February 7, 2019

Leveraging UPI 2.0 for Powering Collections Piece of Lending Value Chain


Introduction A recent BCG-Omidyar Report on digital lending highlighted that the unit cost of the collection via DSA-led traditional channels for an INR 1 million unsecured business loan for a one-year tenure is 0.8%. The same report estimated the unit economics to be 20% more efficient for digital channels that automated collections. Lending is a “spread business” and as such, there is a premium on efficient collection (& onboarding) that keep the spread sustainably viable. The role of greater automation of collection practices, therefore, cannot be overstated. At present, automation of collections appears to be happening through two models; the “anchor platform” approach where the lender collects at source from borrower revenues; and the NACH model where the lender sets up a “pull” on the borrower’s loan account. The NACH product is offered through the NPCI. However, both these models have limitations in terms of the nature of business use…

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