Lentra's Ankur Handa Dives Deep into Digital Lending Trends and Challenges

As the digital lending sector continues to witness remarkable growth and transformation, StartupTalky interacted with Mr. Ankur Handa, Co-Founder and President of Lentra, to discuss the challenges that the digital lending industry currently faces and how Lentra is actively addressing them. Mr. Handa also shed light on the key trends that are shaping the industry.

Lentra, a prominent player in the digital lending arena, has been at the forefront of innovation, pioneering new strategies to maintain a competitive edge. From enhancing accessibility to ensuring data protection compliance, the interaction explored critical aspects of the industry's growth and development.

StartupTalky: Hello, I am Sayantan, and we are joined by Mr. Ankur Handa, Co-Founder and President of Lentra. Welcome to StartupTalky, Mr. Handa. How are you today?

Mr. Handa: Very well, thank you so much for having me here.

StartupTalky: It is a pleasure to have you here today. I am sure our audience is eager to learn more about Lentra and the digital lending market. Let us dive right in. What key trends do you see in the digital lending industry, and how is Lentra innovating to stay ahead?

Mr. Handa: The lending technology landscape in India is undergoing significant transformation, particularly in the aftermath of the COVID-19 pandemic. One notable shift is the substantial growth in retail credit consumption, now surpassing commercial lending for the first time in history.

What is most striking is the pluralism we see in our credit markets today. Credit is no longer limited to the salaried class or industrialists. It is now accessible to a diverse range of individuals, including street vendors, entrepreneurs, farmers, students, and homemakers. This expanded accessibility is largely attributed to initiatives like Jan Dhan Yojana, Aadhaar, and the widespread penetration of mobile internet. As we move towards a digitally connected world, this inclusivity becomes a significant equalizer for our diverse society.

Another notable trend is the evolution of artificial intelligence (AI). AI is not only revolutionizing the way we assess creditworthiness but also changing the speed and scope of these assessments. It is enabling us to reach a broader customer base and customize services. One impactful application is leveraging business intelligence to address challenges related to accurately targeting potential customers. We are witnessing a shift towards a greater focus on "Government-to-Customer" (G2C) interactions, with initiatives like India Stack playing a pivotal role, particularly in sectors like agriculture and rural development.

The decentralization of credit is another compelling trend. Initiatives like the Open Credit Enablement Network are standardizing the flow of credit among borrowers, lenders, and credit distributors. This move represents a democratization of financial services. As a certified TSP with Samadhi and Credit AI, Lentra leverages extensive cash flow data and a vast network of retailers to facilitate rapid underwriting.

Additionally, co-lending is gaining traction, emphasizing customer-centricity and relationship management. There's potential for non-banking financial companies (NBFCs) to collaborate with public sector banks, capitalizing on lower costs of funds to develop innovative business models.

Lastly, the growing trend of "APIfication'' is reshaping our industry. APIs (Application Programming Interfaces) are being integrated into various aspects of our operations. At Lentra, we have integrated our Lending APIs and Origination journeys with brands, OEMs, dealership chains, and merchant networks.

StartupTalky: Thank you for sharing those trends, Mr. Handa. Now, moving on to challenges in the industry, what are the major challenges that the digital lending industry is currently grappling with, and how is Lentra tackling them?

Mr Handa: One of the key challenges we face is accelerating our reach in a fast-growing market like India. We are not satisfied with a 7% growth rate; we aim for more. To achieve this, we need to revolutionize our digital distribution channels. Unlike in the past when we relied on physical branches, today, customers have numerous digital channels to access loan products.

However, the challenge is tailoring these digital options to diverse customer segments. In rural areas, where a fancy website may not be practical, we need to use voice and other native digitization methods. For millennials and college students, a simple message or WhatsApp can complete the loan journey. Meanwhile, commercial lending to enterprises requires a different approach.

The main challenge and opportunity lie in building robust digital distribution networks. Outside of that, as technology advances, security becomes a growing concern. With India's growing economy, we anticipate a significant increase in security and fraud attacks by 2030. We must establish the right safeguards to protect our economy.

In contrast, India excels in automation, insights, AI, collaboration with the ecosystem, and product innovation. These areas are not challenges but strengths for us, thanks to initiatives like India Stack. My focus is on addressing security and reimagining digital distribution as the top two long-term challenges.

StartupTalky: All right. Since we have touched on distribution and security, so, my next questions revolve around these aspects. How is Lentra striving to enhance accessibility and inclusivity in digital lending, considering the diverse demographics? What strategies is Lentra employing in this regard?

Mr. Handa: Our primary focus has been close collaboration with government initiatives. While terms like B2B and B2C are well-known, we have been forward-looking with a focus on G2C (Government-to-Customer). We have been early adopters of initiatives like Aadhaar, the Greater India Stack, eSign, and eKYC on our lending platform.

We have also played a role in creating unique products. For example, we worked with a large bank to enable agricultural products like cattle finance loans and Kisan credit cards in just 90 days, benefiting rural farmers in Gujarat.

There is a lot of innovation happening in response to government initiatives. The Account Aggregator, ONDC, OCEN, GeM Sahay, and related products are contributing to financial inclusion.

Financial inclusion has come a long way. Credit card spending and personal loans are at all-time highs. However, we must ensure the sustainability of this credit growth and responsible lending practices. As a technology provider, we aim to support banks in lending responsibly to avoid repeating past mistakes, such as the 2007 crisis. The current NPA levels are at an all-time low of 3.9%, reflecting cleaner books.

Financial inclusion is already happening, with a focus on retail products in both public and private sector banks. As a digital lending enabler, we are committed to creating new product offerings while maintaining sustainable models and robust underwriting, even when using alternate data and algorithms. Our goal is to avoid artificial growth bubbles.

StartupTalky: Thank you for your insights, Mr. Handa. Now, moving on to data protection and security, considering the recent Digital Personal Data Protection Act, 2023, are there additional steps that Lentra needs to take to ensure compliance with the regulation once it is implemented?

Mr. Handa: The key highlights from the Personal Data Protection Act are significant. The most notable aspect is the potential financial penalties, which can go up to 250 crore rupees for each instance of non-compliance. Data processing agreements are mandatory before outsourcing activities to third parties, even for Lentra, requiring scrutiny before using a solution.

The Act also emphasizes periodic data protection impact assessments, mandatory for significant data fiduciaries. The impact assessment focuses on data, application, and infrastructure security, which must be designed for future challenges, not just current ones. India's growing ecosystem means security threats will also increase.

Details regarding the Act's implementation may need clarification, likely after the establishment of the Data Protection Board of India, as outlined in the law. Lentra is actively discussing interpretations with banks and their risk teams.

We have taken proactive steps to structure and process consent-based personal data sets for future adaptability. Data storage, encryption, and retention strategies will need reassessment and reimagination. This is an iterative but mandatory process to ensure data security for all Indians.

Security is fundamental for Lentra, with compliance to ISO 27001, ISO 27018, ISO 22301, SOC 1, SOC 2, SOC 3, and AES 256-bit encryption already in place. As we gain more clarity, we will further reinforce and adapt these processes to the evolving ecosystem.

StartupTalky: Since you mentioned the need for further clarification on government policies, especially regarding the Data Protection Act, do you have any specific recommendations for government policies that could better support the growth of Indian startups in general?

Mr. Handa: Absolutely, there is more to be done. India has made significant strides in digital finance and payments, with UPI being a headline story. The scale, speed, and unit economics have amazed the world, and India is at the forefront of the fourth industrial revolution.

The government can play a crucial role in two ways. Firstly, it can further accelerate the positive momentum within India. Secondly, it can help Indian companies, like ours, take their products to the global stage. Initiatives like expanding UPI to other countries are promising.

As a private player, we are eager to take the Indian success story worldwide, but we need a conducive environment. Events like the G20 have been instrumental in promoting the Indian narrative on a global scale.

On the home front, credit needs to be integrated into daily life. The government can encourage this by creating frameworks that enable affordability aspects of lending in various sectors like tourism, health, and education. We have the technology stack ready; now we need the right policy framework.

We envision providing credit throughout a person's life, from college to retirement, with various credit products offered by banks and other industries. This holistic approach can benefit individuals in rural areas and tier four and five cities. It is time to explore how we can make this a reality in India.

StartupTalky: Mr. Handa, I have one more question, a bit hypothetical. Currently, commodity-based businesses use their commodities as collateral for loans. So, in this digital age, is it conceivable that companies might use data as collateral for securing credit in the near or distant future? What are your thoughts on this possibility?

Mr. Handa: Today, I am in Delhi, where we hosted an event with friends from the banking fraternity. One interesting discussion point was a banker's dream of creating an all-digital loan against property journeys with no paper involved. I believe this aspiration can become a reality.

I see hope in the increasing digitization of daily life. From making payments through Google Pay to accessing documents in DigiLocker, these building blocks are aligning. It is conceivable that property purchases and land records could end up in a DigiLocker in the future, although this will involve complex security measures.

India Stack has played a crucial role in this journey, starting with Aadhaar's identity layer, and now expanding to consent and data layers, including account aggregators. As these layers evolve, they will trigger a chain reaction, although predicting the exact outcome is challenging.

One thing is certain: there's hope, belief, and the right tools, capabilities, and environment to make it happen. If this transformation occurs anywhere in the world, it will be in India. The next step is to create an environment for India's success story to benefit other communities and countries, promoting inclusive growth and economic development.

While we aim for growth and revenue with ethical practices at Lentra, the ultimate goal is to see both Lentra and India thrive economically.

StartupTalky: As you rightly said, India has definitely made significant strides in digital payments and fintech, surpassing the West in many aspects. So, moving on to my final question, what is your outlook for the industry, and what advice do you have for budding entrepreneurs?

Mr. Handa: I would say take a fearless leap. When I started Lentra with my partner, DV, we were in our fourth year, incubating this idea. I came from a corporate background, having worked at Capgemini and Barclays. It was a pivotal moment, and I am glad I took the chance. Some things cannot be meticulously planned; they unfold in unexpected ways.

Facing challenges, patience, and persistence are crucial. We have adopted an iterative approach, not starting with a grand plan but having a vision and adapting along the way. We have made mistakes but also made more right decisions, which got us this far. We cannot become complacent; curiosity and a hunger for growth are essential.

We are fortunate to thrive in India, where the ecosystem is expanding, attracting global giants like Apple and Google. Indian entrepreneurs have the opportunity to create localized solutions that cater to India's unique needs. Opportunities surround us, and we should take the risk, have courage, and improvise. It is a conducive environment with ample support and resources available. So, my advice is to go for it.

StartupTalky: Thank you, Mr. Handa, for sharing your valuable insights. I have learned a lot, and I am sure our audience has too. We appreciate your time, and we look forward to future interactions whenever the opportunity arises.

Mr. Handa: My pleasure. Thank you so much for having me. It has been a pleasure interacting with you.

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