Rachit Gehani, CTO, IIFL Home Finance
The core principles that lead to increased automation and self-service integrations will drive the mortgage journey in the post-COVID period as customers’ propensity for digital, hassle-free and paperless loan applications has increased, writes Rachit GehaniChief Technology Officer, IIFL Home Finance Limited, in an exclusive interaction with Shruti Jain of Elets News Network (ENN).
How has technology changed the banking and financial industry in recent years, and what do you see as the most important trends and developments going forward?
The BFSI industry has been significantly impacted by technology in recent years. The home finance industry has also been able to assimilate technological solutions into their use cases to improve existing workflows. We have seen an increase in digitized lending through fintech integrations in recent years. It has transformed the credit disbursement landscape, making it faster to process based on a quick turnaround time for loan application approval through automated credit checks that form the basis of digital underwriting systems.
The advent of mobile banking has enabled borrowers to manage their loans and make repayments using their mobile devices. Open banking has enabled the sharing of financial information about a borrower between different institutions. It has formed the basis for an account aggregator that allows lenders to utilize the borrowers’ data to formulate an adapted loan value and duration through a rules-based engine.
Going forward, we feel that the role of artificial intelligence and machine learning will increase as most technology companies continuously innovate to find better solutions in this field. We are witnessing an increase in the traction of generative AI tools that have the potential to drive the next wave of growth within the fintech ecosystem by further improving user experience, efficiency and productivity. It can lead to improvement in existing workflows of processes such as credit risk assessment, customer service and compliance with statutory and regulatory frameworks.
AI reasoning engines will offer personal loan products based on analysis of customer data. At the same time, we see the role of information and cyber security increasing as the use of digital technologies increases to secure critical business and customer data.
How does IIFL Home Finance leverage technology to better serve its customers and stay ahead of the competition?
IIFL Home Finance is a leading home finance company serving large segments of the public in the affordable housing space. The push towards digitization through technological advances and policy changes from the government has been reflected in the growth of the digital footprint of the target segment with ubiquitous mobile phones and easy access to the internet.
We have created an award-winning customer platform with a built-in business rules engine that instantly makes a decision on a loan application based on a person’s risk assessment through validated data. Once the application is approved, it is moved into an internal real-time loan origination system for property valuation. We also ensure that underwriting is assisted by integrating AI and ML tools that use deep learning algorithms to arrive at customized commercial calculations for loan sanctions. The customer’s journey towards payment is digitized through e-documentation of the loan agreement, in line with the overall organizational ESG goals. Customer service ecosystems have been integrated with do-it-yourself and omni-channel workflows to improve customer experience and delight.
As a result, our customers have experienced increased transparency, minimal documentation, faster closings and more affordable mortgage interest rates, allowing us to stay ahead of the competition.
How has the COVID-19 pandemic affected the banking and financial services industry, and what steps has your organization taken to adapt to these changes?
The COVID-19 pandemic indirectly affected the BFSI sector due to its impact on commodity-oriented sectors of the economy. It resulted in a rapid economic decline in a force majeure environment. Business activities across various industry sectors saw a steep decline during the peak of the pandemic. Decisive regulatory measures to limit the downward spiral of the banking and financial industry were quickly implemented by the government, although the dynamics of the situation were unprecedented and normalization measures had no precedent in this case.
The housing finance sector faced challenges in equal measure and we were no different when we faced obstacles to sustaining growth in our loan books due to a highly uncertain environment during various stages of the pandemic. We followed government directives during the peak of the pandemic to help our customers by offering moratorium and loan restructuring options that led to either deferment or lowering of EMI repayments.
The central bank’s decision to cut the repo rate gave an impetus to the affordability of mortgages. However, a new paradigm unfolded with changes enforced in consumer behavior compared to the pre-COVID period. The new digital lifestyle minimizes manual interventions for processing loan applications. This led us to quickly develop new digitized solutions to further automate loan applications. Self-service integrations within lending platforms increased, which simplified the disbursement workflow. We have introduced e-signing and e-docketing of loan applications to ensure that customers do not need to visit the branches to sign or receive sanctioned loan documents. Similarly, for customer management, self-service workflows helped ensure that customers could get relevant information at the click of a button.
We also continue to observe that core principles leading to increased automation and self-service are driving the mortgage journey in the post-COVID era as customer inclination towards digital, hassle-free and paperless loan applications has typically increased.
Financial inclusion is a critical issue in many parts of the world. What developments were made as CTO to improve access to financial services for underserved communities?
We recognize that financial inclusion is a critical barometer for our organization as we serve large segments of society, including marginalized or underserved communities. The organization’s vision revolves around facilitating credit requirements for economically weaker sections and low-income groups by providing affordable home loans. We have introduced new loan products that are tailored for communities that do not have a well-documented source of income and repayment history. These people often live in rural areas or are urban poor with a lesser understanding of the financial ecosystem. They are either part of the gig economy or are small shop owners with thin margins. We have also reached out to such parts of society by imparting financial competence through voluntary organizations and otherwise so that they know which financial services they can use to achieve their financial goals.
Our award-winning customer platform has enabled us to open branches in rural and semi-urban areas to provide underserved communities with easier access to credit. Our do-it-yourself customer service workflows are integrated with communication in the language so that such people can answer most of their support questions. It helps them get immediate closure of lingering issues without having to visit a branch.
The organization has also collaborated on government programs such as the Pradhan Mantri Awas Yojana (PMAY) to provide affordable home loans to eligible beneficiaries who may not be able to afford home loans otherwise. In this regard, we also focus on providing a platform for sustainable and energy-efficient affordable housing by stimulating the introduction of green technology in property development.
How does your organization visualize the future of do-it-yourself platforms in the mortgage industry? Can it completely replace manual interventions in the future?
Compared to a decade ago, when mortgage applications were mainly driven by a brick-and-mortar approach for most of the customer-centric process, the mortgage industry has seen a shift to a higher degree of digitization as the target audience is better adept with digital means. Due to the covid-19 fallout, the work to increase digitization and the rollout of the do-it-yourself workflow has become normalized. Therefore, we are witnessing a phygital approach in mortgages with step-by-step changes in the digital aspect of lending. It has begun to replace manual or personal interventions where possible.
At IIFL Home Finance, we have introduced do-it-yourself measures in customer onboarding and customer service workflows. However, we have observed that some tasks still need to be done in a manual home finance environment that a digital or DIY journey has not matured enough. Processes such as mortgage valuation and field surveys still have a physical view. Thus, eliminating the manual touch to the mortgage disbursement process can take time.
We also visualize that the DIY journey will take a prominent role in the phygital mix. The share of the physical channel will decrease in the future with improvements in technological frameworks for loan processing and strategic digital transformation initiatives from the government.
With the rise of fintech companies and digital banking, how do you see traditional banking institutions adapting to meet the changing needs and preferences of customers?
It is an observation of a transition towards change in wider demographics and consumer behaviour. The young generation and consumers with sufficient digital skills now make up the majority of customers who choose to avoid the physical presence of traditional banks for transaction requirements and adopt technology-based services. As a result, traditional banking institutions have adopted technology to give a push towards digitization.
The increase in the consumer adoption rate of digital workflows increases the propensity for digital banking solutions to be offered by such banks for end-to-end banking needs of the customers. The ecosystem for digital payments has seen significant growth in recent years. It has transformed the way monetary transactions take place. The fintech ecosystem helps customers make money transactions from traditional banks without the need for cash withdrawals.
Traditional banks have made major investments in digital banking infrastructure without compromising the legacy infrastructure, allowing customers to use hassle-free banking services for most of their needs. They also compete with new banking institutions that have been significant beneficiaries of the fintech revolution. Traditional banks are consistently working to improve their existing financial systems workflows to enable customer retention and remain competitive in the financial services industry.
Elet’s The Banking and Finance Post Magazine has carved a niche for itself in the crowded market with exclusive and unique content. Gain in-depth insights into trend-setting innovations and transformation in the BFSI sector. Best offer for Print + Digital editions! Subscribe here➔ www.eletsonline.com/subscription/
Get a chance to meet Who’s Who in NBFCs and Insurance Industry. Join us for upcoming events and explore business opportunities. Like us on Facebook, contact us on LinkedIn and follow us further TwitterInstagram and Pinterest.
