Shaping financial technologies the Factory Model way, Rama Krishna Raju, Co-Founder & CEO, Pennant Technologies

By Gloria Methri

Pennant Technologies was established in 2006 as a services company but in the midnoughties transitioned into creating its own products, building its own IP and scaling it to service global customers. IBS Intelligence spoke to the firm’s Co-Founder and CEO, Rama Raju about Pennant Technologies’ journey.

Initially serving clients in the Middle East, Pennant Technologies was involved in custom developments and middleware development, building a branch banking application or a credit card processing application.

CEO Rama Raju explained: “The first 10 years of our journey was predominantly servicing customers for their business requirements. Post that, we transformed from a services company to a product company. We wanted to build our own IP. We wanted to scale that IP to the next level and be able to service global customers.

That’s why we built applications. Our purpose is to build innovative FinTech products and core platforms, with the highest level of passion and integrity, that enable financial institutions to transform, disrupt, and deliver differentiated value to their customers.

“A good example is our flagship product Lending Factory, which takes care of end-to-end lending, offering banks composable features and scalable capabilities to deliver differentiated loan origination, servicing, and collections experiences.

“We empower our customers to unlock value from their lending operations and grow their business, including:

• Accelerated loan portfolio growth and increased market share for a large non-bank finance company (NBFC) in India through the implementation of a multi-year, multi-product lending transformation program.
• We assisted a top 10 global bank in streamlining its consumer lending operations, improving both business agility and growth
• A leading financial institution leveraged our solutions to achieve 4x growth in its retail loans portfolio.”

Lending Factory as a name tells you everything you need to know. But how do you think that customer preferences have changed in recent years?

“We picked the name Lending Factory about 12 years back. Where did the factory concept come in? Initially customers would say: ‘I need a personal loan system.’ They would be happy with a personal system which does a basic application and normal repayment schedules. Then they would want a mortgage application. If it did the basic work of giving a mortgage loan covered over 20 years with X interest rate, and then doing the basic work, things were working.

“But end-customer preferences have changed. Not all end-customers want the same kind of loan! Depending on background, depending on age, depending on risk appetite, depending on kind of employment, the product needs to be tailored. The consumer may not want to take what the bank offers. If you, as a potential borrower, went to a bank maybe 10 years back and asked for a mortgage loan, the bank would say this is your loan, it runs for 15 years, here is the rate of interest, this is your monthly instalment payment – take it or leave it! That’s how it used to be.

Today, the banks have changed to a mindset where their customers come first. They work with the customer. They see customer preferences based on a tailored product. That’s where our factory concept comes in, end-customer requirements can be tailored.

That means the banks can produce the right set of products, which help customers to understand their requirements and then actually service them as per their needs. In effect, we were an early adopter of personalisation.”

What are the key trends that you see now in the BankTech sector?

“Technology trends in the last few years have changed banks, moving from their traditional core applications. The banks had one single application doing everything right from branch banking to the deposits, to the loans, to the cards. There used to be one monolithic, large core banking system which runs in a bank and that does everything. Over the last few years things have changed. The banks are looking for specialised platforms.

“They are happy running multiple platforms for servicing the different segments of the banking environment. That’s been the trend. Going forward, the trend is actually becoming more and more about the capabilities that they’re buying, depending on their requirements, rather than buying everything from a single vendor. That’s one of the mega trends that we see. Banks are also looking at how they can modernise on a real-time basis rather than waiting for a big upgrade that they do once in 5-6 years.

“With GenAI coming in, expectations have further changed. Banks are looking for user interfaces that are easy to understand, where they should be able to communicate further – a lot of contextuality is required. Then there are various trends coming in where we, as a platform company specialising in lending, are able to help our customers to handle their core banking to come to a specialised platform like us.”

What is the implementation process of the Lending Factory?

“It changes from client to client. Take a complex case, a lender that is already established, has perhaps 10 years of legacy, say 5 varieties of loan products and with systems already in place. Whenever we work with such complex customers, we go back and understand what the various products are that they are running, what kind of data requirements they have, and how much of the data we need to migrate from the existing system [because this is a highly regulated area].

“We basically do a business process mapping study to understand where the bottlenecks are, what the challenges are. Then we look into the future – over the next 5 years, what does the bank want to do? How are they going to transform themselves from a traditional lending business to a more modern lending business? What are the new channels that they wanted to adopt in the coming years?

“Basically, we look at the past and we look at the future and then come up with an implementation strategy that would allow the bank to launch a new product on our platform without touching the existing system. That means we don’t disrupt what is already running. Then we take that new product line, we implement it in parallel to the old products that they already have and stabilise this new product line. The next step 6-8 months down the line is to migrate one-by-one products from the old system to the new system. We always try to find the minimum risk path. Over a period of 2-3 years, we will sunset the old system and migrate everything into the new platform. That’s the kind of model that we take to address an established lender.

“In cases where it’s a new greenfield setup. there are no challenges. But, wherever there’s a legacy, we always have to be very, very careful in understanding the past and looking to the future, then trying to blend a balance of both.”

How do you ensure security in the solutions you offer?

“Whenever we talk about security, we talk about a multi-layered approach. One, how do we secure our own development environment? How are our internal teams secured? How are our data centres secured? That’s a security layer that we always emphasise.

“Second, it’s about the kind of code that we develop. In the last 2-3 years, there have been multiple tools that have been pre-integrated into our development shop. Rather than waiting for the final development, these tools go along with our development cycle and on a day-to-day basis, on release by release, these tools validate if there are issues in our code. So, we address security issues that can go into the build.

“The third layer is that we basically deploy the application, and we have a set of certified companies who come in, validate our product and see that there are no vulnerabilities. The fourth stage is to ensure that customers follow and implement the standards that we set about how the software product is implemented in the bank environment

“Finally, we also recommend doing a security audit in the final deployment, so that any gaps can be flagged. We repeat this every 6 months to 1 year, depending on the kind of requirement, because things will keep changing.

“Plus, we also have teams internally who will continuously be monitoring various kinds of security vulnerabilities that are reported in the tools. Any high security issue that gets reported in one of the components that we are using in the software, we actively upgrade that component or replace it, and then we notify our clients. It is not a one-time setup. It’s a continuous approach that we follow in every stage of our lifecycle from build to deployment and then continuous monitoring.

What other areas are you focusing on?

“One is our e-statement solution, which basically helps banks to send a monthly PDF or interactive statement to customers. We also have a payment solution, Host Integrator, which helps banks in terms of hosting their ATM switch integration with the core banking.”

What’s the place of AI in your business?

“As a company we’ve taken an approach of saying what are the various areas in which we could take advantage of GenAI? One area that we are using right now is in the development environment, wherein we can empower our developers to code faster and fix bugs faster. Can we improve our code quality by using AI tools? We are doing some piloting with certain tools, but security is important to us – we can’t let our code go out of our development environment into a public repository.

“Apart from Lending Factory, we are also coming up with a new development framework, which is going to help our customers to design their own screens, design their own development workflows, design their custom journeys as per their requirements.

“In that product, we are enabling a lot of GenAI capabilities, wherein the user can say, ‘I want to design a loan application form with a set of fields.’ They just write in simple English. We translate that English using GenAI capabilities and then convert that into the frontend application. From there, the user can just click a button and then we generate the entire code so that there’s less need for developers and we can have business users generate some of these applications. The third area that we are looking at is a co-pilot. We are looking at our legacy products and seeing if we can enable a co-pilot to help our end users to navigate to the application faster and more easily. The last and the fourth area that we are looking at is in our support system. Can we enable our support staff to look at a knowledge base using a GenAI? Can we come up with a better response to our customers in a faster manner?”

Where are your biggest opportunities and your biggest challenges?

“Most of the banks today offer customer onboarding in a very smooth digital way. But then they are still not adapted to digital servicing – let’s say you take a mortgage application, the bank will either give you a completely online process or they come to you and the agent will come with a tablet and he will give you a home mortgage loan. However, whenever you want to close your loan, whenever you want to do a settlement, whenever you want to change the rate of interest, the banks still tell you: why didn’t you raise a request? Why didn’t you come to the branch? Digital servicing is going to be the next big thing, because now the banks are looking at doing a 360-degree view of the customer rather than just looking at onboarding. The features that we have in our application offer end-to-end digital servicing capabilities. That’s where we see high growth for the Pennant Lending Factory in helping the banks to do that.

“The innovations that we are doing in GenAI and low-code/no-code are some of the challenges. We have to make sure that we innovate more and stay ahead of our competitors.

“Talent is another issue that we see. In India, at least we can get fresh talent, we are able to train them, we can retain them offering different learning curves and structuring some kind of career path for them. We are able to retain good talent, but it is definitely a challenge.”