Next Gen Gold Loan Business driven by - Technological Innovations

By Mohan Vizhakat, Chief Technology Officer, Manappuram Finance

In recent years, NBFCs have played a key role in the monetisation of gold by offering hassle free gold loans to a large section of financially excluded citizens who otherwise were at the mercy of local pawnbrokers and moneylenders. With profound technological changes all around, the stage is now set to roll out the next generation business model within the gold loans sector. With the success of the government’s financial inclusion drive (the Jan Dhan Yojana), Gold loan NBFCs have been encouraging customers to use their bank accounts for gold loan related transactions. 

Already, technology is playing a big role in gold loans. To recapitulate, some of the recent tech related innovations in gold loans include the following:
• Online payment system using which the customers can remit their principle and interest in a totally transparent and convenient manner.
• IMPS based instant payment for transfer of the loaned amount directly into the customer’s bank account.
• Use of eWallets so that gold loans can be disbursed even to customers who don’t have bank accounts.

In addition, also on the cards is an eKYC project based on biometric authentication with UIDAI servers hosting Aadhar data in lieu of paper based KYC (Know Your Customer) verification.

Next-Gen Technology for Gold Loans
Until now, the leading gold loan NBFCs have been using information technology mainly to improve efficiency of operations. This was achieved by building a centrally managed application that is simultaneously accessed by all branches for each and every transaction. 

However, one vital component of the business has so far been left out of the ambit of technology, i.e. the lockers. In the current business model, due to the necessity of having to open the lockers frequently, the keys to the lockers are held with branch staff who operate within a vicinity of five meters from the locker during working hours. For obvious reasons, this is a major security risk. 

Internet of Things (IoT) is an emerging technology that not only offers unique solutions to problems such as the one mentioned above, but has also made it possible to envisage the complete transformation of the Gold loan business in ways considered unimaginable until now. For instance, by the use of the IoT based technological advancements, it should become feasible to develop an eLocker system that is totally keyless, fully automated and completely managed (opening, closing, auditing, remote monitoring etc) through secure/encrypted IT systems. In fact, gold loan companies have already initiated investment towards research and development necessary for realisation of this futuristic vision that will, upon implementation, help revolutionise the Gold loan industry. 

New Business Models using IoT based eLockers 
The two models of next-gen Gold loan business made feasible by use of IoT based eLockers are described below.
• Business Operational Model ‘A’: - Shrink the size of current branches into small Kiosks. These kiosks would be around the size of an office cabin, with built-in eLockers, and manned by just two agents, thereby reduce OPEX substantially. The reduced OPEX will enable us open more outlets at hospitals, trading stations or any such places where people may have immediate need of Gold loan. Later this idea could also be extended to build fully automated mobile kiosks. 
• Business Operational Model ‘B’: - Essentially this model proposes to segregate the current Gold loan business process into two sub sections:
Gold Deposit Services: This service is meant to encourage many regular customers (with no immediate ask/need for gold loan) to deposit their gold assets with MAFIL, primarily for safekeeping. Provide swanky, very secure, hi-tech, well monitored and guarded ‘gold deposit services’. This facility will contain an array of eLockers within a strong room and separate hall for multiple customer facing counters as in any bank. However unlike bank lockers, the customers will get a receipt for their asset deposited with MAFIL. As an additional value added service, the depositor may also be able to view his/her assets (through remote IR cameras placed inside the lockers) online anytime. MAFIL will own the liability of custody for which the customer may be charged a certain amount.

Online Gold Loans: Simplified process for disbursal of Gold loan as follows:-

The customers who’ve availed the gold deposit services as above will become automatically eligible for Gold loan, up to the applicable loan to value (LTV) limits. 

o As and when such customers needs gold loan, they can apply online, without having to physically visit any branch. If eligible, loan within limits of LTV can be disbursed to his/her bank account or eWallet card online, 24/7 almost instantaneously.

o The rule based software system will automatically check all the eligibility criteria before disbursing the loan.

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