Lenders will have to do a better job, and channels that they use need to evolve: Shahid Charania, MD, Equifax

Atlanta-based Equifax is one of India’s four operational credit bureaus, helping the country’s lenders underwrite loans using technology and analytics. In an exclusive interview with Ashwin Manikandan, Shahid Charania, managing director, emerging markets, discusses how India is going through a shift in credit behaviour with millennials embracing tech for quick loans. Edited excerpts:The Indian economy has witnessed slowdown in GDP growth over the last few quarters. How do you see it impacting the credit growth?If you look at India’s history over the last 25-30 years, economic growth has gone through ups and downs just like any other major economy in the world. But if you look at the credit numbers, the potential is huge whether for people who are new to credit or the existing set of people in the credit system. So, we have to look at a much broader perspective like, say, 10-15 years while gauging these numbers.If you look at some of the other developed countries, the ratio of loans to customers is much higher than in India. While one consumer in US has multiple loan products, here in India, the ratio is still hovering around 1.5 per customer.We believe there’s a huge amount of potential to grow our business. There are still over 300 million customers that are not covered by any financial services. This represents a massive opportunity for credit uptake in India.Any signs of stress or delinquency in the retail credit books?We’ve not seen high delinquencies overall. However, there might be some pockets prone to delinquencies which can be attributed to external factors. Obviously, there has been a slowdown in sourcing but that can be due to a variety of reasons.India has one of the youngest demographics in the world. What are some of the new trends that you’re seeing?The younger generation is more open to credit as against older ones. They want both short-term and longterm credit right away and that’s where a lot of fintech companies are doing well.A lot many transactions are going digital. Growth of personal loans is also an indication of increased demand for instant credit.We are seeing the shift to nontraditional borrowing e.g., travel expenses. Historically, we have not seen people borrow money for vacations which is now changing. This brings back the whole point of alternate data.These are your non-traditional borrowers. Having alternate data in our ecosystem would help credit decision-making models. Lenders will have to do a better job and the channels that they use need to evolve as per the shift in behaviour.What do you think would be drivers for credit growth in India? How can lenders make the best use of technology to expand services?If you look at the fintech industry in India, they’re trying to solve some niche problems that the banks are perhaps not solving. The biggest advantage a fintech has is that they use technology to make their operations faster and nimbler.Even at Equifax we are spending a billion dollars to transform ourselves in ensuring that our data is available instantly. We are enhancing our technology much more and integrating some of the fintech solutions to our platform to solve traditional problems.How will RBI’s proposed public credit registry (PCR) change the credit bureau model?PCR envisions aggregating comprehensive raw credit line data and data from alternate sources. While Credit Information Companies (Regulation) Act, 2005 (CICRA) allows credit bureaus to do some analytics on existing data, the level of sophistication allowed needs to evolve. The RBI has been progressive in these matters. We have had dialogues with the RBI on the growth and how bureaus can facilitate the credit in the country using analytics.We have also highlighted other regulators across the globe use different scoring models.How do you feel global warming will impact lenders in their credit decisions? Are they already factoring these risks in their models?There is definitely a conversation that is happening on global warming and how it impacts factors leading to credit requirements. We feel that the use of alternate data can come in handy in predicting risks. For example, the use of agricultural data and land data can help predict impact of, say, a crop. I think there is an expectation from lenders across the globe to bring out these aspects and give them a better picture through robust data scoring models.Equifax had a major data breach in US in 2017 where data of nearly 147 million customers were leaked. What are some of the steps you’ve taken to shore up your systems?We are spending over a billion dollars. The transformation is happening as we improve our technology and security standards even more than what we are required to comply. From an India perspective there was no impact of the breach on Indian customers but our standards are global and they apply to our India operations as well.

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