An ecosystem-based approach towards lending

Small enterprises are often unserved or underserved by traditional financial institutions, largely due to lack of data or because they are considered to be high risk verticals. Indifi Technologies has therefore partnered with large aggregators in varied ecosystems to penetrate deeper in these segments. This has given it a better understanding of the verticals along with relevant data to assess creditworthiness.

For instance, it works with aggregators like Swiggy and Zomato in the food industry to gain access to small restaurants’ daily transactional data, reviews and ratings. It leverages this information with other data points before assessing the loan to be processed.

This ecosystem-based approach has helped it further digitization among its customers, said the company’s CEO and Co-founder Alok Mittal. For instance, it has partnered with Pinelabs in the retail ecosystem. “By accepting digital payments through Pinelabs, these businesses have their own digital identity. And through this platform, we gather data of and facilitate credit to these businesses. Additionally, since all our processes are initiated and completed online, it becomes an imperative for businesses availing loans from us to use the online channels,” he stated.

Indifi Technologies uses a tech-based credit score SME lending model, which is a mix of conventional business data like banking and turnover. It juxtaposes this with segment-specific indicators around revenue, customer ratings/reviews, and transaction business volume to arrive at a composite credit model. This information is accessible through partnerships within the ecosystem.

“Our proprietary underwriting algorithm evaluates this information to assign a score to every business that helps our own NBFC arm or marketplace lenders in deciding whether to extend financial support or not. The final decision power lies with the lender. We help facilitate the decision-making,” Mittal explained.

If a business from a certain segment wishes to avail a loan, Indifi will first assess the conventional data points like CIBIL score and bank statements, similar to other lenders. Additionally, it will gather relevant data points through of partnerships with large aggregators from those segments as part of its ecosystem-based approach.

“For instance, if we are assessing the creditworthiness of a restaurant, we will take into consideration non-conventional data points like how much they are selling daily through online ordering platforms. By running a thorough analysis on both these business as well as segment-specific data points, we can assess creditworthiness more accurately,” Mittal stated.

As a digital lending platform offering financial support to small businesses all of Indifi’s processes are online. This not only results in better screening, and faster approvals and disbursals, but also in gathering relevant information without the need for a physical interaction. Information from partners, combined with other financial details, helps it with a more accurate credit risk evaluation and underwriting process, which in turn helps reduce re-payment concerns and defaults.