Jaya Vaidhyanathan, CEO, BCT Digital (Bahwan CyberTek group) outlines how the risk management products from their stable are benefiting the BFSI sector
What are the solutions and services in BCT Digital’s portfolio?
BCT Digital is a global FinTech specializing in Risk Management solutions with its mission to build products locally and bring back the product engineering DNA through reverse innovation. We drive digital transformation for Banks & Financial Institutions through our risk management product suite rt360.
Our first product was aimed at solving the NPA crisis across the globe, and more specifically in India and we launched the first-ever ‘Early Warning System’. Following the success of the product with top banks, we branched into other risk portfolios defined by global regulators. They include risk management products for Asset Liability Risk Management, Enterprise Risk Management, Model Risk Management, Pricing Risk Management, and others. We are the OEM and the implementation partners for our clients.
What is the GTM strategy that BCT follows in the Indian market?
BCT Digital is the market leader in India in the credit monitoring space and we serve top banks in India. We adopt a clear blue ocean strategy – and explore niches in the risk management spectrum that are not covered by the large risk management products. Most risk products currently offer a platform using which the banks have to create their solutions to address business problems in the risk space.
Our entire product philosophy is built on a framework of building for key and important adjacencies in the GRC space at the same time save the bank from spending time and effort building it themselves. Therefore, we found a sweet spot and we formed a team of bankers, technologists, and risk practitioners who build our product with a vision of ‘Business First, Technology Agnostic’ approach, empowering banks and financial institutions to focus on their credit growth and profitability while managing their risks. ‘Build local, go global’ is our strategy for revenue growth.
What are the risk management modules pioneered by BCT?
BCT Digital has built its risk management product suite branded as ‘rt360’ grounds up, to entirely manage the end to end risk portfolio of Banks and Financial institutions. Each of it addressing specific risks;
- rt360-Early Warning System (EWS) for credit monitoring to identify incipient stress in large loan portfolios
- rt360-Model Risk Management (MRM) to calibrate models in line with IFRS9 requirements, IND-IAS, CECL, and DFAST
- rt360-Asset-Liability Risk Management (ALM) to manage liquidity risks
- rt360-RAROC (Risk-Adjusted Return on Capital) Calculator for Mobility-rendered pricing model to optimize pricing and the loan portfolio
- rt360-Enterprise Risk Management (ERM) to address operational risks
Recently, BCT Digital launched a new version of its Early Warning Systems and product to estimate credit losses;
- rt360 Real-time Early Warning System
- rt360 Expected Credit Loss (ECL)
Who are your marquee customers and what are their use cases?
We serve several marquee clients in India, the UAE, and the US. Our top 3 recent clients and use cases are for:
A USD 60B financial services company that serves over 100 million customers wanted to take a proactive approach to credit monitoring. BCT Digital built a robust credit monitoring system building 120+ alerts using their rt360 – EWS. With this implementation, the Bank has been able to proactively identify Red Flag Accounts in their 2.5 Million asset segments, and received close to 780 alerts and can send 4000 notifications to their clients.
One of the largest private sector banks wanted to be fully compliant with the most recent regulation and also wanted to be proactive in their mission to curb NPAs and improve their quality of assets. BCT Digital implemented rt360-Early Warning System with one of the highest alert systems (150+ Alerts) across theircorporate and retail customer segments. With 2000+ alerts generated each month, the bank estimates that even with a 1% reduction in NPA can save them up to 500 M USD each year.
Another large private sector bank wanted to move to an automated model risk management solution. BCT Digital implemented its flagship MRM product ‘rt360-Model Risk Management’ to enable model validation, manage, monitor, and track models throughout its life-cycle. The product helps identify risks associated with their models and ensures governance and compliance with various regulations and policies. This has helped the bank to focus on key business areas while minimizing the hassle of data aggregation, model development, model validation, regulatory reporting, and model performance assessment.
What has been the business and economic impact of the COVID-19 pandemic on your business?
At this time of a pandemic, the banking sector is experiencing significant stress in their loan books. Asset qualities of industry portfolios such as aviation, hospitality, tourism, retail, etc. are expected to fall.
No doubt that stressed accounts in the corporate portfolios were prevalent even before the pandemic, however in recent times their retail portfolio has also suffered. The sequence of defaults in retail and SME segments are speculated to rise due to the huge blow in the retail and microcredit markets. The call of regulators to provide a significant percentage as a contingent provision towards the stress sectors or towards the exposures availing moratorium is foreseen to impact the P/L of the banks furthermore.
BCT Digital has launched two new products during this pandemic for banks to prevent and track their borrowers in real-time and estimate credit losses.
The rt360-Real-time Early Warning System: Real-Time EWS has the potential to detect and prevent suspicious or fraudulent transactions, effectively paving way for a transition from detective to preventive credit risk monitoring. Through the real-time EWS, we want to empower banks by helping them make the right decision, stay ahead of the competition, and prevent possible NPAs and banking frauds with the help of real-time data.
The rt360-Expected Credit Loss (ECL): rt360 ECL is a business-driven technology solution that enables banks to compute Expected Credit Loss as per regulatory guidelines while addressing requirements such as Point-In-Time Probability of Default (PD), Validation, and forward-looking estimates.
What are the measures undertaken to support and service existing clients?
First things first, we prioritized employee safety above everything else. Some of our employees were struggling with new challenges at home front – having to multi-task. We took cognizance of that and informed our clients accordingly. And the best part was that our clients were forthcoming and accommodative.
As our employees stabilized within a few days, we were back on track to ensure business continuity and functioned at 100% productivity. We have been able to carry on with our routine operations on account of robust business continuity measures such as access to client environment through secure VPNs, and collaboration using Microsoft Teams and Zoom.
Besides, we split the deliverables into smaller tasks to assess timelines and ensure delivery. This way, we built a balance so that employees can manage their situation, and yet, the clients’ deliverables run without hindrance. We were able to achieve success in all departments including sales, marketing, product engineering, delivery, product training, and support.
In a few instances, we have been even visiting the client premises after taking due permissions to ensure business-critical issues. All our efforts paid off; our productivity levels and customer satisfaction have remained high and stable throughout the period.
How are you prioritizing between retaining existing clients and acquiring new clients?
Since we are the OEM and the implementation partners for our clients, the relationship with existing clients is long term as we also do the support and maintenance. Therefore, they are always a priority.
During this exceptional time, we had to give priority to both existing and new clients as we were approached by several banks to help them with estimating their credit portfolio more specifically at the time of a global pandemic event. We went ahead and hired technologists and other experts immediately to increase the bandwidth, build new products, and added functionalities to existing products to support our clients at this time. Our entire team spirit is behind the rewarding experience we have had.
What are the special features of your solutions targeted at SMEs? What are the advantages or benefits SMEs can derive from your solutions?
We consider the NBFCs and HFCs and Corporation Banks in the category. Their business model is quite different from that of a Bank, and yet, they do have a huge credit portfolio and are in constant need to watch of Asset-Liability mismatch or Liquidity management. We have customized solutions for them that are smaller in scale, different in functionalities, and affordable for the asset size they manage.
How can digital technologies help BFSI during the current situation with things like liquidity crunch or NPAs?
The need for technologies in the BFSI industry is increasing to seamlessly tackle issues that supersede human bias. Instances like Non-Performing Assets (NPA) are issues that are construed as a global crisis. To resolve such a massive problem, the need for technology disruptors such as Machine Learning, Artificial intelligence, Big Data, etc are vital to dissect diversified data from various sources and to have real-time alerts that will benefit the BFSI industry.
Looking for data through limited sources is now a primitive theory. Today we are talking about dealing with a quantum of data that needs to be gathered and tested for issues such as NPAs. On the other hand, it becomes challenging for human beings to identify, understand, and make quick decisions in a short time.
Therefore, technologies like Early Warning System that use AI, today can quickly ingest the data and provide insights and alerts that can be accessed on digital mediums and in formats that are easy for human consumption. Data includes information from credit bureaus, real-time alerts on corporate actions, etc., through digital sources that synthesize huge volumes of not just structured but unstructured data sources as well, thereby making technology inevitable in decision making. An AI or ML propelled technology layer can analyze three thousand different data points arriving at decisions based on intelligent pattern matching accurately within microseconds. Therefore, I believe that technology is irreplaceable and a crucial component of the BFSI industry.
What are going to be your key focus areas for the next 12-18 months?
Our goal is to grow 20X shortly with products not just for all the risk needs of the BFS vertical, including Operational Risk, Liquidity Risk, and Model Risk in the RegTech spectrum by adapting to local regulations and data privacy laws.
We are expanding our market in India, targeting private sector Banks, Foreign Banks, NBFCs, and HFCs. Globally, Australia, the US, and Europe are potential growth markets for our products.