Guest post by NIRA Finance
Less than 10% of India’s population is able to get loans from banks. The majority of India’s 1.3 billion person population doesn’t have assets to put up as collateral or a credit rating, so banks are unable to underwrite their loan requests. It’s also too expensive for banks to use the traditional model of lending for disbursal of loans of small ticket sizes (under INR 1 lakh), given the high costs of processing loan requests. Technology can address this problem by reducing the costs of processing as well as distribution. A growing group of Indian fintech companies are now addressing this market for small-ticket loans.
NIRA is a consumer finance company leading that charge. NIRA believes there are good borrowers across income levels. Through its mobile app, NIRA provides small loans of up to INR 1 lakh to qualifying borrowers.
NIRA’s target group consists of blue and white-collar salaried individuals, earning between INR 15k to INR 40K per month, across Tier 1 and Tier 2 cities, i.e. Indian cities with a population above 100,000 and above 50,000 respectively. This group falls into an underserved section of the market: individuals who find it challenging to get loans for urgent personal or family needs.
How Does NIRA Do It?
NIRA saves costs by taking traditional banking processes online, thus drastically reducing investments in real estate to set up branches and staff to service customers at these branches. This helps ensure their cost of the loan to the customer is substantially lower than the alternatives available today.
NIRA’s major differentiation is not the loan itself, but the pre-approved credit limit, which is available to the customer at their time of need, free of any fees. Customers thus do not pay, but withdraw up to their credit limit, which increases as they successfully pay back the loan. NIRA offers loans to customers who do not have a credit score — a deal-breaker for other, more traditional lenders — and asks for much less documentation than other players in the market.
It is feasible for NIRA to extend credit to this group of people in an economically viable manner because it’s able to utilize new sorts of data that is getting generated today on borrowers’ mobile phones. This allows NIRA to form a reliable credit assessment and collection mechanism unconventionally. NIRA also uses risk-based pricing; borrowers pay an interest rate of between 1.5% and 2.5% per month, depending on their score on NIRA’s proprietary credit model.
NIRA has partnered with several large banks, including Federal Bank, along with some key Non-Banking Finance Corporations (NBFCs) to serve more niche segments in the group. This is a mutually beneficial partnership; NIRA is able to get loans approved for otherwise unserviceable customers, and its partners are able to grow their customer base.
Once a borrower’s credit limit is activated, they can draw down loans from as small as INR 5k all the way up to their full limit.
They only pay interest on the amount drawn, and their limit replenishes as the borrowers repay their loans. Further, as borrowers demonstrate good payment history with NIRA, their limit starts increasing. For example, if a borrower who took an INR 20k loan against child education pays it on time, their limit would increase to INR 50k next year which they might very well use to cover a major wedding expense in the family.
The Technology Behind NIRA
NIRA’s user journey can be broken down into two parts. As the first step, an in-principle decision is given to the customer in one minute based on the information they provide. As the second step, multiple verifications are done including employment, bank account, and then they are given a final decision for a loan.
NIRA projects its mobile application could be serving 10 million customers a year in next 5-6 years. To meet its ambitious growth plans, NIRA was looking for a technology enabler that could help it scale seamlessly. It also needed infrastructure that was cost-effective, robust, and secure to support every aspect of its startup journey. Being in the financial services domain, it required a secure and reliable infrastructure to comply with a range of financial data regulations. More importantly, handling sensitive financial data of customers leaves no room for errors.
In 2016, NIRA was looking for a cloud partner in Mumbai, but there were very few who fit the bill. Since AWS already had plans to set-up a data centre in the city and provided a highly robust and scalable solution, it was NIRAs first choice.
AWS Solutions Deployed
NIRA chose the AWS platform for its scalability and reliability. When it became mandatory for companies to do an e-KYC (Know Your Customer) verification linked to the Aadhaar card (an identity card with a unique identification number issued to Indian citizens), Amazon Rekognition services helped NIRA with image verification and validation services of customers’ Aadhaar cards. This mandate also required NIRA to store data in highly secured servers, a need which was met by Amazon S3 storage.
“During scale-up, as we encountered new data related regulations or partner lender’s requests concerning data processing, we always found that AWS had a ready solution. It reflects AWS’ forward thinking to pre-empt challenges and build client solutions well in advance,” said Nupur Gupta, Co-Founder, NIRA.
To meet its scaling requirements, NIRA implemented AWS Lambda, which is a pay-per-use cloud infrastructure solution. It is a serverless facility that offers automatic scaling. Essentially, if you have one user, you pay only for that one rather than setting up sites and waiting for the customer base to rise. With AWS Lambda, NIRA was able to scale up from a few thousand customers to 85,000 monthly active customers, without requiring any major infrastructure or configuration changes. The pay-per-use model also enabled the company to keep its spending in check.
We were able to optimize AWS Lambda and scaled up to capacities of 10X. We have a good end user experience, but we might have dedicated servers and containerization requirements to be used in the future. AWS Lambda ensures that a minimal amount of time is spent when going from one scale to another,” said Gupta.
These AWS Lambda Functions are also invoked by the Amazon API gateway which handles API management and user authentication and authorization through Amazon Cognito service.
NIRA used Amazon CloudWatch to log user events such as app registration, verification, uploading, and checks. Based on these logs, it can resolve customer queries through troubleshooting, to determine the point of failure. For instance, in a third-party API used for an electronic loan agreement, it could log in responses in Amazon CloudWatch, and find out if the process resulted in successful loan disbursement and gave a response or if it had a failure for a request.
Amazon CloudWatch provided data and actionable insights to monitor NIRA’s applications, understand and respond to system-wide performance changes, optimize resource utilization, and get a unified view of the operational health of the company infrastructure. 1
Amazon DynamoDB NIRA benefits from DynamoDB’s fast response to customer queries and a self-managed NoSQL database that auto-scales for performance based on the volume of queries.
Other AWS Solutions Deployed
NIRA got access to AWS Activate through the Nasscom Startup and Techstars Accelerator programs that support startups with mentoring and business community development. The AWS Activate framework helped the company directly through credits as well as through invites to industry events. “We have an ongoing relationship with AWS for over two years now. They are very forthcoming with providing support, through tech solutions, knowledge sharing, and where required connecting us with external entities in the ecosystem,” added Gupta.
NIRA also implemented AWS Glue, an ETL tool used to extract data from the database, transform it, and load that information into required applications. It is also used for reporting.
Lastly, the finance company used Amazon SES (Simple Email Service), an email system, to facilitate all major communication with customers.
The Road Ahead
NIRA is planning to introduce multiple products and will scale its data infrastructure to support a higher level of reporting and analytics. Additionally, it wants to focus on controlling costs. The pay-as-you-go model of AWS gives the company flexibility to only incur costs for resources utilized, and Amazon CloudWatch enables monitoring of these resources — allowing the company to discover opportunities for cost-saving.
Going forward, NIRA is looking at automating its resources to address the needs of the fast-growing customer base.
from AWS Startups Blog