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Nucleus expands its reach to help in a rapidly evolving digital market

A pioneer in retail and corporate banking software since 1986, Nucleus Software provides lending and transaction banking products to the global financial services industry. IBS Journal spoke to CEO Ravi Pratap Singh about the company’s plans and his views on the current drivers in the industry. 

What is the next frontier for Nucleus?

Nucleus has always been driven by the belief that technology can and indeed should be used to help improve people’s lives. In lending, for example, we’ve been striving to reduce the cost of processing loans so that lenders can extend credit profitably including to people who have historically been in the unbanked or underbanked sectors. The driving force here is a statement made by our founder and managing director, Vishnu Dusad – he said it was his desire to use technology to help “Make a 100 rupee loan profitable”. Today, we support the operations of more than 150 financial institutions in 50 countries worldwide, ranging from leading banks operating across multiple countries to niche financial institutions operating in focused geographies.

As technology rapidly advances, we see a tremendous opportunity to accelerate our mission. In 2012, we started investing in the new avatars of our product suite, re-architecting it with the latest technologies, improved design patterns and future ready capabilities. The first release came out in 2014 and I am delighted that FinnOne Neo figured at the top of the IBS Sales League Table in an extremely short time.

With the products renewed, we are expanding our operations into new countries, new markets and new segments. We believe that many areas have great potential for digital banking transformation including Australia, the Middle East and South East Asia. Our core proposition is to help our customers grow, enabling them to achieve their ambitious business plans without worrying about the technology infrastructure.

We continue to constantly explore new technologies and business trends to further evolve our products through our six monthly releases.

Nucleus Software has recently launched FinnOne Neo 4.0. What are the new functionalities and features that customers should look out for in this version?

FinnOne Neo 4.0 is the latest version of our market-leading solution. Apart from enriching the business functionalities further, the focus was on enhanced digital capabilities, improved scalability and evolved extendability. It builds on the tremendous functionality of previous releases with a range of new capabilities that further enable lenders to digitalise their business. We already had a digital stack with an omnichannel experience. We have deepened the digital experience, with the front-end channels getting backed with the ‘digital backbone’, the core product processors. Additions to the API vault, new straight through processing (STP) experiences and voice-assisted loan servicing are some key additions in the release. The API vault enables easy integration with the lender’s ecosystem.

In the release we have continued to enhance our extension layer, FinnOne Neo Xtend, which enables lenders to add custom capabilities without requiring complex, time-consuming and expensive software development projects.

FinnOne Neo 4.0 also helps lenders to rapidly assemble and launch innovative product ideas and lead the market. Features such as split loans, geo tracking, email approvals and so on provide uniqueness in the market, efficiency in the field and control of operations.

How is the microfinance industry shaping up? How important is the microfinance customer segment for FinnOne Neo?

Microfinance plays a very important role in promoting financial inclusion all over the world. In India, for example, KPMG says the sector has grown at 27% CAGR over the past few years and is expected to continue to grow at this rate during the next five years. Technology plays an important role in this sector.

And that’s why we created FinnOne Neo mFin, which brings the benefits of advanced technology to the microfinance sector. As a specialised microfinance solution, it is designed to ensure that microfinance companies can perform paperless data sourcing, real-time application submission, instant verification and provide credit grading via a single mobile application.

The solution helps microfinance companies make loan decisions faster, while streamlining customer on-boarding and reducing operating costs. FinnOne Neo mFin has a wide range of unique features including the pre-population of application data, seamless integration with credit bureaus, support for group lending, geo tagging, image capture, upload and role-based dashboards. The solution makes full use of India Stack to deliver an end-to-end digital lending experience. We are confident that FinnOne Neo mFin will be a key step towards fulfiling our vision of making financial services more accessible. This is the next step on our long-term strategy of using technology to make a 100 rupee loan possible. With this solution, microfinance institutions  can use our digital capabilities to reach more customers in more places, more cost effectively.

In short, this solution helps microfinance companies bring advanced banking services to all people, regardless of location or income level. The solution is a part of our wider lending mobility suite, which is now processing more than 50 million transactions worth more than $13 billion across our customer base.

 Could you please provide a quick overview of last financial year’s performance?

Our business has continued to accelerate and witnessed great traction worldwide. During the year, we signed significant deals for our lending and transaction banking solutions with leading banks in Australia, Africa, the Middle East and India. As businesses all over the world continue to follow their digital transformation journeys, our investment in new technologies has positioned us well to deliver more value to our customers. We also saw solid traction for our corporate banking solution, FinnAxia, as there has been a marked increase in engagement with many leading banks and other financial institutions globally. We continue to be delighted by the rapid growth and adoption of FinnOne Neo Cloud in the market. These are exciting times for us as we have gained more than 35 customers in the past 24 months, and as testament to the design of FinnOne Neo Cloud, 20 of them have gone live already.

 The digital lending market is rapidly evolving. What is your advice to banks?

While many banks have begun their digital transformation journey, a significant percentage has not yet been able to capitalise on its investment and gain from the potential of the new technologies. Moreover, offering digitised, automated and multi-channel solutions will soon become ‘table stakes’. As products and services become more commoditised, customers are looking for personalised experiences and banks need to stay ahead of the curve. In the future, it is possible, perhaps likely, that there will be no direct interaction between customers and banks as their requests for finance will be handled by digital assistants and bots operating completely autonomously.

Today, tasks such as analysing consumer behaviour to identify a new type of loan product, offering a tailored experience, taking finance  to customers’ doorsteps and plugging lending into the evolving purchase cycle for a seamless experience have all been facilitated by analytics and artificial intelligence. On the corporate banking side, sleek and efficient offerings around payments, foreign exchange, advanced analytics and supply chain finance are redefining service, creating lucrative niches and extending corporate banking activities from the corporates to the small business segment. To make this possible, it is vital to leverage the capabilities of API-driven integration and process huge transaction volumes at machine speed. Banks must be able to launch new products in minutes, anticipate customer needs before they even express them and be agile enough to align very quickly to market needs.

I personally feel that quite unfortunately, ‘digital’ is largely associated with channels (mobile apps, portals and so on). Some people think that having a mobile app for acquisition or self-servicing is all that is required to go digital. However, I believe that going digital means cutting through the entire application stack. Even the core product processors need to go digital in terms of their ability to be integrated and radical flexibility (on both fronts – flexible process flows and dynamic product offerings). Financial institutions need to design their complete digital landscape before starting on the digital journey. Channels may get you short-term satisfaction but the constraints of the back-end ensure that there is no dramatic change in the end customer’s experience.

Finally, going digital ushers in a new era of scale and fraud. Digital IT landscapes must have enhanced capabilities of scale as you can expect a lot of ‘noise’ since manual filtering gets removed. Fraud becomes more difficult to catch with automation of the entire transaction across multiple systems.

 Where is the next wave of transaction banking coming from? Will it focus on security, fraud?

In a hyper-connected world where corporates are expecting transactions that adapt to the way they and their supply chain ecosystems work, banks need to deliver real-time, integrated financial services through multiple channels, expedite new products to market, scale as required and swiftly take advantage of market opportunities as they arise. But, in addition to many benefits it brings, the realtime and digital nature of the transactions have also made financial services more vulnerable to payments fraud and cyberattacks.

Billions of dollars are lost every year to online payment fraud, partly as a result of the increased number of potential vulnerabilities brought about through the use of online and mobile channels. We have been working on exploiting machine learning to come up with an integrated fraud error detection solution. Initially, it is available with our FinnAxia offering.

There is a lot of ongoing focus on solutions such as instant payments and virtual account management, which enable corporates to execute transactions in real time, providing convenience, speed and faster availability of funds. There is also an increasing interest by corporates and banks alike on the use of technologies such as artificial intelligence to help in faster on-boarding, working capital optimisation  and fraud prevention. The current hyper-connected environment has also brought about a greater dependency of the corporates on their supply chain ecosystems, which mainly comprise small suppliers.

The supplier’s continued struggle with working capital financing requirements affects the profitability of the corporates themselves. Financial institutions are looking at offering a wide range of supply chain finance and trade finance solutions such as dynamic discounting and loan overdue monitoring through which corporates can ensure smoother operations of their supply chain partners.

 What innovations are happening in the corporate banking space from Nucleus’ outlook?

There is a focus on transforming the corporate’s banking experience by driving innovations that simplify the processes. We have started using artificial intelligence to enable non-tech-savvy professionals to interact with FinnAxia more intensely.

Fraud and bad debts are a growing concern in corporate lending. This becomes more complex as the scale increases due to a growing SME business segment. Innovations to tighten the controls either when taking credit decisions or later while the loan is processed over its life are of great interest. Our FinnOne Neo Corporate provides an end-toend solution, which not only enables businesses to offer flexible loan structuring and risk-based pricing but also has tight controls built in to ensure that the approvals are given as per policy and bad debts are identified and highlighted in time.

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