Digitap's Nageen Kommu Discusses Fintech Innovation, Data Protection, and Government Policies

In the ever-evolving landscape of fintech innovation, one name has been making significant waves—Digitap. As a B2B SaaS provider in the FinTech market segment, Digitap specializes in API-based solutions for the financial sector.

In a recent interaction, we had the privilege of speaking with Mr. Nageen Kommu, CEO, Digitap, who provided valuable insights into their unique approach to financial risk management and customer onboarding.

Mr. Kommu shed light on their unwavering commitment to data protection, and the benefits of Indian startups following G20's Startup20 initiative. He highlighted the significant role that government policies have played in fostering the growth of startups like Digitap in the dynamic Indian fintech market.

StartupTalky: Good morning, everyone. I am Sayantan, delighted to introduce our guest today, Mr. Nageen Kommu, the CEO of the tech startup Digitap. Digitap specializes in developing API-based solutions for fintechs and banks, harnessing the power of AI and machine learning. Welcome to StartupTalky Mr. Kommu. How are you today?

Mr. Kommu: Good morning, Sayantan. I'm doing well, thank you for having me on your show. It's a pleasure.

StartupTalky: It's an absolute pleasure to have you here. Thank you for your time. I'm confident that our conversation will be enlightening for our viewers. Let's dive right into the questions.

Mr. Kommu: Certainly.

StartupTalky: What makes Digitap's AI and ML algorithms unique in financial risk management and customer onboarding, and how do you achieve top success rates in the market?

Mr Kommu: That's a great question, Sayantan. Our approach at Digitap revolves around providing alternative data solutions, which differ from traditional credit bureau scores. Traditionally, banks and financial institutions relied heavily on bureau scores to assess customers' creditworthiness. If a customer's score exceeded a certain threshold, they were approved for a loan, and if not, they were often disregarded. However, this approach only caters to the top 100 million Indian users, and it doesn't account for those with scores below 730, who may still be reliable customers. Additionally, approximately 40% of the Indian population lacks any credit score because they've never taken a loan or credit card.

Our challenge is to distinguish good customers from bad ones within this vast customer base of the next 400 million. We achieve this by focusing on alternative data sources that enable our clients, including NBFCs and banks, to underwrite these customers. The key is to identify unique data sources that set us apart from competitors. Having exclusive access to such data sources can provide a significant initial advantage, even if competitors eventually catch up.

The next challenge is to convert unstructured data from these sources into structured formats, a step that most AI and ML companies can accomplish. The real differentiation comes in constructing meaningful models from this structured data. This is where we excel and distinguish ourselves from competitors. The process involves data structuring and the creation of scoring models tailored to specific use cases or outcomes, ensuring that our results stand out.

Regarding success rates, the availability of data plays a pivotal role. The more data we have, the more refined our models become. We strive to strike a balance between identifying unique data sources and finding customers willing to allow us to use their data to train models effectively. It often involves partnering with a champion client, offering incentives, and leveraging their data to fine-tune our models before introducing them to the market.

StartupTalky: Thank you, Mr. Kommu, for sharing your insights into Digitap’s unique approach and success factors. With the Digital Personal Data Protection Act, of 2023, now in place, how is Digitap planning to secure customer data effectively?

Mr. Kommu: Certainly, Sayantan. The Digital Personal Data Protection Act, of 2023, brings several facets related to data protection into focus. Even before its implementation, the concept of account aggregators gained prominence in the BFSI segment. Adhering to this concept, the Data Protection Act mirrors many principles outlined in the account aggregator ecosystem. It provides guidelines on how to obtain customer consent, the duration of consent, the purposes for which consent is granted, and mechanisms for customers to revoke consent.

At Digitap, we consider ourselves data processors. We don't store data; we process it on behalf of our clients, who are the data fiduciaries. While there may not be specific guidelines for data processors, we voluntarily adopt the same policies and procedures that data fiduciaries follow. If a customer wishes to revoke consent, we ensure that the data is deleted, complying with the Act's requirements.

The Act also addresses data security during storage and transmission. We already have robust security mechanisms in place, as we deal with RBI's outsourcing norms, which mandate data localization within India. We undergo regular audits for data localization and application penetration testing to assure our clients, especially those regulated by RBI, of the security and integrity of their data.

Since we don't store data, our role is primarily processing, and we strictly adhere to this distinction. West are paramount to us, given the sensitive nature of financial data.

StartupTalky: Thank you, Mr. Kommu, for outlining your approach to data protection and compliance with the Digital Personal Data Protection Act. It's crucial in today's digital landscape. How will Indian fintech startups benefit from the G20 Startup 20 initiative, and do you anticipate increased competition from foreign players as a potential challenge?

Mr. Kommu: Definitely it is an opportunity to unfold ourselves in the international market. However, in my opinion, the Indian fintech ecosystem is well ahead of a lot of countries in terms of innovations, especially from the West. You are now seeing a lot of startups mushrooming around the account aggregator ecosystem which is one of the flagship initiatives of the Indian government.

Now we are seeing countries like UAE and France adopting our UPI ecosystem. So, we have that edge in terms of some of the technology and some of the innovations that we have gotten about, especially around the digital infrastructure like Aadhaar, UPI, and account aggregators. It will actually help us, the Indian startups, to take these initiatives outside our country and then start internationalizing them.

Another place where definitely the Indian ecosystem or Indian startups will flourish is in our domestic market, where we have proven ourselves to be very effective in catering to a huge volume of the market. India's market dynamics, marked by substantial volumes, allow us to fine-tune our models, especially those related to AI and ML.

While these volumes might not be as readily available in regions like the UAE, Paris, or even the US, the experience gained from catering to India's diverse and high-volume market equips us to address large-scale use cases and refine models accordingly.

Also, I believe that there is a huge potential around the lendingtech as well. We ourselves find a lot of traction in the international market in this sector. This includes the development of LOS (Loan Origination System) solutions, LMS (Loan Management System) solutions, and underwriting solutions.

While Western markets possess the digital infrastructure to support underwriting, there remains a substantial need for LOS and LMS solutions of the kind that Indian companies have developed at scale to serve a vast customer base within India.

StartupTalky: So, who do you think has the upper hand? Indian or foreign companies?

Mr. Kommu: When comparing the potential for Indian companies venturing abroad versus Western companies entering India, the advantage clearly favors Indian companies. It is completely because of the complexity and diversity of the Indian market, which can be challenging for Western companies to navigate.

Western companies specializing in insuretech, lending tech, or payment solutions often find it difficult to adapt to India's diverse payment landscape. In India, there's a wide spectrum of payment preferences, ranging from traditional methods like checks to digital-first users who rely solely on UPI. Western companies may struggle to cater to the diverse needs of the Indian market, including IMPS, NEFT, RTGS, and more.

Even in lending tech, Western companies are accustomed to underwriting based on digitized data, while India presents a different set of challenges. Many Indian customers, especially in Tier 3 and Tier 4 areas, lack digitized KYC documents or mobile number linkage, necessitating unique solutions. Indian companies, including ours, have already innovated in response to these challenges.

Western companies entering India often face difficulties due to the market's complexity and the pace of fintech innovations. For instance, a Chinese company, Advanced AI, found it challenging to adapt to the Indian market's intricacies and competition.

Indian companies, on the other hand, have had almost a 20-to-25-year history in terms of catering to the Western market. We know what works in the Western markets and that advantage will definitely play for us. The 1990s and early 2000s, it was an era of outsourcing where Infosys, Wipro, and TCS thrived. I believe this to be an era of outsourcing your complex data science and AI ML solutions. I think there is a huge scope for us to play in terms of looking for outsourcing of these solutions in the US or European market.

StartupTalky: Thank you, Mr. Kommu, for your insights into how the Startup 20 initiative could impact Indian fintech startups and the potential challenges foreign players might face. Now, as we near the end of our discussion, could you share your perspective on the government policies and support that have facilitated the growth of startups in India?

Mr. Kommu: Historically, in the fintech space, government support has been crucial due to the regulatory nature of this sector. From the perspective of lending tech, for instance, every user's digital journey today is closely linked to various government policies developed over the years.

Consider the impact of the Aadhaar Act, which revolutionized digital customer onboarding. It eliminated the need to visit a bank branch or produce physical documents for insurance, bank account openings, or loans. Instead, users can securely provide their entire Aadhaar details via OTP, thanks to the government's efforts.

Furthermore, government actions like the introduction of credit bureaus in 2006 dramatically expedited the underwriting process, allowing banks to assess customers in minutes or even seconds. Recent RBI regulations, particularly those related to UPI and payments, have spurred remarkable growth in companies like Paytm and a surge in startups in the UPI ecosystem. Looking ahead, the government's Account Aggregator initiative is poised to revolutionize data sharing and address data availability challenges.

These government-led initiatives have significantly reduced the time required to access financial services. Just a few years ago, it was unimaginable to open a bank account in under ten minutes or secure a loan in less than 15 minutes. Today, even in the home finance sector, some clients are achieving a 15-minute turnaround time for home loan approvals, all made possible by government digitization policies.

Moreover, these policies have propelled financial inclusion. Previously, without digital access, financial products were limited to the top 10 or 50 million customers. Now, apps like Groww or Zerodha enable individuals in tier 3 and tier 4 cities to invest in stocks within 15 minutes, using only a mobile phone from their homes. This increased financial inclusion is a direct result of government initiatives.

StartupTalky: What are your future plans with Digitap?

Mr. Kommu: So, with the advent of account aggregator, we definitely feel that there is a huge opportunity for us, at least in India, to create differentiating data models that will help on several use cases pertaining to lending, marketing, and collections. Whether it be onboarding, underwriting, or collections payments, we see a huge potential, at least in the near term, for data-driven solutions across the value chain in the lending space itself.

We still feel that there is a gap that needs to be addressed, which can be addressed with the usage of data coming out from the account aggregate ecosystem itself. And we also see a huge potential for international expansion, especially in data-driven models. When it comes to the usage of data, western countries have solved the problem of data availability in terms of digitizing every aspect of their data transaction, but I still believe that there are still gaps in their ability to use the data. We can utilize this, and that will be our expansion plans in the foreign market.

StartupTalky: Thank you, Mr. Kommu, for sharing your insights and future plans. It's evident that Digitap is at the forefront of fintech innovation, and your contributions to the industry are noteworthy. We wish you continued success in your endeavors.

Mr. Kommu: Thank you, Sayantan. It was a pleasure being here, and I appreciate the opportunity to share our vision and insights.

About Digitap

Digitap empowers financial institutions through its extensive, alternate data-based risk management stack and high-tech advanced AI/ML solutions to new age internet has driven businesses for reliable, fast, and 100% compliant Customer Onboarding, Automated Risk Management along with Big Data enabled services like Risk Analytics and Customized Scorecards. The company’s proprietary Machine Learning Algorithms and Modules provide one of the best success rates in the market. Working with the largest digital lenders in India, the team brings together deep and vibrant experience in Fintech Product and Risk Management, Management Consulting, and Consumer Retail/E-commerce Business.

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