Technology

Tech-Driven Innovation Drives HDFC Credila's Growth

HDFC Credila, backed by private equity firms BPEA EQT and ChrysCapital, is set to redefine its future with advanced technologies. Initially, the digital transformation of HDFC's education finance arm involved converting physical loan applications into editable PDFs, an improvement that required manual processing. But over the past four years, the company has upgraded its tech stack, moving from legacy systems to sophisticated in-house loan origination solutions and SaaS platforms for customer relationship management, KYC, e-signatures and e-agreements.

This digital transformation has evolved HDFC Credila's operations, from the adoption of digital channels to the use of data analytics and AI. Adopting advanced technologies has modernized loan servicing and significantly enhanced operational efficiency across the value chain.

A 4x Growth Driven by Innovation, Fintech

The company adopted a strategic blend of building in-house solutions while integrating third-party fintech platforms, leading to substantial improvements in the speed and accuracy of loan approvals. A key milestone during this transformation was the deployment of e-sign and e-agreement solutions, which reduced the agreement-signing process from 10 days to under an hour.

"Our loan book grew from INR 7,000 crore [$850 million] to INR 28,000 crore [$3.4 billion] - a 4x increase driven by digital innovations," said Shashank Agrawal, CTO of HDFC Credila Financial Services.

Enhancing and Integrating: A Two-Pronged Approach

HDFC Credila followed a two-pronged strategy: enhancing its existing homegrown lending system, developed over 15 years, and integrating third-party fintech solutions. "Despite our legacy system lacking a strong API architecture, we engineered layers around it to enable seamless communication with external platforms," Agrawal said. This approach facilitated the integration of various fintech solutions, such as Signzy for video KYC, Karza for Aadhaar masking and Leegality for e-signed agreements.

The company implemented a rigorous onboarding checklist for technology vendors, ensuring stringent requirements are met. Partnerships with IT services firms, such as TO THE NEW for legacy platform support and Talentica Software for future platform development, have been pivotal in driving digital innovations and operational improvements.

Automation has also been crucial in speeding up the loan disbursal process. The company also uses optical character recognition for reading bank statements and KYC documents, reducing the processing time.

Despite the complexities of education loan applications, the new system enables self-service with human support when needed. "Our new platform places the customer at the center, with journeys and flows designed around their needs. We've greatly improved the onboarding process, making it more intuitive and user-friendly," he said.

Utilizing a Cloud-Native Stack

HDFC Credila’s new tech stack is cloud-native, not cloud-agnostic. Built specifically for AWS, the platform offers benefits, including automated deployments using tools such as Terraform, which helps reduce errors and overcome security challenges compared to manual deployments.

Moving the application stack to AWS Cloud and Oracle Fusion Applications marked a crucial milestone in HDFC Credila’s digital transformation journey. "AWS provided the right mix of tools and services that fit the company's requirements, and Oracle Fusion Applications offered a robust SaaS solution for financial modules, ensuring scalability," Agrawal said. The new, containerized, horizontally scalable tech stack is more cost-effective, with the hosting costs for new applications nearly 50% lower than the legacy stack owing to the use of open-source technologies.

Next Phase of Growth: HDFC Credila 3.0

As the company enters the 3.0 phase of its transformation, it has introduced a new lending platform to replace manual data entry from paper forms. Following a successful rollout at its Mumbai branch in India in April 2024, the company is now preparing to expand the platform nationwide. "This has been effective in automating processes and significantly reducing processing times. Our goal is to disburse loans on the same day in the near future," Agrawal said.

The new tech stack includes AI//ML capabilities for credit underwriting and scorecards. AI technologies are used for analyzing large datasets, including academic records, financial documents and social media profiles, generating accurate credit scorecards. The company is also exploring generative AI capabilities to enhance underwriting models, further streamlining the credit assessment process and reducing loan approval times.

HDFC Credila 3.0, built on a modern microservices architecture, aims to phase out the legacy system while prioritizing information security and seamless operations. "As we enter the next phase of transformation, we are aiming for exponential growth in business metrics, customer satisfaction and internal efficiencies," he said.