The service is the collateral, with Neel Juriasingani

"It was at that time, a very crazy idea", Neel Juriasingani tells me. "A lot of people still look at us as those crazy guys. But coming from that tech mindset, we were forced to think about how tech could be built to solve these challenges".

Over the last decade or so, lenders have invested a lot of time and money to turn the smartphone into an optimised account acquisition tool - you want to be where your customer is, after all. But the fact that their smartphones are where your customers are at, means we could be using them for far more than data transfer. And maybe we just needed someone from the Telco industry to open our eyes to that.

Neel and his team at Datacultr have optimised the smartphone as a contact tool, even when they're outside of network range, to create as many opportunities to engage with a customer as possible, and in a language that they understand. They're even able to turn phone service into virtual collateral if that's what's needed to secure a loan for the most underserved and underbanked populations.

Datacultr is found at https://datacultr.com/

If you'd like to learn more about their model, or if you'd like to maximise the risk-reduction potential of your customers' smartphones, Neel can be reached for discussions via neel@datacultr.com.

You can learn more about myself, Brendan le Grange, on my LinkedIn page (feel free to connect), my action-adventure novels are on Amazon, some versions even for free, and my work with ConfirmU and our gamified psychometric scores is at https://confirmu.com/ and on episode 24 of this very show https://www.howtolendmoneytostrangers.show/episodes/episode-24

If you have any feedback, questions, or if you would like to participate in the show, please feel free to reach out to me via the contact page on this site.

Regards,

Brendan

The full written transcript, with timestamps, is below:

Neel Juriasingani 0:00

To understand the behaviour and how these first time borrowers react to different messaging, the format, the messaging, time of dya/ day of week, when should we remind you, what is the best time to send you a reminder - is it one day prior to the due date, or is it three days before that... and then devise and develop a complete strategy around customer engagement. So segment the customer and build optimised life cycles for these micro segments.

And all that is to ensure that these people understand their loans and make their payments on time, there shouldn't be any instance where we have to limit the access to the device. Hence, how we use AI and ML so that the delinquencies are in check these people don't miss their payments.

Brendan Le Grange 0:51

In the weeks leading up to this episode, BMW was in the news for all the wrong reasons. They had just announced their subscription service for heated seats and the public weren't taking it well. But it did get me thinking: in a world where your car could go online and check whether you were allowed to turn on your seat heaters, what would happen if a consumer defaulted on the auto loan? Could the bank send a message telling the car to turn itself off and refuse to drive until you are back up to date? Well, maybe.

In the 21 years I've worked in lending, I've done very little work in the secured space. So I am may be overreaching, but I feel like I know enough about secured loans to know that collateral brings you two benefits. There's the direct benefit in terms of what you could get back from selling the asset in the secondary market. But there's also an indirect benefit, which stems from the consumer's reluctance to lose the use of that asset.

So I'd seen that before in loans to buy all the secondhand cars where the resale market probably wasn't that strong in reality, but the consumers desire to keep the car was. But today's guest has an even more interesting spin on that. So we're going to talk about how virtual collateral can help finance a smartphone, and how a little bit of telco thinking can create an entirely new way to communicate with your customers.

Welcome to How to Lend Money to Strangers with Brendan le Grange.

Neel Juriasingani, I am delighted to have you on the show. We are here to talk about data culture and your clever take on secured micro loans. But before we do that, I'd love to learn a bit more about the forces that have shaped you.

Neel Juriasingani 2:52

Hi, Brendan, good to connect here on your podcast.

Yeah, so I'm a chemical engineer. I did almost a year of using whatever I had learned at the engineering school, and then quickly realised that that's perhaps not my cup of tea. I went on to do join a B school, do my MBA, and from there join a telco.

Airtel, at that time, was the largest Telco operator in India. I was part of sales teams, marketing teams, strategy teams, was part of new product launches - or, in fact, complete new organisation that we set up. And that helped me to learn a lot about business in general. Telco, yes, telco, you have to learn when working for a telco, but a lot about new products, consumer behaviour, market launches, completely new to market - products like M commerce, which I was fortunate enough to be part of the launch in India. It was perhaps the first M commerce product that was launched in in the country by a telco. So that was for six years there. I learned a lot about consumer behaviour.

Telcos changed the lives for a lot of people in India and in a lot of other emerging markets. And, you know, we saw really great stories coming out of people using mobile phones to improve their lives. Fishermen in Kerala selling at better rates because they had more information using mobile phones. So, you know, some great stories that kind of kept coming out as more and more people in the rural hinterland also started using telecom services.

Then I was working for around two years at Nokia. There I was part of the, as they called it, local commerce teams setting up business for location commerce and location based advertising for Middle East and Africa and Asia. I was there for two years, and then started up Datacultr, of course.

This is my second startup. The first startup was in the mobile advertising space. And pretty much what we were doing at our first startup led us to Datacultr, things that that we thought will happen and things that we thought will scale up and shape the Indian market and the subcontinent that led to what we are now doing Datacultr.

Brendan Le Grange 5:01

Yeah. So let's talk about Datacultr: you were in the telco space, and you were starting up your own ventures in the telco space, but then you turn to fintech - what was the motivation behind that? What was the spark?

Neel Juriasingani 5:14

Yeah, it was not really by design, right?

So you know, first startup, where we started off by building advertising, serving technology to smartphone manufacturers across South Asia and a few other markets in Middle East. And we were doing it very successfully, we signed up pretty much every smartphone manufacturer that was in India and the subcontinent. I'm talking 2017/ 2018 when the market was booming.

A lot of these players started to focus in the entry level smartphone market, which essentially would mean something which is sub $75. And we all thought it was a great idea because it was a huge market out there. A huge opportunity. Almost 700 million people back then in India alone, who were not using smartphones, or were on feature phones and wanted to move on to using a smartphone. We thought, okay, now that we've signed up all these smartphones, we're now integrating our technology into their phones, we now have to just sit back and look at the market grow.

And the market didn't grow.

It was kind of an eye opener for a lot of us, we all thought 700 million people, all these big brands coming out with the right product, or so we thought, and we kind of you know, figured out a couple of things that was not really right at that time in the market, because the quality of the phone was not really great. But apart from that the main concern was that people who we thought will buy the phone, were finding it unaffordable.

So a $75 phone or a $50 phone - people not able to purchase those phones because again, if you look at the market and people - not just in India, across emerging markets - they are working in the unorganised sector, earning perhaps $5 or less per day. Which would mean a $75 phone is almost 50% of their monthly earning. And that's something that they can't really, you know, give up and purchase a phone.

Right. So affordability therefore came out as a as a big concern, which we were not really at that time thinking of being tech entrepreneurs. And we further then reached out to a few banker friends to understand more about, you know, this, we thought it was still a big opportunity. The banker friends and you know, other people that we met from the financing fraternity essentially told us that you know, what, yes, we acknowledge that there is a big opportunity and a big market, but there are big challenges as well, right?

So one, of course, the biggest challenge - and it's something that we keep hearing of - is these people don't have credit scores. Unbanked and underbanked people that we are always wanting to do something about, but you know, we didn't know what and how. So they said, you know, what, they don't have a score, what can we do? And there were at that time, a lot of tech companies coming up with interesting platforms that could use alternate data to create alternative scores. And we said, okay, you know what, there are so many companies doing that, why are you not using them?

The stark reality was that these people didn't have a great quality, digital footprint, or data points that could be consumed by these platforms to churn out cores with high confidence levels, and hence, banks and other financial institutions were not able to use it. So that was one big challenge.

And the other big challenge was, of course, that, these people need smaller ticket loans, say $100 loans. To service such small loans, what if they missed one payment and you have to send somebody or call - just the cost of collecting those funds will make it unviable?

Brendan Le Grange 8:47

You came into this industry as outsiders serving a part of the market that had been left out for all these sort of very real reasons: logistics, lack of data, and lack of margin to make it affordable. And you started your business to serve them. How did the market react?

Or what were those first few years that data culture language, you're getting this business up and running that I guess many of the incumbents would have thought was kind of a crazy idea.

Neel Juriasingani 9:16

It was at that a very crazy idea.

A lot of people still look at us as as those crazy guys. But yeah, see, again, coming from that tech mindset, we were forced to think how tech could be built to solve for these challenges. A lot of other good tech was, of course, getting built. Still a lot of good companies coming out building tech to solve for these problems. We said, what could we do knowing such markets?

We had spent so much time you know, working and learning in the inner market to know what were the ground realities, and what were the challenges? Now, you know, we had to kind of bridge that gap between what the people needed and what these large organisations who wanted to cater to this segment, but were unable to do that, how do we bridge this through tech?

We just wanted to be very practical. I've personally taken loans where bank has kept some kind of collateral against which and we said, this is something that the market understands the banking folks understand this. And, you know, can we use the same fundamentals here pretty much coming down to the fact that can that phone that I want to purchase be used as a collateral, the idea was not to take away the phones from the people who were taking loans.

So, how can we use tech to ensure that people understand that they have taken a loan and they've missed a payment, and they need to make that payment, they need not give away the phone to get money, they should continue to use that phone because those phones are livelihood, enablers growth, enablers, access enablers, more and more users of that phone, we have seen and we've, as I was explaining earlier, great stories where people have improved their lives. So people are using smartphones should continue to use those smartphones, but should still be able to access funds to mirror maybe use a smartphone or purchase a new smartphone. Right. So so that was the idea. How do we collateralize phones? And how can we use tech to do that, instead of that brute force of taking away something from people because they've not paid?

Brendan Le Grange 11:09

And I think that's what makes this a really interesting business model. So let's pause on this a bit, and maybe even take a step back. What is it that Datacultr does in terms of structuring its loans and making that collateral work?

Neel Juriasingani 11:24

Here's the thing. So we have pure play tech, we don't lend on our books. So our clients are banks and financial institutions who use our tech to offer loans to these people. In that sense, we're a classical enterprise SAS platform we integrate with, with banks, their collection systems, their loan management systems to maybe automate the entire journey, the risk assessment is all still done by the bank or the lender, whoever that is, the fact that they are able to collateralize the phone becomes a critical factor in their decision because lack of credit score lack of data - then what else can they use to give out that first loan, cross that initial barrier of giving out a loan to this unbanked or underbanked segment? And have access to the customer via their phones?

Banks who were earlier declining loans to this segment, because of the lack of data and lack of score, they have now started giving out loans, people are now walking into maybe a physical store where they want to purchase a phone and they need a loan, they were only getting declined, now they are being told that okay, Neel, you want a loan to purchase this $100 phone, we can provide you with that loan, as long as you agree to some additional terms and conditions that will be part of your loan contract. If you're okay with that, you can take away this phone and pay us every month for, say, the next nine months.

Here's a way that you know, they're able to purchase that phone that they earlier were not able to. And you know, even when the bank or the lender tells them very transparently, what are those additional terms and conditions, they happily sign on those PNCs and take away the phone pay off every month, and you know, happily use their phones and hoping that you know, not just their lives are getting improved, but their families lives are also moving up.

Brendan Le Grange 13:08

When we talk about collateralizing here, this is not the old model where you hold a legal right to the asset. And if they don't pay, you're gonna come and knock on their door and ask for the phone back. But rather you've built a tech solution to collateral whereby you can restrict the usage of the phone, sort of a virtual collateral,

Neel Juriasingani 13:28

Sure, see what your collateral would mean from messaging, to nudges, digital nudges that we have, you know, softer nudge like kind of temporarily put wallpaper, which essentially keeps reminding you that you've missed a payment; from there to perhaps you know, lock the entire device, the idea is to keep reminding the customer that they've missed a payment, and they need to make that payment quickly. And we increase the intensity of those nudges gradually, rather than coming in as a shock.

And the entire journey is programmable, so we don't programme the journey, but the client decides what the user experience should be. Some of our clients do assign a secured loan contract where they could potentially take away the phone if somebody has not paid that's between the bank and the consumer, but most often this kind of loan is still unsecured. So nowhere in the contract or the T&Cs is mentioned that we will take away the phone even in cases where you know the bank has signed a secured contract and a loan or bank or telco for that matter. We don't see rarely telcos going out you know taking away people's phones that's not really the idea.

And the good news is that we see more like a habit formation happening amongst these first time borrowers. I can think of think of it from their lens right they've never received a loan they really don't know what's a score right? So no, no point talking about you don't have a credit score and no loan there for right they have to begin their credit journey.

Datacultr is helping such people.

We try to make it as healthy as possible by helping them and reminding them to make payments on time, there's a big element of educating the customers around the loan that they've taken, you know, also telling them that you must have heard about, you know, jargons like credit scores here is what they really mean is how that will help here is how making payments on time will help you.

So right now you've gotten a $75 loan, how can you get $200 loans? I will tell you, they also need to know about about the phone itself. If they are first time smartphone users, there's a lot that they don't know, how do we educate them about just purely you know, how to use internet, how to use search, how to use maybe YouTube, for example, right? So there is a big emphasis and big element around educating the customer. So we have signed quite a few agreements with large players who have, we're creating high quality content around financial literacy around digital literacy.

The idea is to create as many opportunities to engage with a customer and in a language that they understand. So you know, it's not just a text, which traditionally banks have or telcos have sent out, right, they send us SMS is hoping that we will read them, some of us do read them, but even for a lot of us, it goes down as spam. Right? So so maybe text is not the way to go. Can we send a video message? For example, can we send a big image to these guys, we've seen such multiple formats - the richer the format, the better the impact.

Can you explain the customer how to make a payment through a video message rather than giving them steps on a text message?

Brendan Le Grange 16:31

And we mentioned right up front that there's some very real logistical issues with serving this market as well. And I imagine that includes a lot of people being outside of easy phone networks and such. But I see that you're actually able to use your messaging systems, even when a consumer is outside of the network range, which I assume is sort of, again, more of your telco skills coming in. But I expected that makes quite a big difference in this sort of market that you can reach consumers that a normal bank, sending normal text messages, maybe isn't going to be able to get to.

True, true.

Neel Juriasingani 17:02

And we've also seen that, you know, while telcos have done a wonderful job reaching to deeper parts of the rural and hinterland there are places where still the network is, you know, either bad or not present at all right. So you know, we now have offline messaging formats as well, which we are introducing to our clients to use, even if the customer is completely out of network, we shouldn't be able to use some of these richer formats to communicate.

Brendan Le Grange 17:28

Yeah, and then you're leveraging AI and other tools to build credit profiles on consumers. So you're over time you learning more and more about these consumers, as you say, sort of educating them the next step, the next step, the next step, as well. So not just here's your loan, and then we'll leave it to the banks and the non bank financials to pick it up. You're actually building credit profiles and habits and scores, what does that side of the product look like?

Neel Juriasingani 17:51

Right? So you said it, right? So there are broadly two elements to a loan, right? One is ability to pay, which essentially comes from credit scores and alternative data to create alternative scores. And then there is intention to pa.

At that time, we saw a lot of action in the in the ability to pay or using alternative data to score and we said, Okay, let those guys solve for that problem.

We, of course, are helping people to get their first loans and create a credit history create more data that those platforms will consume. PII therefore started to focus more on intention to pay, can we help set up a habit amongst these people? Right.

So therefore, there is a lot of effort to understand consumer behaviour, how do they react to a message to a messaging format? Do they react better to video formats versus, you know, a banner format time of the day of week? When should we remind you what is the best time to kind of save or send your reminder? Is it one day prior to the due date? Or is it three days before that?

The messaging itself? Right? Can we change the message from 'Neel, we will report to the bureau that you've not paid' to 'Neel, you've not made a payment to get access to other loans or other services that we offer? Keep your payments on time'.

Because again, credit scores really don't resonate well for that customer, but the fact that I can access more loans and more services from the bank makes a lot of sense, right?

So, the messaging itself can we change, make it more people friendly, make it more empathetic, again, is is an important factor that we keep working on. So understand the behaviour the format's the messaging, and then devise and develop a complete strategy around customer engagement, what is the life cycle that we can build? So segment and perhaps micro segment the customer and build optimised life cycles for these micro segments of customers that we are onboarding and all that is to ensure that these people understand their loans make their payments on time? There shouldn't be any instance where you know we have to limit the access to the device. So the idea is never to reach that hence, how do we use AI and ML to create very effective and efficient life cycles, messaging journeys for these people. So that, you know, the delinquencies are in check.

Brendan Le Grange 20:14

Prevention rather than cure, but also making it less intimidating to a group that's taking their first loan. And I think your approach and your ability to really get close to the customer is a good one to be able to avoid at all costs that default and work together on a mutually beneficial arrangement.

And that works obviously being recognised as well. I found data culture when I was looking through the Inclusive FinTech 50 winners list from from last year, but you've also won many other awards and recognitions for the work you're doing.

Neel Juriasingani 20:48

Oh, yes, we've been fortunate enough to win a few awards. That always, of course, helps create more awareness amongst the people that we want to reach out to. The FinTech 50 was was a big one for us. In the past, we've also been recognised as Red Herring Top 100, Asia, NASSCOM Emerge 50 award, any of which is a good one, as long as you know, they help us reach and create more awareness.

We of course, always boast about our awards that we won with with clients that we reach out to yes, we've seen something like an Inclusive FinTech 50 opens up more avenues for us, markets where we will not rarely present. So I'm based in Singapore, the company is headquartered in Dubai, from there to reach out to a Spanish speaking Latin American market, right. And of course, makes it easier for us to do close deals. So we essentially started off in India and Bangladesh in 2019. And from there to now we have clients in Mexico, Ecuador, Kenya, Nigeria, Indonesia, in Pakistan, Central Asia. Yeah.

Brendan Le Grange 21:57

It's interesting to hear that you're able to sort of expand into so many different markets, I guess, again, the benefit of being a tech based solution and being in the sort of space of smartphones, which are so ubiquitous around the world now means you're able to leverage that same sort of approach into any market, where context of ality and logistics or issues and smartphones are expanding, which I think is pretty much every market. So yeah, wish you the best on your global expansion.

Are you also looking to expand in any other directions? Or what's next for Datacultr in the next couple of years?

Neel Juriasingani 22:30

A big thing about what our clients are saying about our product, and what are they what are they looking for from us?

There are mainly two asks that that keep coming out from our clients. One is how do they extend the same platform to other kinds of loans. So smartphone loans to purchase smartphones are of course there, but not every lender out there has a product that specifically focuses on that. But they all focus on unbanked or underbanked. And trying to figure out ways to reach out to those guys. So how can we extend the same platform to those loans as well. So there is this work that has gone in so where we have a product called Easy loan, which is currently in beta, which essentially means I need a small loan on nano loan or micro loan BNPL. And I could present my phone as that virtual collateral against which you can give me an unknown. So this also opens up a bigger market for us.

But even for our existing clients, you know, they're able to kind of open up the market further using the data culture platform. So that's one the other thing is, can they and which is probably part of the easy loan portfolio itself is can we create that virtual collateral experience on other devices as well? So can it be done on smart TVs and other devices? Smart TVs is perhaps something that we will cover and launched by Q3. So these are the two innovations coming out from our tech teams very soon.

Yeah, and apart from that, so there is a complete module that is digitising collection processes. You want to you know digitise promised to pay processes that I'm not able to pay right now, but I can I can pay by the 10th of August? Or maybe you know, can you restructure my payment plan because I'm not able to follow this payment plan that I've been given - digitising a bunch of such processes. The idea is that digital processes give more options to the customer if they want to restructure if they want to delay because they don't have the money right now which is which is a very real challenge that people face right. I'm a farmer, the seasonality in my earning, I will have a lot of money right now but probably three months down the line I will not have that much you know free cash.

These are these are real challenges, right? How do we solve for these real challenges is where you know a lot of such digital components come in the you are bringing in higher efficiencies at a much lower cost. So what we're building is a complete operating system for digital collections, digital debt collections. So that's the overall vision of the company to build digital OS for debt collections.

Brendan Le Grange 25:02

You talk about going into new loan types. I guess with Tesla's and all that sort of subscription based car functionality we get these days, I suppose one day, you'll be able to do an auto loan where you can simply turn the car off and tell it to come back.

Neel Juriasingani 25:16

Yeah, we wouldn't want to do that, too risky thing to do. But even the idea is not that right. So the idea is to create a habit to pay on time - and we see that happening, right? So people who missed their payments this month, very less chance that they will miss a payment in subsequent cycles. So that's the habit formation that we see happening right now, itself and what we therefore have to do.

And that's what we're doing, is bringing in more ML to improve the collection efficiencies, to improve on time payments, so that people don't miss their payments.

So that's, that's where a lot of work is going on. And what else can we digitise? So we work very closely with our clients to pick up processes that are very people dependent, so to say, and digitise them so that you know, we are being we are able to bring in more efficiencies at lower costs.

Brendan Le Grange 26:08

Yeah, and I think you raised a really interesting point there, because in previous episodes, I've spoken to people in the collection space about the move to digital and how having a nice app or having an online process allows consumers to interact more without the sort of nerves of phoning up and talking to somebody face to face, it means more people are talking to collections earlier.

So we can help solve problems before it's too late.

But you also brought up a point I hadn't even thought of but which is in hindsight, quite obvious that these costs, the manual process costs are part of the reason micro loans were not profitable, and therefore not available in the past. So it's not just about helping collections. But if you've got a cheap, low cost way of collecting any money, more people can come in. And I think that's also a really good message to remind ourselves, and operational cost savings are not just about operations, it can mean that allows us to grow more. So yeah, thanks for calling that out.

Neel Juriasingani 27:05

But absolutely there now clients of ours who don't have people on the collection side, or the armies of people that they would keep earlier, right. So there are companies who are coming up and saying, We'll, with your tech, I can go to market very quickly, which will help me bring down my costs. So we definitely started off with that, with that niche of smartphones to purchase and to help, you know, the underbanked unbanked to get their first loans. But what we realise is that operating system for debt collections is helping a lot of new age fintechs also go to market very quickly, again, catering to that segment. That gives us excitement that you know, we are able to bring impact to people and see that happening on ground.

Brendan Le Grange 27:52

Yeah Neel, I'm sure it is exciting, it's exciting for me just to listen to so I wish you the best of luck for that. If people are listening and they want to learn more about Datacultr, where can they go to reach out to speak to you or to learn more information,

Neel Juriasingani 28:06

We're happy to happy to interact with with anyone who who's interested to know more about us, they can directly write to me at Neel@datacultr.com. We'll be really happy to receive emails from from your listeners and respond to them.

Brendan Le Grange 28:27

Great. And I'll put the links and and details in the show notes as well. Neel, thank you again for your time today. It was wonderful chatting to you and I wish you the best of luck.

Neel Juriasingani 28:36

Thanks, Brendan, great chatting with you as well

Brendan Le Grange 28:39

And thank you all for listening. If you enjoyed that, please do rate and review on your preferred podcast platform and share widely including on LinkedIn... and while you're there send me a connection request.

The show is written and recorded by myself Brendan Le Grange in Brighton, England and edited with assistance by Kane Hunter. Show music is by Iam_wake and you can find full written transcripts, show notes, and more content at www.howtolendmoneytostrangers.show

And I'll see you again next Thursday.