Finsire

Lending through the Account Aggregator Ecosystem is growing! 50% of all lending to date through AA ecosystem—measured by both value and volume—occurred in just the first half of fiscal year 2024 The reasons? 1. Data Accessibility: With AA infrastructure, lenders now have access to real-time, reliable data. This means faster, more accurate decision-making. 2. Improving Success Rates: To ensure smooth data fetching, many companies are integrating with multiple AAs or implementing solutions like 3. Dynamic Account Aggregator Switch (like the one from Finsire) to improve the success rate. These dynamic switches help create fallback journeys, ensuring data availability even in case of initial failures. 4. Tapping into New-to-Credit (NTC) Customers: The next frontier is lending to new-to-credit (NTC) or those with limited credit history. With real-time data available, lenders can confidently explore this segment. According to TransUnion, nearly 4 crore NTCs are added annually in India! Even if 25% of them need loans with an average ticket size of ₹50,000, that’s a ₹50,000 crore opportunity waiting to be unlocked. 💡 Massive potential! The availability of data ensures no lender wants to leave this untapped segment behind. Interesting times ahead for fintech and lending!

💡 Remember when companies first started offering free credit scores? It was a game-changer back then. Now, it's something we take for granted. Guess what? Net Worth tracking is the new frontier, and soon, it’ll be just as commonplace. Here's why: 1️⃣ It all started as a download driver: Companies like IndMoney were ahead of the curve, offering net worth tracking early on and marketing it brilliantly to get users hooked. It worked like magic for app downloads and user growth. 2️⃣ Now it’s becoming hygiene: Just like free credit scores, multiple companies are now offering net worth tracking to stay competitive. Users are increasingly expecting this feature, and it’s driving more downloads and engagement across the board. 3️⃣ Product offerings will soon be tied to it: Imagine a future where your net worth unlocks better deals—be it a higher credit limit, better interest rates, or exclusive offers on pre-approved loans. If users link and provide consent to access their financial data, they’re likely to see personalized benefits that could make a real difference. 4️⃣ If you don’t offer it, you’re losing out: Companies that don’t incorporate net worth insights will struggle to offer truly customized products, and users may start opting for fintechs that can provide this level of personalization. It’s not just a feature anymore—it’s becoming a key part of user retention. 5️⃣ B2C companies need to jump on this: Net worth tracking is no longer a “nice-to-have”—it’s a must-have for companies in lending, financial advisory, or any B2C fintech space. In fact, we’ve already seen institutions ask Finsire to custom-build Net Worth metrics that aren’t widely available yet. The smart players are already thinking in this direction. 🚀

🔍 Challenges in Scaling Loan Against Mutual Funds Following our last post on the opportunity in the Loans Against Mutual Funds, a few asked what’s holding institutions back from tapping into this Rs. 10 lakh crore market, especially when the current outstanding is only around Rs. 50,000 crore. Here’s the Real Challenge: Implementation Complexity Integration Time 🔄: For a seamless implementation of LAMF, institutions need to integrate with both CAMS and KFintech to access mutual fund data, as not all fund houses are serviced by a single entity. This integration can take anywhere from 8 to 10 months per firm. Cost Viability 💰: Integrating with MF Central could streamline this process, but then the issues of cost-effectiveness and additional integration time arise, making it less feasible for many. But That’s Why We Exist: Finsire’s Solution 🌟 Faster Integration: Finsire's Loan Against Mutual Fund Stack cuts down the integration time dramatically — think a couple of months vs. the typical 8-10 months. Simplified Management: With Finsire, managing the entire lending process from origination to loan management and collateral management for mutual funds becomes much more streamlined. Looking Ahead 🚀 Deployment takes time, but in the next three years, it’s expected that almost every financial institution will have the capability to offer LAMF digitally—it’s becoming essential. We're excited to see many, like City Union Bank Ltd., already going live with Finsire's system at Global Fintech Fest, and we have at least eight more in the pipeline. 😉

🌟 Key Insights from the Global Fintech Fest This July, as per the RBI data, two credit products demonstrated solid growth: Loans Against Securities and Loans Against Gold Jewellery. This trend isn't just about numbers; it's a significant insight we've gathered from this year's Global Fintech Fest. Engaging with over 500 delegates from various sectors like banks, NBFCs, and fintech companies, one clear trend emerged: there's a substantial interest in tapping into underutilized assets for collateralization. Why is this shift happening? Here’s a deeper look: Loans Against Securities are Gaining Momentum: 📈 Massive Market Potential: Mutual Funds in India have hit an impressive total AUM of Rs. 60 lakh crore, with a solid 60% held by retail investors. That's Rs. 36 lakh crore potentially available for collateral. 🔍 Market Gap: Considering if half of these retail investors seek loans and banks/NBFCs provide loans at a 50% Loan-to-value (LTV) ratio, the opportunity scales up to an eye-opening Rs. 10 lakh crore. Currently, the credit outstanding is significantly lower, between Rs. 30,000 to 50,000 crore. No wonder every bank and NBFC representative we interacted with was keen to explore how Finsire’s Loan Against Mutual Funds stack can help capitalize on this trend. It's clear that tapping into this potential is not just beneficial; it’s becoming essential.

More to come from our team 🔥

Great launch of loan against mutual funds with City Union Bank Ltd. at Global Fintech Fest for their application. It was inaugurated graciously by Dr N Kamakodi, MD & CEO. This was done quickly and in about a couple of months. CUB is 120 years old, and it seems surreal. Oldest organization we’ve worked with, and it feels like the experience has made us more wise. Please do check out the City Union Bank Ltd. application for a seamless journey - Great work by the team!

The Evolution of Tech Stacks in Lending Lenders have perfected the art of delivering a seamless digital experience to their borrowers, particularly through applications. This progress was especially evident 2019 onwards, and unsecured lending saw exponential growth. Securing a personal loan got so convenient that a first-time borrower could have money in their account within five minutes—all through a digital process. This development marked a significant achievement for the financial sector in perfecting the Loan Origination System (LOS) stack. However, a new challenge emerged: the Loan Management System (LMS), the front-end interface that lenders use to manage loans post-origination. While robust LMS platforms exist for unsecured lending, the same cannot be said for secured lending. Many in the industry are still grappling with the complexities of scaling LMS solutions to accommodate secured loans. Here are some key challenges: 1) Collateral Management System (CMS): When collateral is involved, an ancillary tech stack—known as the CMS—becomes essential within the LMS. Collateral has its own unique challenges, especially when dealing with assets like mutual funds, stocks, or debt where market values fluctuate daily. 2) Flexibility in Collateral Management: Features like top-ups and top-downs add further complexity. The system must provide the flexibility for borrowers to pledge additional collateral or unpledge assets as needed. 3) Varied Credit Instruments: The landscape of secured credit instruments is still evolving with term loans and overdrafts being most common. Newer instruments such as credit on UPI, secured credit cards, and other secured financing options are still in development. 4) Integration Challenges: Seamless integration between LOS, LMS, and CMS remains a hurdle, as few players in the industry have mastered all three. By FY 2025, I anticipate that infrastructure for an integrated secured lending system will have overcome these challenges altogether. At Finsire, we are actively seeking industry insights to further enhance these systems, ensuring that India has a resilient and comprehensive end-to-end secured lending technology stack.

By FY25, every Indian is likely to have access to an integrated bank statement analyzer within their net banking and other super apps. This AI-driven tool, will enable individuals to manage finances more effectively, with insights that are accessible only to high net-worth Individuals today. In addition to this, Indians will be able to monitor their net worth in real-time across various accounts and institutions through a single application. This will allow seamless tracking of all financial holdings in one place, with the added convenience of performing transactions through a unified platform. The ability to track and share net worth will empower users to negotiate better deals with financial service providers. By leveraging competition among providers, users can secure more favorable terms, whether for credit options or investment advice. However, this increased transparency and competition might come at a cost for those with poorer credit histories. As India's per capita GDP and disposable savings grow, a shift towards secured credit is expected. Most users will likely prefer secured credit over unsecured options, driven by the benefits it offers—lower interest rates, tax advantages, longer tenures, and flexible repayment structures. These features will make secured credit an increasingly popular choice for loans, overdrafts, credit cards, and financing purchases. Finsire is fiercely developing such solutions, to help financial institutions stay ahead of the curve and the predictions above become a reality ASAP!

Account Aggregators(AAs) are positioned to unlock the next leg of innovation that transforms finance in India. Financial services providers like Banks, NBFCs, Asset management companies (AMCs), Funds managers and Distributors stand to gain the most. However, applying Account Aggregators to improve decision making tools and lower costs of services is a huge challenge in itself. Take for example bank statements, they are one of the most sought after dataset for a financial provider looking to service their customer well. While AAs make this possible, bank statement analysers (BSA) are by no means an easy build. Many easy looking problems can take us into a dark-web of counter-productive analysis. You’d expect that every bank would report the same transaction with same narration, however in practice, narrations vary across banks for the same transaction, especially with all the payment modes involved. Add to that the complexity of UPI - related narrations that plague our bank statements. These transactions are to street food vendors, shopping, groceries, pan/cig stalls, booze shops, p2p and other day-to-day scenarios, making it near impossible to classify with precision into any meaningful buckets for analytics. There are playbooks which have been exploited to bucket transactions considerably well by using a combination of bank statements and other datasets or tools. Today’s BSAs can help determine user’s incomes, loan obligations, investments and specific types of expenditures, providing insights to certain problems better than other problems. Knowing which problems to tackle and which to avoid have been a big learning for us over the last few years. Banks and NBFCs can use BSAs to provide both credit solutioning and personal financial management products with cheaper costs at their scale. Other entity’s like AMCs, fund managers and distributors can use BSAs in combination with asset holding statements provided by their users, so as to enrich an investment advisory experience like never before. Finsire along with the industry continues to tackle some of these problem sets related to an ideal Asset Gateway technology, so as to bring innovative AA powered solutions for data science and credit applications.

The Asset Gateway: Infrastructure for Financial Information Aggregation All our financial information is securely stored within the servers of financial institutions like banks, brokers, insurance companies, depositories, registrars, and other such agencies. In the industry parlance, these financial institutions are called the financial information providers (FIPs). The Unsung Heroes: FIPs FIPs are the silent superheroes of our financial world, playing a crucial role in the Account Aggregator (AA) network. Think of the AAs as the friendly neighbourhood postal service providers, delivering your financial data to whoever needs it – like your lender or the investment advisor – all in real-time. But how does this magic happen? The Great Data Chase Picture this: You need to share your financial information with your investment advisor or lender digitally verified in real-time. This isn’t a simple handover; it’s more like orchestrating a bunch of backend activities. Since our financial data is scattered across multiple FIPs, located in various digital vaults aka servers across geographies, the cooperation of all FIPs is essential. Enter the AA Network Using the AA network, one can send a real-time request to all their FIPs, asking them to share all required financial information with the lender or investment advisor of choice. But to make this happen smoothly, a robust tech stack is required by your lender or the investment advisor. This stack includes a front-end application and portal, powered by a back-end system that utilises data science for managing all your consented information from various FIPs. Finsire’s Asset Gateway Now, here’s where Finsire comes into play as a Technology Service Provider (TSP). Finsire's Asset Gateway is based on three layers of fallback journeys, each layer prioritising the most effective approach. It’s like having a multi-step plan, ensuring success at one stage or the next. Layer One: The Sure Shot On an average day, FIPs have a success rate of 40-80% varying across the AA network. Using some data analytics, a TSP like Finsire can determine the highest probability of fetching any FIP's data at any given point in time. Layer one will take you to the 80% probability option first, then 70%, and so on. It's like almost always hitting the jackpot on your first try! Layer Two: The Backup Plan If the first layer doesn’t work out, no worries! Layer two kicks in, involving any other entity that might be an alternative, such as another TSP or FIP. This layer even includes an option to log in directly to the FIP’s account with some automation to fetch your financial info. Layer Three: The DIY Approach Finally, if all else fails, layer three lets you upload your own documents. Finsire is in the midst of a version 2 of the Asset Gateway, and we’d be glad to have a chat with interested folks that are keen to see such a high-trust public sharing network succeed in India. #AssetGateway #AA #FIP #FIU #TSP