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Speaking to TechGraph, KaramVeer Dhillion, Co-Founder & CEO of Perpetuity Capital said, “By implementing Artificial Intelligence and Machine Learning, NBFCs can profitably serve a vast unbanked population and help them attain financial inclusion.”
Read the complete interview:
Could you help give a sense of how far Perpetuity Capital has come since its existence?
KaramVeer Dhillon: Perpetuity Capital was started with a clear vision to become a one-stop solution for asset financing to the underserved sector of the economy. Given our proximity to the logistics industry, we saw firsthand the liquidity needs of single-owner drivers and small fleet owners. Even after clearing all costs & EMIs, an owner needs a minimum of Rs. 2 to 2.5 lakhs of liquidity a year to maintain a commercial vehicle. This cost includes yearly costs such as third-party insurance, fuel costs, and tire replacement costs that are above and beyond the regular maintenance of a vehicle.
Observing these pain points, we started financing and refinancing Commercial Vehicles (CV) to bridge this gap. It was a confusing process initially, figuring out taxes, permits, insurance, and hypothecation. We started with a single commercial vehicle loan and over the years ventured into Personal (PV) and two-wheeler loans as well. Today, our current loan book run rate is closer to INR 1 crore disbursals per month, barring capital constraints.
How is Perpetuity Capital utilizing its sectoral expertise and technology to solve the unsolved credit gap in the Auto Industry?
KaramVeer Dhillon: Perpetuity Capital runs on a hybrid model (both offline and online) or what we call ‘phygital’. We offer our borrowers a digital experience coupled with a physical presence.
At the moment, a physical aspect is required considering the need to verify the value of a used vehicle or a commercial vehicle when underwriting a loan to ascertain its underlying value or resale value. With new vehicles, this problem is mostly mitigated.
However, other than that we use technology for loan origination, document collection, document verifications, and loan disbursals in addition to providing door-step service to our borrowers. Looking forward, we are also exploring ways in which telematics can help us to better understand the conditions of the vehicle and other driver habits by partnering with EV players.
How is Perpetuity Capital facilitating the entire finance process digitally?
KaramVeer Dhillon: Borrowers can apply through our web and mobile app as well as through WhatsApp. Our online application cuts the tediousness with a simple 2 minutes process along with a user-friendly UI/UX making the whole loan application frictionless for borrowers.
Once an applicant uploads their relevant documents our integrated APIs verify the documents and process loans within 48 hours. Loan amounts are automated with a rule-based LTV decision. Once the borrower signs the loan agreement the amount is disbursed directly into the dealer’s account.
How is technology transforming the NBFC industry? Do you think the trend had taken hold even before the pandemic-induced disruptions?
KaramVeer Dhillon: Yes, if we look back at the last couple of years pre-covid since the launch of UPI and digital wallets there has been some tech adoption. However, the pandemic has accelerated this shift to digital. Customers are getting comfortable applying for loans online instead of traditional offline methods.
Customer communication has become digital, although customers usually prefer visiting a branch to speak with an agent. Even legacy NBFCs have adopted technological tools to process their loan application quicker, providing e-KYC and e-sign. Recently Shriram Transport Finance announced that they would launch a super App which entails all these features as well, so the shift to digital is broad-based not just with fintech.
What are the new trends in the NBFC industry?
KaramVeer Dhillon: Digitization and co-lending opportunities are the latest ongoing trend not only in the NBFC sector but in banking as a whole. Particularly, it has allowed NBFCs to partner with fintech to scale and reach a wider audience more efficiently and in the process provide a frictionless loan process to borrowers.
The onset of the pandemic forced NBFCs to rethink their operations, in particular changing their way of customer correspondence, having chatbots help in the onboarding of customers, and answering customer-related queries. Even the loan sanctioning process has been made easy through digital options like eKYC and eSigning.
Perpetuity Capital is incorporating these digital processes to source loans and underwrites credit by analyzing customers’ digital footprint. This includes several data points including digital wallet transactions, FASTag routes, away bills, etc. to better understand the customer’s ability to repay their loans.
How do you see technologies namely Artificial Intelligence, and Machine Learning, with regards to their relevance across the NBFC? What does the future look like?
KaramVeer Dhillon: By moving the needle beyond traditional methods of underwriting credit and ‘credit-scored’ borrowers, by implementing Artificial Intelligence and Machine Learning, NBFCs can profitably serve a vast unbanked population and help them attain financial inclusion.
The use of AI & ML and data-driven decision tools are helping lenders with a higher realization of good credit and is also ensuring borrowers’ adherence to repayments and healthy credit use.
For NBFCs, factors such as social media habits, digital transaction frequency, and so on, are becoming more substantive with AI, than the traditional mores of credit history verification, which are helping lenders in assessing risk to make a better credit decision independent of human error.
More importantly, it is automating and lowering turnaround time for lenders. Our Perpetuity Capital mobile application also uses APIs to provide a seamless loan application process to our borrowers in 48 hours. Part of the credit for this goes to developments in the digital domain, reflected by the Aadhaar stack and its linked KYC functionalities. Instantaneously, using banking API’s PAN numbers, Aadhar numbers, and Bank accounts can be verified without a human interface.
We are currently witnessing a host of players, including telecommunications firms, small finance banks, payment banks, and financial technology companies, harnessing AI & ML to reinvent traditional business models and offer faster, cheaper, and more convenient financial products and services to underbanked and financially unrepresented people.
What is the roadmap for Perpetuity Capital going forward?
KaramVeer Dhillon: We started with a vision to provide financing to the underserved logistics and mobility industry, and to that end, our current focus is on increasing our reach and customer base. The platform is working towards growing its loan book to over 50 crores as we expand to newer geographies.