[Exclusive Interview] This Global Credit Intelligence Provider Manages $55 Billion Assets Across 9 Nations

Recently, we interacted with Mr. Mukund Kulkarni, CEO of Pepper Advantage India – a global credit intelligence provider operating in nine jurisdictions across the UK, Europe and Asia Pacific.

Q1. Elaborate the journey of Pepper Advantage since Inception.

The seeds of Pepper groups business were first sown in Australia in the year 2000. Thereafter Pepper group has established its business roots across multiple markets in Europe & Asia. The company has two large business lines: Pepper Advantage and Pepper Money. Pepper Advantage, incorporated in 2012, focuses on credit management, credit investments, credit technologies and data analytics. Pepper Money is involved in lending primarily in the underserved market segment & geography. 

Pepper Advantage entered the Indian market in 2019 with a primary focus on building credit management & credit technologies/analytics business. Recognizing India’s promising economic outlook and GDP growth rate, the company is committed to make significant investments in building this business across India.

Q2. Kindly share your point of view on the current scenario of data analytics/AI/ML.

Artificial Intelligence and Data Analytics are continuously widening the spectrum and adding value to the financial sector. The use of data analytics , machine learning and artificial intelligence have changed how data is captured, processed, and used to generate actionable business insights. It has redefined how business is done in the banking industry in last decade. Modern technology has increased checks and balances in place to reduce the level of risk involved. Moreover, while technology is a crucial component, its effectiveness depends on proper execution and utilization.

One of the biggest advantages of technology is the ability to reach a larger market spread across geographies in the most cost-efficient way. It has opened an opportunity to bring into the banking fold the part of the society which has been deprived of it for a long time. 

Q3. What sets Pepper Advantage apart from its competitors?

Pepper Advantage is phydital service provider. We provide a comprehensive solution that covers both the digital platform and the physical execution, offering a distinct advantage in terms of breadth and depth. Most players in the market today are either digital solution providers or provide physical infrastructure and service are in bit and pieces.

Pepper Advantage addresses this gap comprehensively. Not only do we provide advanced technology platforms for digital collections, legal actions, customer service management etc but we also do the on ground execution for credit management activities. We provide a one stop solution to all the outsourcing needs of the lenders. This holistic 360 degree approach sets us apart, making Pepper Advantage a unique player in the market that offers both advanced technology and its effective ground-level implementation. 

We offer one-stop solution that obviates the need for banks to engage multiple vendors. By choosing Pepper, banks gain access to a PAN India reach and complete lifecycle management. Our solution dramatically streamlines their operations, negating the requirement for a dedicated vendor management team. Essentially, we take care of the entire servicing business, fulfilling the primary reason for which clients appoint us as their service provider.

Q4. Can you share the details about the recent acquisition of Rieom.ai and its contribution to your operations?

In April 2023, we successfully acquired Rieom.ai, a Pune-based technology company specializing in AI&ML modules. This acquisition holds particular significance as Rieom.ai’s technology is tailored for risk assessment during the loan origination process. The AI&ML module employs a sophisticated algorithm comprising over 600 rules. When borrowers submit loan application documents, the system conducts an automated assessment, thoroughly evaluating document authenticity and borrower creditworthiness. The algorithm generates actionable insights, offering clients a comprehensive analysis of borrower profiles and predicting the probability of timely loan repayment or potential default. This integration empowers us to provide lenders with vital intelligence right at the outset of the loan application, enhancing our capabilities in risk assessment.

Q5. What do you think the reason behind number of bad loans are increasing in MSME industry? Is it due to lack of financial technological capabilities?

Technological capabilities can be a great enabler to the lender as well as the borrower. For example, the early warning system (EWS) mechanism can clearly help the lender and borrower identify the stress in the business or lending well before the event happens.  With the deployment of such technologies such events can easily be avoided by taking timely corrective actions basis the EWS. Further technology will significantly improve the data management and overall governance in the MSME industry. This in self will bring in a lot of discipline in borrowing by customers and also streamline the resolution process. 

Q6. What are the critical pillars you want to focus for FY24?

Insurance sector is a prime area of focus for us. Additionally, we are also directing our attention towards the Custodian Business. In the context of the Pune market, numerous multinational banks have opted to outsource their custodian operations to India. Interestingly, approximately 80% of this custodian business is centralized through hubs in Pune.

As Pepper advantage acts as a service provider to banks across Europe, New Zealand, and Australia, where outsourcing is already prevalent. Given this advantageous position, our strategy involves establishing a hub locally to tap into this existing business flow and provide our services. The custodian business, insurance, and reinsurance sectors are the specific domains we intend to target.

Reinsurance presents an especially attractive synergy for us. A substantial portion of reinsurance transactions, around 80%, is facilitated by providers based in Germany or London, while we maintain a presence in these regions. This makes the reinsurance field a logical expansion for us, as we can effectively leverage our existing infrastructure in these countries. Our forthcoming expansion initiatives target these two overarching sectors.

Q7. What are the future financial goals and projections that Pepper Advantage has set for itself, and how does it plan to achieve them?

In terms of Credit Intelligence and Credit Risk Technologies, our focus for the upcoming 12 to 24 months is directed towards a substantial growth trajectory. Currently, we handle approximately one lakh loan applications per month, totalling around 12 lakhs annually. Over the next 12 to 18 months, we are aiming for an ambitious growth rate exceeding 150%. This projection would translate into an increased volume of loan application processing, potentially reaching a range of 30 to 45 lakhs.

Shifting to the credit management aspect, our target is to achieve a growth rate of 300% to 400% in terms of the Assets under Management (AUM) that we handle. This planned expansion would significantly enhance the portfolio we manage on behalf of our clients.

Q8. What is your opinion on the challenges faced by lenders in debt recovery practices? How will Pepper Advantage can modernise debt collection process in a dignified manner?

Main challenges faced by lenders in debt recovery practices are, non-compliant and fragmented agencies, lengthy turnaround times, insensitive collection methods and poor grievance handling. The systemic challenge was also highlighted by the Indian Finance Minister, where she suggested that the approach to debt collection as a part of the entire process of loan repayment should be treated sensitively, where banks, either private or public should pursue loan recovery cases with a touch of humanity.

Pepper Advantage with its specialist AI/ML driven credit assessment software platform, brings together the power of intelligence, data analytics, automation and digitalization. It helps banks and other lenders in determining customer behaviour, preferences, socio-demographic and profile based analysis. Such analysis helps lenders to provide a personalised approach to customers and ultimately can result in a successful loan recovery without any human intervention.

Q9. Do you think BNPL (Buy Now, Pay Later) is a safe option for lenders?

Yes, absolutely. BNPL is safe option for lenders. It is a short term financing facility given by e-commerce lenders to the buyers in partnership with Fintech firms. In India, BNPL has become the fastest growing online payment method due to its instant access to credit. It is safe because of buyers accessing the BNPL facility for the first time need to complete the Know Your Customer (KYC) formalities on the provider’s platform. A BNPL account is connected to your bank account, and monthly payments are deducted on the due date automatically. Most of the lenders who provide this facility offer repayment at no cost EMIs which in future is likely to become the preferred payment option especially among the youth. The scope of BNPL looks good provided the customers are able to use the facility properly and clear the amount on time, in order to ensure healthy credit score.