Resolving India’s NPA crisis with Medius AI | Made in India Startup Stories

Medius AI is an innovative Indian startup, which is eyeing upon boosting the collection efficiency of banks and NBFCs with the power of predictive analytics. Nitin Purswani, CEO & Co-founder of Medius AI is in discussion with Thought Habitat about his startup, and the passion behind it. Also, he is talking about rising NPA levels and how Medius is solving the same with the power of Artificial Intelligence (AI).

Edited Excerpts:

Why don’t you tell us something about yourself and your professional journey so far?

I am the CEO & Co-founder of Medius AI. I’ve spent a significant amount of time developing e-commerce & fintech products. I love building products from 0-1 & then scaling them from 1-10.

My roots run deep in the world of technology. I began my entrepreneurial journey nearly a decade ago with Zepo, a SaaS e-commerce platform used by millions of consumers and thousands of businesses.

For the last couple of years, I’ve been fascinated by financial technology, particularly the use of artificial intelligence and machine learning in conjunction with traditional banking systems, which inspired me to found Medius, an AI-powered debt collection solution for banks.

Describe the industry challenges you’re attempting to address with Medius. What observations have you made that compelled you to enter this space?

The banking sector is booming as the Indian economy expands rapidly. Credit is expanding rapidly too, but so is delinquency. COVID-19 also had a significant impact on the lending industry. Banks and other financial institutions have been issuing warnings of rising NPA. A significant portion of their losses is due to this bad debt, which costs each major bank billions of dollars. Collection and recovery are also some of the most expensive aspects of loan servicing.

The banks are challenged. Everyone knows that and can read about it daily. Their NPA ratios are expected to rise four to six times. They are aware of the serious strain on their balance sheet and are unsure how to address it. This is the challenge we have taken on – resolving India’s NPA crisis.

How will you solve this issue? What insights did you use to build your solution?

Data-driven debt management can turn this crisis into an opportunity. Smart debt collection and recovery is critical now more than ever, and technology can help lenders retain revenue and customers.

For decades, collection management has been rigid and out-of-date. COVID-19 brought that to light. Historically, the banking industry has been slow to innovate. Most banks were unprepared for the spike in delinquencies. New laws, mobility restrictions, smaller teams, and dispersed operations have made it even more difficult to manage.

Lenders typically rely on third parties to collect. However, if we enable banks with new-age technology that helps them reach out to delinquent customers at the right time, with the right strategy, the repayment rates would improve. Strategies for collection management that rely on a single channel, or even multiple channels asynchronously, are prone to failure. It’s past time for banks to go omnichannel.

Could you please elaborate on Medius’s products and solutions?

We use the P-A-R model (Predict-Act-Reduce) to help banks reduce NPAs. Firstly, we predict by combining historical bank data with newly generated borrower information. This gives us the Medius Score, which determines whether a delinquent account will self-cure with little to no activity, roll deeper into delinquency (no matter what we do), or make a payment if properly treated.

Second, we use machine learning to train our conversational AI to collect debt quickly. Our collection and recovery models use deep analytics to realign strategy for better results at every stage of the collection – early, late, and recovery.

Third, we use legally integrated workflows to resolve past due accounts. Pre-litigation and mediation are used to first try to resolve disputes outside of court. Then we help banks generate and manage large volumes of cases with a single click.

Since COVID-19, the situation has gotten even more difficult for many banks. How did you handle collection & recovery during the pandemic?

Post-Pandemic, banks were forced to adopt new collection methods due to mobility restrictions on field teams. After my partner, a well-known lawyer, became inundated with requests for collection assistance, we determined that we needed to leverage technology to resolve this crisis.

Our expertise is in data analysis, forecasting consumer behaviour, and optimising customer interactions. Leveraging our strength, we were able to reduce the bank’s reliance on collection agencies, allowing for faster account resolution.

We designed the workflow to handle the massive scale of default effectively. Customer engagement was also a major issue. We live in a 24/7 environment, thus this process had to be digital, omnichannel, and interactive. using our conversational AI, we were able to get the desired response from clients in 9 out of 10 cases. Our solutions were successful in making an enormous impact on the way our banking clients manage, monitor, and mitigate the delinquent activity.

How much growth has Medius experienced over the last six months?

Typically, non-performing assets are the third-largest liability on a balance sheet. As a result, when we improve our banking clients’ collection by a significant percentage, they see a significant impact on their balance sheet. And because our growth is directly related to the results we deliver, we have been able to scale our business very quickly.

Over the last 2-3 quarters, we’ve seen tremendous growth. We have been able to onboard some of India’s largest banks and NBFCs as clients. The allocated loan portfolio has nearly doubled in size as our client base has grown. As we continue to make technological advancements, our loan recovery rate has been increasing quarter over quarter.

Along with collections, we launched two new verticals and began assisting our banking clients with Pre-litigation and Litigation activities. This resulted in not only increased collections for our banking clients but also a twofold increase in our revenue.

What is the USP of your solution? How are you different from the competition?

On a technical level, AI and machine learning are critical components of our solutions. No other player currently offers a fully AI-driven solution, to my knowledge. To be honest, our goal is to add value with our unique and comprehensive solution rather than compete.

With our omnichannel conversational AI, we reach out to borrowers via seven to ten channels, are interactive, operate primarily in digital modes, are available 24/7, and support channel hopping – all of the things that customers now expect.

As we’ve seen in the market, other solution providers aren’t driving the right insights to contact the right customers with the necessary resolutions to assist them in overcoming their financial difficulties. That’s why their recovery rates remain low. 18% to 20% of the delinquent portfolios we receive are typically recovered in less than 30 days, which is significantly better than the industry average.

Do you have any immediate plans to raise funds?

Every business requires the appropriate resources to grow. And so would we, to bolster our teams and product offerings even further at the right time. We are currently self-sustaining and profitable, and our primary focus is on expanding our product offering and client base. We plan to begin fundraising by the end of this year.

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