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The challenge

The loans are deposited electronically directly into a borrower’s bank account. However, the collection of monthly instalments has been traditionally cash based, resulting in several challenges and concerns including:

• Cash handling issues ranging from the risk of theft, fraud and fake notes to the logistical inconvenience and long queues at branch counters or personal visits for collections by SCNL representatives.
• Higher operating costs related to human resources, counting machines, bank charges and more.
• Inefficient working capital since there was a delay in funds availability after being credited to SCNL’s bank account.

The company was looking to simplify processes and reduce costs while also ensuring seamless collections by digitising Equated Monthly Instalments (EMIs).

The solution

To accomplish its overall objectives SCNL worked with its banking partner HSBC to implement Unified Payments Interface (UPI) AUTOPAY, a feature introduced by the National Payments Corporation of India (NPCI).

The UPI AUTOPAY solution allows SCNL to collect funds seamlessly from their borrowers via automated EMI debits. To do this, SCNL uses real-time APIs for mandate registration, which send a mandate creation request to the borrowers who then simply make a one-time authorisation by completing the registration mandate using SCNL’s application/interface. Any subsequent EMI instalments are then seamlessly debited digitally.

Through this new-age technology solution, SCNL has managed to redefine the way its core business operates by debuting UPI AUTOPAY into the micro-finance sector in India.

Best practice and innovation

SCNL has been at the forefront of innovation and takes pride in being customer-centric with its technology in the industry. This was a unique case of many ‘firsts’ for both SCNL and HSBC. It was the first case of UPI AUTOPAY being utilised by a micro-finance institution in India and made HSBC India the first international bank to implement such a solution in the country.

The entire solution results in a near real-time experience at the various stages, from mandate registration to the actual collection on the due date. It also leverages the API infrastructure for auto-reconciliation on a transaction-level basis.

Being the first-to-market solution, this journey required a disciplined approach on both sides to overcome many technical queries and obstacles throughout the development stage. The project team did comprehensive pre-launch testing of the UAT platform and live internal tests to ensure the anticipated user experience was achieved.

With the addition of UPI AUTOPAY to its suite of cashless payments and collections solutions, SCNL has successfully established itself as a new-age technologically driven micro-finance institution.

Key benefits

• Significant cost savings.
• More efficient working capital management.
• Real-time access to funds for better treasury management.
• Enhanced borrower experience.

This solution also helped support social distancing guidelines implemented during the COVID-19 pandemic, giving borrowers a contactless, secure way to repay loans. SCNL expects to shift at least 25% of its more than three million borrowers to the digital UPI AUTOPAY channel by 2022.

“It is a delight to partner with NPCI and HSBC India in making UPI AUTOPAY a reality for micro-finance users. UPI AUTOPAY has the potential to accelerate and drive cashless collections at a much faster pace. With the COVID-19 pandemic leading the ‘new normal’ and here to stay, implementing innovative solutions like UPI AUTOPAY are very much needed,” says HP Singh, Chairman and Managing Director.