AI helps us check borrowers’ digital footprint, offer loans: FlexiLoans’ Lunia

Mumbai-based digital lender FlexiLoans Technologies Pvt. Ltd, backed by KKR India chief Sanjay Nayar among others, is betting on emerging technologies to get ahead of the competition. It is currently in the process of rolling out an enhanced version of its application programming interface platform that will allow it to make faster inroads into the e-commerce and point-of-sale markets. It expects lower drop-offs and a spurt in loan renewal rates with the launch of the latest API iteration.

Founded in 2016 by Abhishek Kothari, Manish Lunia, Deepak Jain and Ritesh Jain, FlexiLoans makes working capital loans available to small and medium enterprises. It has disbursed loans worth Rs 300 crore so far. Soon after being founded, it raised Rs 100 crore from Nayar, Vikram Sud, the former head of operations and technology at Citibank, and other senior executives from the financial services industry. In May last year, it acquired Mumbai-based supply chain financing platform CreditPeriod.com.

In a conversation with TechCircle at the company’s offices, Kothari and Lunia spoke about how the firm is using artificial intelligence, data sciences and other emerging technologies to build out its business. Edited excerpts:

How is FlexiLoans different from other digital lenders?

Lunia: When we started up two years ago, we were the earliest to focus on the 'new to credit' market segment. About 45% of our customers are new to banks because they haven’t ever taken any business loans. So far, we have disbursed over 2,500 loans in 400 cities. We now have the capability to service about 1,000 cities. Our average loan ticket size is Rs 5 lakh. The minimum is Rs 50,000 and the maximum is Rs 50 lakh over a 24-month repayment period.

Tell us more about your business model

Lunia: We started FlexiLoans to provide quick and easy loans to micro and small businesses. We have a B2B2C (business-to-business-to-consumer) model where we partner with e-commerce marketplaces and lend to their suppliers and sellers. We have covered 95% of the e-commerce sector and our partners include players such as Flipkart, Shopclues and Paytm. We offer unsecured collateral-free business loans to merchants or sellers on these platforms.

Unlike consumer lending, the business model is such that we make profits every day. Our customers are very comfortable online and prefer a process that is quick and easily accessible. All we need to process loans is surrogate data which comes from customer details like Aadhaar, PAN card, etc. The moment we put the names in our system, our technology detects the credibility of the customer within seconds after sifting through their digital footprint. If a borrower fails to repay the loan, they stand to lose business opportunities with our partners, who can bar them from future transactions.

When does the latest version of your API platform go live and how is it different from the existing one?

Kothari: The latest version, which we call API 2.0, is expected to go live by the end of the month.

The API integration suite has been available since last year but what we've done now is convert it into an extensive framework that will enable almost any external platform in India to integrate with us.

When we partner with large e-commerce or POS partners, we want their vendors or sellers to have a seamless experience. Vendors or sellers on an e-commerce platform, for instance, can apply, fulfil, track and manage their loans via that platform. Our broad API suite allows partners to integrate with the FlexiLoans lending platform within a matter of days and they can start offering working capital financing to their vendors or sellers. The entire underwriting and loan management can be done via the platform without any human intervention and this leads to huge efficiencies.

E-commerce companies can send leads in terms of onboarding customers and FlexiLoans can share information on their loan status. So, it becomes a two-way platform, unlike earlier where we had a one-way platform and where we were just onboarding customers.

Do your partners incur any cost for integrating with the API platform?

Kothari: We don’t charge for the platform, which means any ecosystem can integrate with FlexiLoans for free via its APIs and start offering lending solutions. The platform takes care of everything—onboarding, credit assessment and post sanction servicing.  

How does the API system work at the vendor’s or seller’s end of an e-commerce platform?

Kothari: The vendors can log into their accounts on the e-commerce platform and will be able to see a pre-approved line of credit that is powered by FlexiLoans. This allows them to have a seamless experience and quick access to capital which they can use as needed to grow their business, buy inventory, and bridge working capital gaps without getting into the hassle of any paper or queues. The wait time for information access will shrink from days to hours.

Does the API work a bit differently for your POS partners?

Kothari: For POS platforms, the target customer is the merchant who uses the swipe machine to accept payments. These are retailers who have a shop and need money to refurbish it, buy more inventory and have to stock for seasonal demand. They can get loans from FlexiLoans against the card swipes that they do and repay via daily deductions, thus reducing their equated monthly instalment burden.

Are loan repayments also easier because of the API integration?

Kothari: The loan repayments are done via the National Automated Clearing House, which is a separate activity, but since the borrower can now access their repayment schedules at the partner portal, they are more aware about their upcoming payments and can plan better.

How does the loan underwriting and management process work?

Kothari: Underwriting and management are done through FlexiLoans’ proprietary technology and the results are provided to the borrower who may be accessing it on the partner’s portal.

How do you arrive at the pre-approved credit line for sellers?

Kothari: Pre-approvals are based on an algorithm which incorporates the seller’s or vendor’s past performance, returns, product quality, vintage, customer ratings, etc.

Tell us how you use artificial intelligence

Kothari: We use a lot of artificial intelligence in our daily lending business. To give an example, banks work in a linear acceleration model whereas ours is an exponential model. We have a high variable tendency. Anything which is documented can be automated using AI. We have taken one second of human activity in the lending space and have started automating. Any document that you give us today can be ready by machines on FlexiLoans. The technology will match that email with the person who has made the application and will extract all the attachments, be it Aadhar, bank statements, etc. and would automate to assess which is required for KYC. Through a combination of image recognition, fraud detection, and optical character recognition (OCR), AI also reduces the turnaround time.

Through AI we have served lakhs of customers now. When we started, our turnaround time was seven days, and more importantly, we have grown ten times in size. We have reached the image recognition level but not the fraud detection level yet and we are the only ones in India to reach this level till now. Others present in different cities use basic machine learning but we are the only ones in India processing entire payments using AI.