Digital collections can slash costs by two-thirds, says Creditas co-founder

Our data reflects a steady increase in self-service digital payments, said Panwar

Creditas Solutions wants to rewrite the collections business with its fully-automated digital offering, Ethera. It claims that lenders can cut collection expenses by two-thirds, even as borrowers are sent personalised nudges in a humane, non-intrusive manner, which helps reduce delinquencies. “There’s no scope for customer harassment or unsavoury experiences, which happen with manual collections,” says ANSHUMAN PANWAR, the firm’s co-founder, in a conversation with Raghu Mohan. Edited excerpts:

How is the digital route to debt collections going to better the existing system?

The manual procedure of collecting debt is way too tedious and also a wrong approach to deal with customers who have defaulted. Ethera, our SaaS-based “neo collections” platform, plugs into lenders’ existing collections management systems to execute a full-stack end-to-end delinquent customer outreach. It sits on top of their existing solutions, orchestrating data to help them get a comprehensive customer view. Ethera can also comprehend data of diverse customer behaviours for creating sharp customer segments. It’s skilled in intelligently using contextual nudges to engage with customers across all delinquency buckets. You see, banks may have ten daily calling or field agencies. And typically, a collection agent is on a salary of anywhere between Rs 10,000 and Rs 15,000 per month. But the entire interaction is fraught with friction.

One of the major reasons is the ease and efficiency that comes, for both lenders and customers. Lenders can boost customer engagement by 4x while cutting up to 60 per cent of the collections cost. And borrowers are sent personalised nudges in a humane and non-intrusive manner. Further, it reduces delinquencies by anywhere between 15 per cent and 35 per cent across different buckets and portfolios, and improves the collection conversion rate by 30 per cent. We work with ICICI Bank, HDFC Bank, Axis Bank, and Tata Capital to name a few; and have been able to help over 500,000 customers with a total outstanding of over Rs 9,000 crore.

Why do you think it will lead to better cooperation from stressed borrowers?

If a customer is not reachable, then typically, what will happen is that the agent would call up that person’s relatives, friends, or neighbours, and let the world know about the customer’s delinquent status. Or, call the customer’s office and start bothering his colleagues. You run the risk of abuses taking place, and threats being made by the agent. What happens is that the customer will pay some amount under duress, or say, “this is no way to deal with me.” The point is that the entire experience can be quite painful. 

Now, in the digital collections world, there’s no coercion or use of strong language. Our endeavour is always to use certain customer hooks. For example, “Mr Customer, do you know that a delinquency could impact the chances of you getting a loan in the future?” What you are doing is having the customer interact on, say, a web page, which is impersonal as opposed to the person on the other side. Do also remember that collections are different from sales. In sales, personalisation is good in the sense that you can cater to that particular customer. But in collections, it’s not that the guy at the other end of the line is selling you something — he’s trying to get the money back. Again, we provide for interactions in nine vernacular languages, not just in English, which is also an issue with most banks and non-banking financial companies.

Can this approach to loans also be extended to smaller enterprises?

It’s a piece of technology, right? So, whatever a len­der chooses can be built out. Small businesses are just retail borrowers who have taken on borr­o­w­ings anywhere between Rs 100,000 and Rs 2 million. So, yes, the same concept can apply here, too.

What have been the trends in the pre- and post-pandemic eras on the delinquency management front?

Our data reflects a steady increase in self-service digital payments. In the southern and western states, we have witnessed a 11 per cent increase in self-service payment. We also did a survey to understand behavioural changes in customers with respect to loan repayment, post the second wave of Covid-19. Interestingly, the data showed that there was a rise in delinquent loans which grew by 4.1 per cent when the second wave was at its peak, during April-June 2021. There were also some changes in customer behaviour through and post-Covid across different portfolios. The data suggested that the age group of 18-35 showed the highest resolution rate as compared to others. This was followed by 35-45, 45-55, and 55-and-above age groups.

Also, the resolution rate for cash credit, personal, auto and agri-loans showed a dip during April-June 2021 and has gone back to normal post the second wave. We helped over 540,000 customers to avoid default on their credit lines and protect their credit scores during this period of the pandemic. Maharashtra, Telangana, Karnataka and Delhi had the highest sign-up for hardship measures offered to avoid defaults, under the Reserve Bank of India’s restructuring scheme. Of the 540,000 customers who opted in, 62 per cent were for credit cards, followed by 13 per cent for two-wheelers and 10 per cent for auto loans. Agri-loans and overdrafts saw the highest opt-in from customers (in excess of 35 per cent), followed by education loans, credit cards, personal and business loans.