Implications Of Licensing NBFCs And PSOs To Authenticate Aadhaar

The Reserve Bank of India, on Monday, September 13, 2021, invited Non-Banking Finance Companies (NBFCs), Payment System Participants, and Payment System Providers to apply for Aadhaar e-KYC Authentication License. 

Payment System Operators (PSOs) and NBFCs can apply for authentication licenses to become KYC User Agency (KUA). These entities may also apply for a Sub KUA license to perform the authentication process through a KUA. 

Presently, banks are the only institutions allowed to do customer identification and verification. It is through one –time password (OTP) based on the Aadhaar card. The OPT is received through a mobile device.

The Prevention of Money Laundering Act, 2002, provides that the Central Government may permit through a notice to a non-banking entity to perform Aadhaar authentication using the e-KYC authentication facility. However, the entity in question should comply with standards of security and privacy as prescribed in the Aadhaar Act, 2016.  

In addition, consultation with the appropriate regulator and UIDAI should happen before the issuance of the notice of permit. The credentials of the reporting entity should satisfy the regulator and UIDAI.

According to the Circular issued on May 9, 2019, the process of application by Non-Banking Finance Companies, Payment system Participants, or Payment System Providers starts by applying through the respective regulator. The regulator determines the format of applications. 

The regulator reviews the submitted applications and can reject them if unsatisfied. If satisfied, regulators forward applications to UIDAI for further scrutiny. UIDAI finally sends a recommendation to the Department of Revenue, Ministry of Finance for notification. UIDAI may issue some conditions when submitting its recommendations. If satisfied, the Central Government issues the notification. UIDAI will then authorize the applicant to do authentication upon payment of required fees and adherence to terms outlined in the Aadhaar Act.

These are the possible implications of permitting Non-Banking Finance Corporations and Payment System Participants to obtain e-KYC authentication license:

Simplify the process of onboarding customers. Instead of relying on the cumbersome process of verifying physical KYC documents, e-KYC authentication will make the process smooth through digitization.

In addition, NBFCs, Payment System Participants, and Payment System Providers will save on the cost per transaction by eliminating manual paperwork and adopting Aadhaar e-KYC verification. It is because customer information is already pre-captured.

Save on the cost of operation. Through digitization, NBFCs and PSOs will realize savings through a reduced staff. A digitized process requires less staff than a manual one. In addition, the entities seeking e-KYC authentication would eliminate travel expenses to verify the physical address of clients since this information is in the Aadhaar card. 

NBFCs and PSOs will experience a faster authentication process. As a result, they will serve a large population in a short period rather than the slower manual processing of KYC documents.

E-KYC authentication will help NBFCs, and Payment Operators reach more micro, small and medium enterprise (MSME) borrowers. Turnaround time for loan processing will reduce. Ultimately, a broader population will have easier and faster access to credit, resulting in a positive impact on GDP and the general growth of the economy.

Improve trust and confidence levels. Customers will have more trust and confidence to engage with NBFCs and PSOs that are licensed. Approved entities will have met the cut after undergoing the rigorous application and vetting process. More trust would translate to more business for non-banking entities as they strive to offer accessible and affordable financial services. 

KUA or Sub-KUA licensing would help curb incidences of fraud that would pass through a manual validation process by NBFCs and PSOs. E-KYC is robust and foolproof. It would safeguard NBFCs reputation and prevent loss of resources through impersonation and other fraudulent activities, making it a safe platform for customers.

Improve compliance. NBFCs offering financial services have been relying on third parties to onboard customers. Once they acquire a KUA license, they can directly authenticate clients and be more compliant.

It is a novel program. The need for a ready and central data repository is unprecedented. Invitation to Non-Banking Finance Companies to come on board is a testament that the demand is high. There is no need to reinvent the wheel. Licensed entities will leverage the online database and verify the identity of customers. It will enable better and convenient service delivery by entities that tap into this system.

On the other hand, possible misuse of customer data is one of the biggest challenges this authorization will create when more entitles could access customer data. Regulations to address the same are in place, but enforcement to ensure compliance will be necessary. 

For example, in 2018, the Supreme Court of India had banned Private Entities to use Aadhaar numbers for verifying customers. It was due to complaints following allegations of commercial exploitation. The cabinet, through an ordinance later, allowed private companies to authenticate via Aadhaar. However, the customer will voluntarily choose to avail their Aadhaar information with these private entities such as banks and telecom operators.

Supreme Court has in the past recognized privacy as a fundamental human right. This ruling delivered on August 24, 2017, should be a constant reminder to those who have access to people’s data to protect it by all means. Privacy recognizes each person’s autonomy and the right to make personal choices. 

Hackers can find a way of interfering with servers and access Aadhaar data for malicious use. Technology is good, and with it comes challenges. However, Aadhaar data is secure and in the Central Identities Data Repository of UIDAI and has not been breached. NBFCs and PSOs will have to ensure their systems are foolproof so that they can protect customers’ data and deter any possible system hacking.

Besides, service providers with the authority to access the Aadhaar system are required to use data only for the intended purpose. This helps in data protection. By granting more entities access to the Aadhaar system, all Aadhaar number holders hope that effective data protection measures will hold.

Conclusion

The notification inviting other players besides government and banking institutions to apply for e-KYC authentication to address the growing demand of social and financial inclusion by various players is a step in the right direction. It will be interesting to see how entities that pass approval will revolutionize their operations. Customers will also reap greatly.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Rahul Raj

Fraud, And Forgery- How The Indian Insurance Sector Can Use Technology To Prevent Scammers

Introduction

With a US$ 280 billion evaluation, the Indian Insurance sector is a huge market for both domestic and international companies. Life Insurance portfolios alone are expected to grow nearly 75% in the next 5 years.

Unfortunately, insurance fraud has been on the rise around the globe and in India, particularly. The Financial Express reports that more than 9% of claims in the insurance sector are false or fraudulent. Annually, it results in more than Rs.40,000 crores loss. In 2019 alone this was more than Rs.45,000 crores.

Continued, this will result in a massive drain of India’s economic prowess. On top of this over $6.25 billion is lost by insurance companies to fraudsters. This in turn might cause the companies to increase premium rates for genuine customers.

This article takes a detailed look at how that is possible. With some selected cases of fraud that could have been prevented with technology, it gives a better perspective on how useful is technology against fraud.

Let’s Understand Insurance Fraud And Its Types

An act performed to defraud an effective insurance process is called insurance fraud. It occurs primarily when a claimant tries to gain an advantage or benefit not entitled to them. Fraud is deliberate and willful. In this sector, it always involves financial benefits performed under false and illegal pretense.

The Apex entity and the overseer of all insurance business in India, Insurance Regulatory and Development Authority of India(IRDAI) defines 3 generalized classifications for insurance fraud in India:

  • Claims/Policyholder/Customer Fraud- This includes fraud against the insurance company during the purchase, execution, or claims processing of an insurance product or policy.
  • Intermediary Fraud- If an Insurance Agent/ Third Party Administrator Agents(TPA)/Corporate Agent or any intermediary perpetrate any fraud against the policyholders, customers, or the insurance company.
  • Internal Fraud- If a Director, manager, or officer in the higher ranks indulges in misappropriation or fraud against the insurance company.

Out of these three, claims fraud is most common, and they are divided into Hard Fraud and Soft Fraud. If an individual deliberately invents loss such as theft, destruction of property(like arson), or self-inflicted injury to claim benefits from respective policies, it is called hard fraud. Soft or opportunistic fraud includes exaggerated claims by policyholders. The real damages are hidden and an exaggerated representation of the situation is presented.

Insurance Fraud In Different Sectors

 

Fraudsters find different ways to operate in different insurance sectors. Thus a detailed look at how each sector defines potential fraudulent methods is helpful. Fraudsters usually target the following major fields:

Life Insurance

This is the most expansive field of insurance. This renders it the sector most susceptible to fraud. Most of this fraud occurs during the application process usually with applicants misrepresenting their income, health, personal information, or in certain cases, the true documents. Some of these might be to get less expensive premiums, but many cases are for scamming the insurance companies.

Digitizing the processes by insurance agents is an excellent move by companies. But inefficient implementation of this is futile. Some ways in which fraudsters trick the companies is by creating an additional identity as a beneficiary or faking death to claim the life insurance benefits. Fraudsters may return after disappearing for a few years claiming loss of memory to avoid any penalty.

Sometimes fraudsters withhold information regarding multiple policies. This is not allowed. The customer must provide information regarding all policies concerning the insurer. This prevents a single individual from having multiple claims on a single issue.

Health Care Insurance

Health insurance fraud is the intentional deception, concealment, or misrepresentation of information resulting in healthcare benefits for an individual or group. It can be committed by the policyholder or the provider. Some of the major modes of healthcare frauds are given below:

  • A policyholder trying to hide pre-existing conditions while applying is fraud. This is done by submitting false medical data or other documents. The legitimate waiting period for individual policies is ousted in such fraud practices.
  • Documents are outright fabricated to satisfy the terms and conditions of the policy. Insurance companies prefer youthful and healthy people as their customers. But if an aged person approaches them, the company would provide insurance. But the premium costs for this would be high as the risk for the company would be high. People try to conceal their ages in such cases. Faking disability is a divergent fraud practice from this.
  • Submission of duplicate bills that are either forged or inflated is also fraud. This is important in cases where no actual expense occurred. This is because of the basic understanding that insurance policies are not for profit but security.
  • A person participating in a fraud ring i.e collude with an agent, doctor, provide, etc to create a false claim is also illegal.

Automobile Insurance

Fraud rings in this sector collude to fake traffic accidents, collisions, or even death to make a fake insurance claim. The objective is mostly money. This ring may include insurance claims adjusters and forgery experts who make phony police reports and other documents. The Insurance Research Council estimates 21% to 36% of all automobile insurance claims to contain suspecting elements of fraud.

Automobile insurance frauds primarily fall under either of the following categories:

  • Staged Collisions- Fraudsters utilize a vehicle to stage an accident with innocent or involved parties. The fraudsters carry 4–5 passengers in a vehicle and the driver takes an unexpected maneuver that forces the innocent or opposite party to collide with their vehicle. Each fraudster can claim the insurance for the injuries he has been inflicted during the accident. Documents including medical reports and sometimes even identity proofs are forged for this purpose and submitted for evaluation.
  • Exaggerated Claims- After a real accident has occurred, the owner might incorporate a whole set of previous minor damage into the garage receipt associated with the accident. Personal injuries like whiplash might be exaggerated with false documentation.

Property Insurance

Fraudsters might try to insure a property and then destroy it to claim the insurance. This usually involves arson. They tend to forge the necessary documents to prove that the destruction occurred due to natural causes or disasters.

Selected Scenarios Where Technology Could Have Prevented Scammers.

While taking a closer look at how individual insurance fraud cases have fared in India, one thing stands clear- We could have prevented them. Almost all fraud is motivated by money. With technology, we could keep better tracks on scammers and fraudsters. Some of those selected incidents are given below with how technology could have been used to prevent them.

Madhya Pradesh- July 9, 2019.

A 10 member gang in Madhya Pradesh that included a doctor and a lawyer pulled off a brilliant scam for nearly half a decade. With an estimated total of more than 2 crore rupees scammed from insurance companies, the gang was faring very well till early 2019. The gang operated from the Dhar district by forging fake documents of persons in a moribund state and terminally ill people.

The fraudsters first identified their victims that included terminally ill patients. Then they would obtain vehicle finances and life insurance claims in their names. After their natural death, forged certificates proving unnatural causes for their death are submitted. Even the age of these senior citizens was falsified to avoid suspicion. With these forged documents the gang claimed money from the insurance companies.

This is a classic example of how document forgery and pretense are used to defraud companies. This could easily be avoided with technology. If the documents were analyzed by specific and well-equipped APIs or other forms of automation, the fraud could have been detected. As much as a document can be forged, it could never be as good as the original. This difference which is negligible to the human eye can be caught by technology.

Andhra Pradesh- November 26, 2017

A 35-year-old woman declared herself dead to claim Rs.1 Crore from an insurance company. She appointed her husband to raise the claim. The woman’s husband, Syed Shakeel Alam submitted fake documents declaring his wife had died. He mentioned in the documents that his wife was the policyholder.

He approached the insurance company claiming Rs1 Crore insurance. The Rs.1 Crore policy was issued in 2012 and an annual premium of Rs.11800 was paid every year for 5 years. The death report of the woman specified the cause of death as ‘chest pain’. In truth, most of the documents and medical records were either forged or belonged to another woman who had in truth died. Though captured, they had almost pulled off the fraud.

This too could have been prevented if proper technology was used to analyze and identify the documents. Visual verification could have been used to ensure better credibility. The existing APIs available for such measures are very effective. Unfortunately, many companies are yet to adopt these.

Gujarat- January 18, 2021

Four individuals including a doctor, an insurance agent, administrator of a private hospital, and a policyholder claimed insurance with the help of spurious COVID-19 medical documents and records in Vadodara, Gujarat.

Dr. Anil Patel, insurance Agent Pravin Parmar and administrator Dipak Tiwari were the prime culprits. Patel and Parmar would obtain and use bogus medical records. They tried to claim north of Rs.4,00,000. Tiwari tampered with the COVID-19 test samples and pasted the names of policyholders on them. He even tampered with the test results to make them ‘positive’.

The lack of a proper database and the inefficient evaluation of the documents was the major reason this scam had been going on for some time. If the claims processing was more accurate and diligent, this could have been prevented. Technology provides us with APIs and RPA that can be used to make strict verifications and avoid such situations.

How Will Technology help?

It is concerning that ‘insurance fraud’ is undefined in the Indian Insurance Act, 1938. Other instruments such as the Indian Penal Code(IPC) or the India Contract Act from the legal system are also void regarding insurance frauds. Thus, it is up to individual insurance companies to take action to prevent it.

One of the best ways is to use technology and automation to mitigate fraud risks.

Most claims are evaluated by agents or officers from the insurance company. They may make mistakes unintentionally or if dishonest may corrupt the process. This negative human factor can be eliminated with technology. It will also provide benefits to the company in the form of saved time and resources. Some of the specific reasons are given below:

  • APIs can be used to evaluate the document submitted at the time of application and claim. These APIs give unbiased and definitive results. Thus Forgery is detected much easily.
  • A digital repository of all policies can be digitally accessed by the APIs to decide if the applicant has applied for multiple policies for the same issue. This is not allowed by the government and the insurance company is not liable to pay the unmerited benefit.
  • Profiles of applicants and policyholders are double-checked with available repositories and history databases. This will help understand the background and history of the customer from a more credible perspective.
  • Immense time can be saved as a human evaluation would have taken days to complete. But technology can do this in a matter of minutes.
  • Constant monitoring for any fraudulent activities is possible as any kind of suspicious behavior in the database is detectable.
  • Lesser resource and manpower is required for conducting the process of policy claims. This saves the company funds.

Conclusion

As technology advances, the world too shall move ahead. Most of the financial sector acknowledges this and adapts to the changing world of automation. Unfortunately, the Indian Insurance Sector seems to be a little slow in this process.

With a growing number of fraudsters and scammers, it is wise for the sector to understand the technology and implement it in the most efficient manner possible This will save them time and resources while creating a well-fortified system devoid of human errors. This in turn will build their credibility and trust in the competitive arena.

It is only a matter of time before the whole sector transforms in the new era, but if the innovators in the field open their eyes and make the process faster, much attrition can be avoided for their companies. That is why adopting technology is not just necessary, but inevitable.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Mahesh Mohan

A Creative Writer intent on learning and sharing knowledge.

 

Impact of E-Stamping On Indian Rental Economy

E-Stamp paper or electronic stamp paper is an online application through which Stamp Duty can be safely paid to the Government. Government transactions need payment of non-judicial stamp duty. However, doing so in a conventional way would be a time-consuming process. Stamp papers are mostly used for creating rental agreements.

The law mandates that a certain amount has to be paid to the Central/State Govt. each time certain kinds of transactions take place. Such payments are referred to as Stamp duty. Examples of such transactions are buying and selling real estate, business agreements, leasing property, etc.

Stamp Duty is never paid in cash transactions. Instead, Stamp Papers equivalent to the payment value is purchased. Then the deed is printed/typed/written on it. Stamp papers evidently show that the required Stamp Duty has been paid to the Govt. It behaves similar to receipts.

The amount to be paid towards duty differs from state to state. In case a state does not possess its own Stamp Act, it will be overseen by the Indian Stamp Act.

The Backdrop of E-Stamping — How It Came About

In 2019, the Indian Stamp Act of 1899 was amended for the purpose of preventing tax evasion. The amendment was to be officially legislated from April 1, 2020. However, due to the outbreak of COVID–19 the amendment was delayed to 1st July 2020.

The process of E-Stamping is one of the simplest ways to fulfill an agreement. For this, a web portal is available where the payment for the stamp duty can be made. The e-SBTR (Electronic Secure Bank and Treasury Receipt) system enables E-Stamping for the authorized bank. This reduces time and other administrative expenses.

So What Is E-Stamping?

E-Stamping was launched to enhance the stamp duty payment method. Stock Holding Corporation of India Limited (“SHCIL”) is responsible for all the e-stamps utilized in the country. SHCIL is a body appointed by the Central Government. It is also responsible for the maintenance of records.

There are many advantages to using e-stamps. E-Stamping is basically tamper-proof. A unique identification number is generated to check the authenticity of the e-stamp.

There are drawbacks to e-stamping as well. For example, in the event of loss of the e-stamp certificate, then a duplicate copy cannot be issued. Another point is that despite online payment, the actual stamp paper has to be collected physically. This can be done from their respective vendors. It is a hassle and a major challenge in the current situation to collect the physical stamp paper.

Another consequent problem faced in e-stamping is a late fee. In such cases, a late fee will be levied. The Collector is the discretionary authority to accept delayed payments if an appropriate reason is given. This will be at his/her discretion.

An exception with regard to the late fee due to delayed payments is the Maharashtra Stamp Act. According to Section 17 of the Maharashtra Stamp Act, the stamp duty can be paid the next day after the execution.

On April 20, 2020, the Ministry of Finance appealed to the State Governments to issue proper instructions to the Collector. This should be done before collecting the late fee with regard to loan agreements or any other instruments. However, there has been no mention of any penalty.

4 Benefits of E-Stamping

 

Taking the documentation process online is easy, fast and hassle-free. Getting the Stamp paper signed is a challenging task at times. This is especially true when you need the process done faster to move things ahead. Given below are some benefits of E-Stamping:

Fast documentation

The entire process of collecting documents, taking them for stamping and then filing them wherever needs is a lengthy process. E-Stamping makes it easy for you. You can easily upload the documents in minutes on the portal. Using the certificate ID number and other details one can easily check its authenticity.

No Fraud

Going online with the documentation process makes sure there are no frauds. As E-Stamping solutions can be easily verified, there is no danger of manipulations that can be done on paper. These are mainly done by tampering with the quality of paper, signature/thumb impression etc.

No shortages in paper

This is one of the biggest advantages, there will never be an issue of the paper. There are times when people go to buy stamp papers and you come empty-handed as they have no stock left. But with e-stamping, this topic is out of the discussion. Because e-stamps are available online with licensed vendors and banks.

Going Paperless

With an e-stamp made available online, buying or selling properties or renting a place or even goods is easier. Going paperless also helps to save the environment while it gives you the opportunity to complete certain things fast. You can easily get your papers signed and submitted wherever needed. An example is Madras High Court which went paperless in April 2018.

Where Can Businesses Use E-Stamping?

Stamp Papers are utilized for creating agreements/contracts as well as affidavits. Every agreement, starting from the office’s rental agreement to the vehicle lease agreement needs to be printed on stamp paper. Contracts comprise everyday business transactions in almost all industries. On the other hand, affidavits are commonly used by regulatory bodies to issue circulars.

However, if stamp duty is not paid for an agreement, the agreement would not be considered as legal evidence in the court if one of the parties dishonors the terms agreed upon. This is where the e-Stamping & Digital Contracts can be used to speed up business documentation and processes.

E-Stamp Paper And Rental Agreements

In order to use e-Stamp paper for rental agreements, the first thing you need to do is verify whether your state provides this facility. This can be done by logging on to the website of SHCIL and checking whether your state is included in the list. The current Indian states that allow e-Stamping are Assam, Gujarat, Himachal Pradesh, Karnataka, Maharashtra, Delhi-NCR, Tamil Nadu, Uttarakhand and Uttar Pradesh.

To get a rental agreement printed on e-Stamp paper, you must purchase an e-Stamp paper from allotted centers in your city. This cannot be done online from SHCIL or their distributors. Next, you should write/print your prepared rental deed on it. Then the executants must sign at designated places along with the signatures of two witnesses. This makes the contract, legally binding.

How E-Stamping Can Contribute To Rental Economy

The above section explains how e-stamping applies to rental agreements. These no longer apply to just renting a home or commercial space. In India, there are many instances in which people choose to rent goods or services for mostly two reasons. Youngsters do not know which city they might have to live in when they relocate for work purposes. Secondly, many items ranging from clothing to furniture may have a price tag that may not be suitable with one’s income. People who need formal wear for a special occasion may not wish to wait a year to purchase it.

All of the above have given rise to multiple rental businesses which drive the rental economy in India. Most of these businesses require agreements and stamp duty when dealing with tenants, distributors, brokers etc. Some top examples are given below:

Rental/Shared Workspace:

India has seen the rise of startup companies that offer co-working and co-living spaces. They are near each other. Most working professionals or students prefer staying near colleges/schools/workplace. Some popular co-working companies include WeWork, InstaOffice, GoWork, and Innov8.

However, the current Covid-19 crisis has changed this equation to a great extent. While new companies continue to spring up across the country, physical interaction is still frowned upon, giving rise to technologies like e-contracting and e-sign. With the recently introduced e-stamping directive, this innovation is also set to change the shared workspace economy.

Rental/Shared Accommodation:

 

In 2019, rental living companies have expanded to providing a wide range of services. Living spaces by Zolostay, Nestaway or NoBroker are perfect if you are looking for a place to rent/share. In fact, a December 2018 survey by Knight Frank India shows that 72% of millennials gave co-living spaces a thumbs-up. Over 55% of respondents were in the age bracket of 18–35 years. They were more than willing to rent co-living spaces.

In India, 47% of the youth population approximately fall under the country’s working-age population. They are an integral part who take up coliving spaces in major cities.

  • About 60% of Indian students being outstation students in most cities. As such, the demand stands at approximately 100,000 beds across India for student accommodation.
  • Coliving industry in India has a net worth of about 85 Cr INR. This is responsible for about 2.5% of the entire rental market. This is based on the industry expectation and the forecast which stands at 2X growth in three years.

But with Covid-19, the same issue arises where most tenants/customers want rental agreements to be done online. A Digital E-Stamp can speed up the process of creating rental agreements. This can be done by merging the agreements with stamp paper. It helps save the time and effort involved in the physical process of acquiring stamp paper and printing the agreement on it.

Rental/Shared Vehicle Industry

 

The Covid-19 crisis has created an aversion to public transport amidst people. As such, self-drive and rental car companies have seen a steep rise in subscriptions and inquiries. Car rental companies like Eco-Rent-a-Car and Revv have seen a sudden spike in demand. Other companies like Zoomcar have witnessed a 4x increase in rentals while some like Drivezy are launching new services to ride the wave. Work from home, fear of infection in public transport and schools being shut are some of the factors that are contributing to greater demand for car rental companies.

  • Currently, the individual cab business for Eco-Rent-a-Car is up to 350 cars a day. However, travel and tourism which used to be 200 cars a day are now down to almost zero.
  • Revv have seen a 30%-40% increase in subscriptions

While availing the services of cars and drivers, these companies also have a higher demand for signing agreements online. With e-Stamping being cleared by the government, paying stamp duty is no longer a hassle for vehicle rental companies.

Rental/Shared Consumer Goods

While it may not seem like much, but this industry was actually growing at a huge pace before the pandemic. Here are some facts:

  • According to a report by PricewaterhouseCoopers, the sharing economy is set to generate potential revenue of $335 billion by 2025 globally.
  • In 2019, the rental industry has made a huge market in India with estimates that the market stands at about $1.5 billion.
  • In an article by Livemint, a rough estimate shows that the market for rental of furniture is seen at around $800–850 million. Rentals of electronic appliances are approximately a market of $500 million while that of bikes is $300 million.

The rental/shared consumer goods companies need to deal with a lot of third parties like brokers, manufacturers, distributors, retailers etc. They require contracts/agreements on a yearly/monthly basis, which is why the need for e-contracts and e-stamping is crucial in this sector as well.

Conclusion:

In the situation of COVID-19 Pandemic, it is important that the documents can be executed and at the same time be valid under the court of law. E-agreements are valid under the court of law and they are eligible for stamp duty as well.

E-Stamping also points towards a reduction in corruption and improving transparency. Yet there could be technical issues to be faced by the executors of an agreement through e-stamping. This may be a major challenge to sign an agreement.

Further, the state legislature can be lenient in terms of levying delayed payment fees. In contrast, there are certain states which have to show more importance to e-contracts and e-stamping. An important factor is the Indian rural population. People still do not have adequate knowledge in technology. This makes it very challenging in rural areas to adapt to this e-stamping. It could also be challenging for lawmakers and government departments.

In conclusion, while E-Stamping is still in it’s infancy and growing, it has many hurdles to overcome yet across the country before being accepted as a standardized norm.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Reach us at: www.signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

 

Digital Transformation of 5 Cs of Credit Analysis — New Trends in Lending

Digitization has become a marvel of technological innovation. It is dramatically changing credit markets around the world. It is also creating opportunities for consumers and new market participants. However, there remain challenges for traditional financial institutions and regulators.

What are the 5cs Of Credit

 

Credit analysis determines the risk involved with a loan and its borrower. A bank or lending institution will check your business & personal financial details. This comes regardless of the type of financing needed. Credit analysis can be broken into the “5 Cs:” character, capacity, condition, capital and collateral.

Character: This assures lenders about the honesty and integrity of the borrower and guarantors. The lender needs to be confident about other aspects of the applicant. This includes the background, education, industry knowledge and experience which is essential for successfully managing the business. Lenders may need a certain amount of management and/or ownership experience. One can assume the past is the best predictor for the future. On that note, a lender will examine the personal credit of all borrowers and guarantors as a precaution.

Capacity (Cash flow): The lender will obviously want to check if your business is capable of loan repayment. The business should have a consistent cash flow to support expenses and debts. Verifying the payment history of existing loans and expenses is crucial. This is because it acts as an indicator to the borrower’s reliability to make loan payments.

Condition: The lender must identify the condition of the business, the industry, and the economy. This is why it is essential for lenders to know the industry. The lender will also verify the current conditions of the business/individual. The check involves knowing whether the condition will continue, improve, or deteriorate. In addition, the lender will want to know how the loan proceeds will be used. This can be towards working capital, renovations, additional equipment, etc.

Capital: Lenders need to check for personal investments that the borrower plans to make in the business. Investing personal capital reduces the chance of default. Investing in personal assets also indicates that you are willing to take a personal risk for the sake of your business.

Collateral: A lender will evaluate the assets (both business and personal) of the guarantors. This is because they can act as a secondary source of repayment. Collateral is vital, however, its significance depends on the type of loan. A lender will provide details on the types of collateral needed depending upon the type of loan.

The above five components constitute an effective way of credit analysis. It also helps the lender understand the borrower and the business. By knowing each of the “5 Cs,” a better understanding of the loan application process and its requirements can be gained.

Need For Technology In Credit Analysis

In today’s digital environment, customers require excellence in terms of service. The demands are cumbersome when it comes to hassle-free and timely service rendition. Banking and financial services are one of the highest demand sectors in this regard.

Modern lending institutions are Constantly competing to win clients over. Utilizing software solutions can help meet those lofty demands. It can simultaneously mitigate credit risks as well.

The need for an improved credit management process

The traditional lending industry is adopting automated credit underwriting as the accepted norm. This shortens the wait time for clients. It also helps banks improve customer experience through a competitive environment. According to an article by Monja, the automated credit underwriting market stood globally at USD 2,615.8 million in 2017. It is predicted to grow up to USD 5,579.4 million by 2024. This will reflect a CAGR of 11.6% over the forecast period. The traditional lending industry is adopting automated credit underwriting as the accepted norm. This shortens the wait time for clients. It also helps banks improve customer experience through a competitive environment. According to an article by Monja, the automated credit underwriting market stood globally at USD 2,615.8 million in 2017. It is predicted to grow up to USD 5,579.4 million by 2024. This will reflect a CAGR of 11.6% over the forecast period.

 

The paper-based process causes delays in credit estimation, loan approval and releases. Time, as well as the cost of processing each loan application, can be reduced drastically. This requires a streamlined credit management process to replace legacy methods.

Hence, only automation can be the messiah to deliver an immense improvement in the current practice of extending loans. Lending firms that continue to be cynical about the efficiency of automation would be losing a lot. This includes clients, business opportunities, and more importantly revenue.

The paper-based process causes delays in credit estimation, loan approval and releases. Time, as well as the cost of processing each loan application, can be reduced drastically. This requires a streamlined credit management process to replace legacy methods.

6 Reasons Why Digitization Is The Need Of The Hour

Customer expectations. Banks traditionally depend upon physical distribution methods. Recently, it has been challenging to meet changing customer needs for speed and simplicity. Demands like fast online credit approvals are growing. A Report by Mckinsey highlights how the customer needs for online and mobile experience will grow 4X by the end of 2020.

Reduce back and forth client interactions

The current process requires scanning, emailing, and faxing financial information and supporting documentation, . This can be a strenuous back-and-forth process. Customer-facing interactive portals and APIs can easily enable the digital capture of such information.

Eliminate unnecessary manual work: The amount of unnecessary manual data entry can be easily reduced. Leveraging a portal that connects to the borrower’s financial accounting package is the answer. It should also support the technology to read tax forms digitally,

Make quicker and smarter decisions: The time required to generate financial spreads can be reduced. The application of innovative machine-learning technology is perfect for this.

Improved risk mitigation: Risk reduction is the main goal of any lender. Automation technology using AI can easily help in this area. The system will use the rules you define and analyze entire credit applications in seconds. It also reports reporting every error it detects. AI can handle redundant tasks at a higher speed and with lower error chances.

Pressure on cost and returns. The new players in the market are challenging incumbents’ revenues and their cost models. The conventional form of banking operations, branch networks, and legacy IT systems can be cumbersome. Fintech companies can operate at much lower cost-to-income ratios. This is approximately 40 percent lower according to a report by McKinsey.

How Automation Can Transform The Credit Analysis & Lending Landscape

The operational problems present in a manual paper-based solution can be complicated. The automation of credit analysis and the digitization of the key steps can provide savings of up to 50%. The benefits extend well beyond even improvements. Digitization can also protect bank revenue from harm. The potential of reducing leakage can be up to 5–10%.

1.Improved accuracy, zero paperwork

Sifting through voluminous data has been the inevitable cause of delays in loan processing. The front-end data flow requires extensive man-hours. But in a paper-less setting, the complications in the process are reduced. This can be seen from the initiation stage until the approval phase.

An automated lending system can manage the heavy volume of data. It can delegate transactions without missing a step. Signzy’s complete onboarding solutions can help in this regard. With AI-based proprietary technology, higher efficiency is easily guaranteed. Using computer vision, our solution is capable of processing almost 3.5 million documents in 1 day.

 

2. Greater Savings With Lesser Cost

Automation greatly reduces processing time. Thus the cost of doing business or processing a loan application will automatically drop. Credit and loan officers can utilize time to process more accounts.

Most importantly, lending firms can exempt the cost of hiring and training of additional personnel. Overall operating costs are greatly reduced. Automation can help reduce the cost of risk mitigation by 10–25%. Additionally, the overall costs are lowered by about 20%.

3. Optimize lending operations through APIs

A lending software solution can optimize all segments of the lending operation. However, the primary point of focus is always on the risk-assessment aspect.

Signzy uses proprietary APIs that our decision-making engine can use. These APIs can cross-check credit scores against EXPERIAN data. The checks are conducted against the Consumer Bureau database as well. The system checks for accurately retrieving the credit score of the borrower. This allows for a faster decision-making process.

4. Clients are the ultimate beneficiaries

The best customer experience is ultimately desirable in a streamlined credit management process. The processing of consumer, commercial or industrial loans is not a time-consuming affair. Automation can easily satisfy customer expectations.

Clients are not really concerned with the internal mechanism of the process. When all loan requirements ae fulfilled, the timer begins to count down. Most borrowers expect the processing of their loan applications to be timely.

New Trends In Lending — How Organizations Are Adopting To Automation

The onset of Covid-19 has set an inflection point for a spike in demand for contact-less and paper-less lending. This has fast-tracked digital transformation in the lending industry. This is similar to how demonetization catapulted digital payments in India.

NBFC’s have traditionally designed digital capabilities to drive cost-efficiencies and manage risks. However, the Fintech industry has shown digital prowess for improving customer experience.

Digital Analytics For Credit Analysis

FinTech’s have largely managed collections via data analytics led sms/phone/email communication. They have also employed limited on-ground collection teams. As a result, an increase in on-ground collections is viable. This can be either through in-house teams or collection-agency outsourcing.

There has also been a spike in partnerships with payment banks. The purpose of this is to enable customers to deposit cash at kirana outlets. It also entices the proliferation of awareness campaigns for customers to pay using UPI and similar methods.

Fintechs Play A Crucial Role In Digital Lending

In McKinsey’s Future of Risk Management Survey, data shows that 85% of risk managers believe legacy IT infrastructure to be the main challenge in digitization. To resolve this, many large financial institutions have collaborated with fintechs. For example, ING with Kabbage and BBVA Compass Bancshares with OnDeck.

The report also highlights new lending approaches. This includes automating SME credit decisions through the use of alternative data sources. Ex: e-commerce-transaction data from Amazon, PayPal, and eBay. Other examples include: cloud-accounting data from Xero and banking-transaction data via APIs. These are collected from financial-data aggregators such as Yodlee and Finicity). From these findings, it can be inferred that fintechs can play a key role for innovations in digital lending.

Conclusion

Traditional lenders seem to have a notion. They feel that an automated lending system is overrated. For them, a complex process like credit management is impossible to automate. They fear for the weakening of the lending process. On the other hand, sticking to the manual process poses bigger risks.

Moreover, a lending firm that processes loans at a turtle pace will not merit attention. Times have changed and credit risk processes are turning digital. Every player in the lending space needs a lending software solution.

Automation is essential in this day and age. Lenders can hit volume targets, increase profits while managing delinquencies and mitigating risks. It’s the new backbone of any lending business.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

 

 

Impact Of Blocking and Unblocking Of E-Way Bill Generation Facility On Taxpayers & Transporters

The Indian government has introduced new regulations to control the E-Way bill(EWB) generation facility. This move will identify and penalize GST non-filers and evaders. With effect from December 2, 2019, the blocking and unblocking of the EWB generation facility has been implemented on the e-way bill portal.

EWB generation has been deactivated for taxpayers who haven’t filed their returns for the previous two months. In this regard, Form GSTR3B is to be considered (which is filed by normal taxpayers) for the blocking of E-Way Bill Generation. The move is in accordance with Notification #74 which was released on 31st December 2018 to include Subrule ’E’ under Rule 138 of the GST Act.

What is the objective behind blocking e-way bill generation for taxpayers?

According to a report by Economic Times based on GSTN data, around 20.75 lakh GSTINs have not filed their GSTR-3B for September and October months. Moreover, around 3.47 lakh GSTINs (16.7%) of these had transactions for September and October 2019 in the e-way bill system. Taking under consideration the increase in the number of tax defaulters, their ability to generate E-way bill had to be blocked. The tax department is of the opinion that non-filing of returns has been the primary reason for the decline in the GST revenue collection so far.

Blocking of E-Way Bill Generation Facility

Every taxpayer who is registered under GST is required to file GSTR-3B, on a monthly basis. GSTR-3B includes details of sales and purchases made by a business and the final tax payable after claiming input credit.

As per the new rule, when a taxpayer fails to file his or her GST returns (GSTR-3B) for two continuous tax periods, he or she will get blocked from generating an e-way bill. A blocked GSTIN cannot be used for generating an e-way bill. This applies to both consignor or consignee. For example, if a taxpayer failed to file his/her GSTR-3B returns for the months of September and October 2019, his/her E-way bill generation facility would be blocked effective from 2 December 2019.

The new rule also applies to the transporter who will be unable to generate EWB using the blocked GSTIN of the taxpayer.

The blocking of EWB generation will not impact previously generated EWBs in any way.

Unblocking Of E-Way Bill Generation Facility

Unblocking of e-way bill generation facility restores the facility of generation of E-Way Bill. In the event of filing of the return for the default period(s), the default period is reduced to less than 2 consecutive tax periods. This is in respect of such taxpayers GSTIN (as Consignor or Consignee),

For updation of his/her status the taxpayer can visit the EWB portal. Select the option ‘Search <Update Block Status’. Enter their GSTIN and use the Update Option to get themselves unblocked on GST portal. This applies only when GSTR-3B return has already been filed for the default period(s).

EWB generation facility can also be restored by the jurisdictional tax official. This can be done on the basis of manual representation by a taxpayer. The tax officials will issue an online order on the GST Portal, for accepting or rejecting such requests of the taxpayers. In case he accepts the request, the facility will get restored.

Taxpayers will usually receive an Email/SMS of acceptance or rejection will be sent to taxpayer on email ID/mobile number. In order to view the status of the order issued by the tax official,taxpayers can login to the GST Portal. Using their GSTIN, the user can go to Dashboard>Services>User Services> View Additional Notices/Orders.

The Unblocking of EWB will be valid till the period indicated by the tax official in his/her order. The GST Portal will send a reminder to the taxpayer about 7 days before the expiry date via mail/SMS.

Impact Of Blocking/Unblocking EWB Generation On Transporters

Transporters who are enrolled on the EWB portal but not registered on GST portal will not be impacted in any way. This is because they are not required to file GTR3B returns.

If the GSTIN of the transporter registered under GST portal is blocked, that GSTIN cannot be used. This rule applies to Consignor, Consignee or transporter while generating EWB or updating transporter details.

In case an EWB was generated before blocking, the transporter can also update the vehicle and transporter details. He/she can carry out the extension in validity period of these EWBs if required.

Impact On Taxpayers Who Are Blocked From EWB Generation

Not generating an e-way bill will be considered as an act of non-compliance as per the provisions of the GST law. In such a case, the business may be prevented from delivering goods without an e-way bill.

When goods are transported without an e-way bill, the authorities can claim that the consignor of the goods has made an attempt to evade taxes. A subsequent levy a fine equal to the tax amount is payable in such case. Such commodities and the vehicle transporting them can be seized or detained. Both the goods and the vehicle may be released upon successful payment of the pending tax amount and the penalty mentioned by the concerned officer.

The absence of an e-way bill during transportation of goods can lead to the disruption in the day-to-day operations. It can also hamper delivery of goods for a business. This move by the government is intended to push taxpayers to be more compliant and make sure they file their returns/make their tax payments on time.

Businesses need to approach with caution by filing their GSTR-3B within the deadline. Doing so ensures that there is no disruption in their business-related operations. This new modification to the e-way bill system may effectively improve GST revenue collection.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs that can be easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.

You can reach out to our team at reachout@signzy.com

Written By:

Signzy

Written by an insightful Signzian intent on learning and sharing knowledge.

 

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