesses, in terms of spending, in the country. The recently launched Open Credit Enablement Network (OCEN) is a further step to democratise credit and financial inclusion in India.
On the organisation-level, there are high-growth companies that need working capital to ensure their innovative ideas and services can launch successfully. These companies may be smaller compared to typical multinational cooperations and if they are being evaluated using traditional financial instruments used by banks and NBFCs, it would be less likely for them to get approval for the loans required because several data points wouldn't be available. As part of the government's vision to bring the Indian population into the digital age, the IndiaStack, along with other key frameworks, helps make some of these data points available.
The IndiaStack can be understood as a set of open APIs and digital public goods to unlock the potential of identity, data, and payments at population scale and it taps into the extensive groundwork set up by the Indian government including the permanent account number (PAN) and Aadhaar – India's very own 12-digit unique identity number system and the world's biggest biometric identity database. ADVANCE.AI works closely with banks and NBFCs to enable authentication processes and checks with our data partners, to enable these high-growth companies.
On the consumer-level, with the amount of transactional data that is available as digital activity increases, data privacy and data security will be of concern. How risk profiles are being built from payment transaction data, what is in payment transaction data, how fraud is being managed, etc – these are some of the topics that we often hear from consumers, banks and fintechs.
"ADVANCE.AI's AI-powered ID recognition tech is able to verify various types of IDs – such as passports, driver's licences, residence permits and, of course, Aadhaar."
Security guidelines within payment transactions and lending transactions are the focuses with the various cloud initiatives happening on the bank and fintech side. However, organisations are faced with a daunting conflict of an ever-increasing need for security and compliance measures versus consumers' expectations of a frictionless user journey. It's one of the principles behind our cloud-based OneStop Platform that pulls together our gamut of products and solutions, and gives businesses the most seamless onboarding solution, workflows, scorecards and credit underwriting at any time – thus unlocking the value of a frictionless user onboarding journey while still retaining the ability to maintain proper end-to-end compliance processes from eKYC biometric checks to AML name screening to credit bureau reports. Better yet, OneStop Platform offers all these within a singular customer view.
Catering to India's New To Credit (NTC) Consumers
The challenge of friction vs. security is something organisations consider too – even from the point of onboarding. How do we ensure accuracy in our verification process without disrupting the brand experience? Which checks should businesses consider to reduce drop-offs and maximise conversions?
Many verification tech providers using traditional data points effectively exclude most of India's population because many of us are new to credit. Firstly, being a global partner, ADVANCE.AI's AI-powered ID recognition tech is able to verify various types of IDs – such as passports, driver's licences, residence permits and of course Aadhaar – for over 200 countries. Our ID Optical Character Recognition (OCR) and Face Recognition tech also offer 99% accuracy; this is important as we want to make sure businesses are able to recognise high-risk and unsuitable customers right at the start and in an automated manner.
Alternative credit scoring is also part of our solution for Indian companies. From insurance to Ola or Uber rides, credit scoring impacts the way businesses evaluate their prospects and customers. Consumers without the typical financial data points aren't necessarily unlendable. De-risking through a broad exclusion of NTC customers in India means losing out on a significant potential consumer base. Multi-platform score, joint modeling, email detection are all part of what we can offer as a bigger alternative scoring solution. I think it's also noteworthy that these data and insights don't just help to verify customers, they also help businesses build better understanding of their customers and with better decisioning for longer term business impact.
Contact our team today to learn how ADVANCE.AI can be your partner for this on-going digital journey in India.