Allow us to introduce the typical small entrepreneur. A young woman running a small bakery in Uttarahalli needs a loan to expand her business; she wants to buy a fridge to serve her customers cold drinks in the summer. She finds the paperwork and the professional staff in a bank intimidating – and dreads the prospect of being diminished or humiliated. She is also tired of borrowing from moneylenders, who charge exorbitant interest rates. Small business lending is for her.
In a scenario of borrowers who are excluded by traditional banks, either because they live in remote geographies or are intimidated by the threshold barriers of these banks, the most workable model is the one that is based on field agents playing a critical role. 80% of customer interactions and therefore operations, take place in the field. Field agents, who come from similar socio-economic backgrounds as the borrowers, serve as the vital human link between financial institutions and their borrowers.
However, this process is rife with loopholes. Field operations are largely dependent on a costly manual process with awful inefficiencies, for example – limited ability to scale, sub-optimal productivity and customer service, errors, fraud, etc. In other words, a classic case of “a broken, brain-dead, mission-critical process.” Loss of valuable data coupled with poor data quality make it difficult to gather insights to improve performance, create new financial products, and enhance customer experience.
On the other hand, traditional systems (for Core Banking and Loan Origination), which are suited for the larger and more lucrative formal sector, are not designed to deal with this situation because they primarily focus on building the backend while relying heavily on paper at the frontend. Often, in fact, traditional systems discourage financial institutions from collecting any more than the bare minimum data required to enrol borrowers and process their loan cycles.
With Artoo, lenders are able to overcome these inefficiencies and enhance the interaction between agent and borrower, thus improving productivity, reducing costs, and enhancing the customer experience.
To enhance the interaction between field agent and borrower, we have built a complete digital solution especially for small business banking. To keep user behaviour intact, our products are designed to mimic the flexibility of paper while bringing in the intelligence of digitalization. It is easily adopted by first-time technology users. It has strong offline and online capabilities and works even in remote locations.
The world is not binary. The future of microfinance will not be all agents based, nor will it be all self-service. There is a space where technology can coexist with, and even enhance, human interaction.
- Sameer Segal, MFN 2016
Artoo’s products distinguish between traditional automation which merely dumbs down the work and digitalization, which uses technology to also harness people’s unique value. Thus, while using machines to do most of the monitoring, data collection and incident reporting – it leaves the field officers to do things that only humans do well – like touch, talk, observe, empathise and assess on the ground.
For example, Artoo’s technology can pull up credit bureau information in the field and present it in a simple, readable manner. Using this data, the field officer can engage the borrower in a conversation about his or her creditworthiness and explain what he or she could do to improve the credit history: like pre-close an existing loan or resolve an error in the credit history. Or else, based on the data captured, Artoo’s technology can automatically compute complex financial ratios, which the field officer can use to help borrowers better understand their business performance, and what they could do to improve it. All of this means that technology frees up the field officer’s time to allow him or her to focus on building a bond with the borrower. In an industry where product differentiation wears off, Artoo’s technology enables our customers to build trust and improve the quality of their service, thus differentiating them from competition.
The New Frontier of Digitalization is the SMAC stack and Artoo has already brought 3 components of the new SMAC wave of IT architecture to small business lending – Mobility, Analytics, and Cloud computing, and sees good potential for the 4th – Social.
First and foremost, Artoo understood the nature of the borrower and designed a solution based on strong mobile capability, so that all the possible data could be captured in the field itself. We realised that mobile capability is crucial because the enterprise is geographically dispersed, and being able to do everything “on the road” is becoming increasingly important.
Then, we combined mobility with analytics and cloud computing, to digitalize the field processes – to improve productivity, reduce risk, and improve the customer experience and therefore customer retention.
Artoo enables lenders to make peer comparisons amongst borrower demographic data across family structures, business types, and geographies, to make better credit decisions.
In the process, our model also provides a degree of differentiation for the enterprise as the market grows and competition intensifies. To sum it up, Artoo improves both growth and profitability for the enterprise, making it significantly more successful in a more sustainable way.
Going beyond a strong mobile capability therefore, Artoo has, for instance, designed intuitive interfaces and built a highly empathetic Training and Support function for easy adoption – which incidentally also helps the organisation to scale. Beyond that, to address the issue of poor connectivity, Artoo has provided for all functionality to be available in offline mode, with ability to sync data on request when the Internet becomes available.
Now addressing the 4th component – Social – Artoo is committed to building online communities of both field officers and borrowers, so that they learn from each other, build bonds, and help us improve our product on an ongoing basis. This synergy of the SMAC stack will transform small business lending beyond recognition.
Borrowers are slowly beginning to leave digital footprints. Artoo leverages the India Stack (www.indiastack.org) – Aadhaar, e-KYC, e-Sign, Digital Locker, UPI – to make possible self-service, paperless, cashless lending for creditworthy borrowers. Why should someone have to leave their business and lose income, in order to get a repeat loan if they are eligible for it and these alternate sources of data are available?
Artoo believes that it is only by leveraging cutting-edge technology that we can truly improve the borrower’s experience and change the economics of lending.