It is a fact that financial services contribute to progress. It helps entrepreneurs and individuals earn higher incomes by enabling their business, education and healthcare, and thus, making it easier for them to manage financial needs for growth and emergencies. There are many underserved people around the world who do not have the credit to meet these demands.
However, while a general consensus dictates that financial inclusion is vital to eradicate poverty and boost economic growth, it is a fact that over 50% of the world’s population does not have access to simple financial services. Over a billion people around the world lack the privilege of obtaining the financial services necessary to achieve even reasonable levels of financial well-being.
The Global Findex report shows that nearly 1.7 billion of the world’s population, or 38% of all adults in the world, are still unbanked. According to the same report, an additional 57% of basic accounts do not even have access to differentiated savings, investment options, low-cost payment systems, credit or insurance.
Challenges in offering unsecured loans today
The benefits of financial inclusion can be many. For example, research has shown that mobile financial services can improve the income generation potential of people and, therefore, alleviate poverty.
The banking of the unbanked segment is the most complex problem in financial services, and few claim to have solved this problem. As with any other business opportunity, the reward is enticing and enticing, as are the associated risks and threats.
Inadequate data points. The entire financial system is based on the idea that the individuals who participate in it have a traceable and searchable financial history that contains information about their income, assets and overall wealth. The logistics of the existing system are not flexible enough to take on people who do not have sufficient credit history. Without good credit scores, it is difficult for a financial institution to sanction a loan based on strict guidelines and eligibility criteria.
The unity economy does not work. Market research indicates that the transaction cost of a person seeking financial services from a bank in a city with a cashier is around $ 6. This number is further increased if the transaction takes place in remote areas of the country where the number of walk-in visits to a bank is comparatively lower.
In addition, the physical investigation report by the client to determine the creditworthiness of their loan requires field visits, which add to this cost as well as the required administrative and approval processes. So even something like a small personal loan to the business unit of this business won’t work unless the workflow is managed digitally.
The Yabx collaborative loan model
The Yabx collaborative lending model brings together different financial partners such as banks, telecom operators and payment service providers to pursue common goals of reaching users who continue to be underserved in terms of access to credit. .
In order to make this financial inclusion possible, Yabx leverages its deep domain capabilities in machine learning and big data to generate data on income, savings, spending habits and creditworthiness.
Typically, users have a digital footprint that can be assessed using artificial intelligence and machine learning algorithms and reconstructed to create a credit report for each individual in real time, greatly reducing the process of loan application. Consumers are then assigned to a partner lender who is available to service the section. All of this takes place in real time, with little to no latency. The result is a quick and easy loan process from application to approval.
For example, in Malawi millions of people do not have access to a formal financial system. With Yabx, FDH Bank was able to offer tailor-made financial products to its customers, while opening up new addressable business opportunities at reduced risk for the bank. FDH also used a digitally native loan management system and integration with the telephone company to provide loan access to many of its customers in a cost effective manner.
Since its launch in July 2019, the Kutchova loan product has managed hundreds of thousands of loans to customers, 70% of whom have accessed credit for the first time. (FDH Bank was a finalist for the Gartner Eye on Innovation Award EMEA 2020 which recognizes financial services organizations for their innovative use of digital technology.)
In order to serve customers in a more user-friendly and robust manner, loan lifecycle management software is integrated into these networks, and the integration of customer services and KYC controls can be initiated or reused through customer networks.
The main offers to its partners under the Yabx collaborative loan model can be summarized as follows:
Credit rating – With Yabx’s advanced AI and ML models, building a credit score is based on a unique set of characteristics that bypass archaic processes and make way for new ones. This ensures that every aspect of an individual’s life can be leveraged to ensure financial inclusion. Additionally, the Yabx collaborative lending solution has over 12,000 features evoked from alternative data to ensure the lending process is robust and efficient.
Loan lifecycle management – Yabx uses cutting edge tools and emerging technologies to manage the lending cycle of its lending activities. The collaborative lending solution manages the entire loan cycle from client onboarding, KYC processes, loan disbursement and collections to ensure contactless interaction to improve operational efficiency and speed loan disbursement.
And for the relief of institutions offering loans, a loan management lifecycle module is integrated into Yabx’s collaborative lending solution that provides a robust and user-friendly interface for the end user while capturing the most critical data. to guarantee reimbursement insurance. Additionally, Yabx’s partnership with reputable credit providers ensures the highest levels of process success and efficiency.
Portfolio management and decision engine – In addition, the portfolio management module integrated into the solution determines the nature of the approval of a loan to an applicant; thus balancing the desire to achieve financial inclusion while carefully and meticulously managing the risk aspect of each loan. Yabx’s decision engine is configured with parameters set on specific limits, conditions and other factors based on the customer’s derived credit profile. A lender can set and monitor key metrics to ensure their business goals as well.
How Customers and Merchant Networks Win
Since such a large part of the population still does not have access to financial services, digital lending is the most suitable way to resolve this crisis.
Customer and merchant networks have the ability to monetize data, customer and distribution assets. To this end, they end up charging additional fees for each customer, which increases their bottom line.
It also helps banks focus their operations on finding new, innovative and sustainable approaches to broaden their user base to ensure a new wave of growth that could be extremely profitable and sustainable in the long run.
The changes made possible today thanks to fintech innovations are revolutionary. Yabx, through its lending model, enables millions of unbanked and financially excluded individuals and families to access a bank account and finance through this collaboration.
This model is a game-changer for emerging market banks who are struggling to expand their base due to their limited ability to serve the microcredit segment. Yabx is working with some of the biggest banks and financial institutions to enable their next phase of growth by acquiring a portfolio that is currently losing money for the bank and transforming it to create a financially healthy and profitable portfolio.
Rajat dayal, CEO of Yabx, founded the company in 2017. Yabx makes banking products easier and more convenient for financially excluded people. He has 20 years of professional experience mainly in mobile and banking. He led Comviva’s Asia-Pacific activities in 17 countries, mainly Malaysia, Indonesia, Thailand, Fiji and Singapore. He has been deeply involved in the creation and deployment of mobile financial products in these markets.
Prior to Comviva, he worked as a consultant at Opera Solutions (now known as ElectifAI), a data-driven products and services organization. He has worked on huge amounts of data to solve business problems across all industries – financial services, chemicals and industrials, FMCG, telecommunications and software. His career has been geographically diverse, spanning the US, UK and Asia. Rajat holds an MBA from INSEAD France and a B.Tech in computer science.