Integrating technology and operations for enhanced efficiency in lending: Arka Fincap

In an era where digital transformation is reshaping the BFSI landscape, Arka Fincap Limited stands out with its commitment to leveraging cutting-edge technology for enhanced operational efficiency. Under the leadership of Mridul Sharma, Group Chief Operating Officer, the company has established a unique model that intertwines operations and technology to streamline processes, particularly in the SME and MSME lending space. With nearly three decades of experience in the industry, Sharma shares insights into the challenges and triumphs of integrating modern solutions, ensuring data security, and fostering a tech-savvy workforce—all while prioritising customer experience in a rapidly evolving market.

Could you tell us briefly about your experience in the BFSI industry, transitioning from leadership roles in operations to technology and how these two are intertwined in today’s digital era?
I have spent close to 28 years in the BFSI industry, navigating both operations and technology. My journey began in core operations, which provided me with a functional understanding of financial services and their products. This experience served me well when I transitioned to technology, ultimately leading to my current role as Group COO at Arka Fincap, where I oversee both Operations and Technology. In today’s digital era, having a comprehensive understanding of business products and services is essential to effectively deliver technology solutions that power them.

Can you share how Arka Fincap leverages technology to streamline operations and improve efficiency, especially in SME/MSME lending?
Arka Fincap was established in 2019 with a clear vision: to build our foundation on contemporary technology rather than outdated systems, thereby enhancing customer experience. At the outset, we sought to explore low-code and no-code solutions for developing customer onboarding journeys and automating the entire loan sanction and disbursal process. I am pleased to report that we have successfully created a technology platform that is highly efficient, both in terms of processing time and operational costs, allowing us to remain agile in a rapidly evolving technological landscape.

What were some of the key challenges you faced in integrating cutting-edge technology into your operations, and how did you overcome them?
Rather than viewing our experience as challenges, we considered key considerations in integrating cutting-edge technology into our operations. We aimed to create a platform that required minimal upfront capital expenditure, embracing a pay-as-you-use model. This involved considerable effort in identifying new partners who could align with this financial approach, as well as selecting cloud-native technology platforms to leverage computing infrastructure in the cloud.

What is the USP of Arka Fincap’s technology & operations?
The unique selling proposition (USP) of Arka Fincap’s technology and operations model lies in our agility, allowing us to swiftly develop new processes and adapt existing ones. This agility enables us to streamline workflows and accelerate the development and deployment of products and services, providing us with a competitive edge. Additionally, our operational expenses are significantly lower, at one-tenth of those of our competitors. This lean operational model ensures our resilience during economic downturns, facilitating easy adaptation to market fluctuations without drastic cost-cutting measures. Furthermore, we have achieved 100% digitisation of all processes, enabling immediate access to data and insights for better decision-making and improved tracking. With fully automated digital processes, our customers enjoy faster service, personalised interactions, and seamless touchpoints, all of which align with our current rapid growth phase.

Could you walk us through any recent technological initiatives or upgrades that have had a significant impact on the business?
Over the past seven years, I have focused on enhancing the understanding and efficiency of our frontline financial services staff. The frequent roll-out of processes, circulars, and product notes creates a challenging environment for frontline employees, making it difficult for them to address customer queries based on the latest information. While I initially attempted to implement a FAQ-based chatbot, maintaining curated answers and updates proved impractical. However, with the emergence of generative AI capabilities, we have successfully developed a chatbot named Vidya, which allows our frontline team members to pose questions in English and receive guidance on processes, policies, and regulations, complete with references to underlying documents.

Data security and regulatory compliance are crucial in the lending sector. How does your NBFC ensure the protection of customer data while adhering to compliance standards?
Data security and regulatory compliance are critical in the lending sector. We address these concerns by strictly adhering to regulatory guidance and implementing best practices in cybersecurity to protect customer data and confidential company information. Our approach balances cost and outcome by identifying key databases that require protection. We have also instituted basic practices related to employee identity and login security, as well as data obfuscation where necessary.

How has technology played a role in accelerating decision-making processes, such as loan disbursements, especially for MSMEs that require quick access to capital?
Technology has played a vital role in accelerating decision-making processes, particularly regarding loan disbursements for MSMEs that require quick access to capital. Our agile Loan Origination System (LOS) for MSMEs, combined with the full automation of decision-making and disbursal processes, allows us to achieve industry-leading turnaround times. This capability ensures that funds reach our customers promptly.

Can you share an example of how operational automation has improved efficiency, reduced costs, or helped scale your operations?
The automation of our loan decisioning and disbursal process has drastically improved efficiency. We can now complete a full turnaround within four seconds. This efficiency is especially crucial when collaborating with fintech partners, as we are able to integrate seamlessly into our customers’ daily lives and provide timely credit. For instance, if a customer is on a school portal to pay fees, their primary intent is to make that payment, not to apply for a loan. Therefore, our systems must ensure that the entire process is completed swiftly, allowing us to provide this essential capability to our partners while maintaining speed, accuracy, and scalability.

What has been your approach to building a tech-savvy workforce within the operations and technology teams, and how does this contribute to the company’s success?
To build a tech-savvy workforce within our operations and technology teams, we established a dedicated group called the Solution Delivery Group (SDG). This team is techno-functional, with a focus of 70% on functionality and 30% on technical aspects. They serve as architects in bringing new products and processes to life, and once developed, they also train other teams to operationalise these processes. This approach is a key strength of ours.

Looking ahead, what new technologies or innovations do you foresee NBFCs adopting to further enhance operations and improve customer service in the lending space?
Looking ahead, I anticipate that other NBFCs will adopt the innovative path that Arka Fincap has taken by redefining their operating models and technology platforms. It is vital not to rely on the same players who have dominated the industry for the last 20-30 years, as this approach can lead to a loss of differentiation. Embracing new strategies and technologies will be essential for continued growth and customer service enhancement in the lending space.