There are several FinTechs emerging into lending and many consumer tech businesses starting their lending arm. Its a great way to make sustainable money.
Major decision for FinTechs in Lending is Build vs Buy.
Is there any Thumb-rule to decide "Build vs Buy"?
Below thumb-rule generally works
Whatever is unique to FinTechs should be built in-house
Whatever is standard available through third parties should be bought from the market and stitched within the in-house tech. Provided
Long term costs of third are viable
Agility and support is not a problem
All requirements are being fulfilled through standard products + in-house tech
Why this thumb-rule?
Every product has a depth on its own. From outside it might look simple but it has to go through maturity cycle
For standard products, it doesn't make sense to think and develop in-house and traverse the maturity journey. Its a big distraction! Not every battle is worth fighting for.
Ok got it. Can you share some example of standard products?
APIs for KYC, Bank-statements and other validations
Accounting software
HRMS
Dashboarding tools etc
Is Loan Origination System (LOS) - a standard product OR is it unique to FinTechs?
No - Case1: Self onboarding journey - Usually FinTechs offer self-service customer journey which is a unique experience they want to give to customers. In such cases it is highly recommended to build the onboarding tech in-house from scratch.
Maybe - Case2: Assisted journey - In case you want to onboard customers through assisted journey by your fleet-on-street, you can choose a configurable LOS product or platform
Is LMS an standard product OR is it unique for each FinTech?
Yes, ideally LMS should be 100% standard product just like accounting. Its ultimately a back-office core software. Provided it satisfies all your requirements.
If LMS is such a standard product then why most of the FinTechs have chosen it to develop it in-house?
There are primarily two reasons
Reason#1 - Lack of right LMS provider
While we were busy in building world's best LMS, there were no good options available earlier
Option#1 - Go with established LMS players
Pros
Feature rich
Mature and
Stable
Cons
They were built on legacy tech - difficult to upgrade
Heavy Capex investment
Lack of agility
Poor support
Arrogance
Lack of new age features
Lack of APIs
Lack of scalability
Mismatch with startup pace - Slow in making changes
Option#2 - Go with new age players
Pros
Startup DNA
Agility
Better support
APIs
Cons
Lack of features
Limited loan product coverage - specifically built to handle only 1 type of loan product
Behind in regulatory compliances
Mostly built on open source - Apache Fineract. It made sense to directly build on fineract
Lack of depth in the product
Startups die fast - its a core system. Can't risk it
Reason#2 - Availability of open-source Apache Fineract
With Apache Fineract, it looked we have complete LMS with minor tweaks we can have our own LMS
Looked good to handle standard PL products
It could give a quick head-start
Building on Apache Fineract seems like an excellent option, isn't it?
Apache Fineract was developed by MIFOS foundation and it gives a good software to handle micro-finance use-case.
But it carries below problems
Limited loan product support - Only MFI and PL term loans can be handled well. For other products, nuances need to be incorporated. Credit line, BNPL, SCF, Commercial Vehicles, Tractor loans, MSME business loans might require significant changes
Initial customisation is needed to suite Indian regulations - These customisation are 1) Unknown to FinTechs due to lack of expertise in regulation 2) When they get known, it can take 4-5 months of efforts to make it suitable
Architectural debt - Fineract is built in certain way. Building it on it leads to carrying the baggage of the architecture
Compliances consume energy and bandwidth - Regulator regularly roll out new rules and clarification. LMS system needs to be continuously upgraded. With time, Instead of energy going in innovation, it starts draining towards compliances
Maintenance is expensive - Evolution and changes never stop, continuous maintenance is required. Having an in-house team of experts requires heavy expenditure on man-power
Maintenance is risky - LMS by its very nature is a large complex system doing calculations everyday. There are more than 50K scenarios that need to be tested. Which is humanly not possible without test automation. This can lead to wrong calculations and hence compliance and financial issues
Leads to bulky ops teams - Several operations can be automated, but due to system design - automations needs to be added over time. By the time automation is achieved, your ops team get quite bulky.
Your expertise become rate-limiting factor in evolution of LMS - Evolving the LMS from the base fineract is the sole responsibility of you yourself. It will be good only to the level of your expertise and knowledge.
Ok understood problems with Fineract. Whats the problem in building it in-house from scratch?
While some of the problems with apache fineract, you'll be able to resolve by building from scratch but below problems would still persist.
Limited loan product support
Initial customisation is needed to suite Indian regulations
Compliances consume energy and bandwidth
Maintenance is expensive
Maintenance is risky
Your expertise become rate-limiting factor in evolution of LMS
Software decisions should be driven by maintenance first approach.
As LMS is backend software, building it in-house does not give you any specific advantage in business.
So you are saying don't build in-house and also don't use apache-fineract? then whats the solution?
Use Synoriq LMS - its the best LMS in the world so far. Focus on your core, and leave the worry of loan management to us.
Synoriq LMS carries the best of both worlds
Maturity and product coverage of legacy players
Agility and modern architecture of new age players.
Highlights of Synoriq LMS
Feature rich mature LMS
Matured over 3 years with 200+ man years of efforts
Feature rich - checkout the feature list - https://www.synoriq.com/lms-features
Wide loan product coverage
Coverage of 100K+ scenarios
Servicing Rs 30,000Cr + of loan book with 30+ customers
Handles innovative loan products
Supports 15+ loan products across term loans, credit line, co-lending, subvention etc
Any type of innovation you have in mind, can either be configured OR tailor made for you.
Its built from scratch in an architecture, allowing us ability to support whatever is needed
Future proof architecture
Evolutionary architecture - releases every month - constant evolution.
System stability through test automation - every day 35K+ test cases executed
API first - 40+ APIs to readily enable you to build anything on top of LMS
Scalability - achieve near unlimited scalability
Startup DNA
FinTechs find us agile and aggressive
We understand FinTechs well and can work at the desired speed
Compliances focus
Any changes are quickly incorporated and provided as free upgrade
You never need to worry about software changes related to LMS compliances
Advisory is also offered in case of any compliance opinion needed
ISO27001 and SOC-2 Type-2 certified
What is the business advantage of using Synoriq LMS?
Its threefold advantage
Cost benefits
Significantly cheaper in long run if you consider the cost of in-house team and bandwidth of senior management
Reduction in ops team with automation offered by Synoriq LMS
Time benefits
Roll out any new product or changes faster
Ease of life
Worry free life in terms of compliance related to LMS
No more worry to keep evolving LMS - we continuously evolve it for you
No more worrying about Infra - downtime and scalability
Ok good, Synoriq LMS looks like what I needed. But I have already built in-house tech. What to do now?
If you are thinking of long term game in lending - you should migrate to Synoriq LMS
Synoriq can help you with complete data migration as a hassle free service
Synoriq's APIs can be consumed by your in-house tech
Is Synoriq large enough to handle such critical operations?
We started back in 2017 and now aged 6 year old
We have been bootstrapped and profit making for last 6 years. We have built this business for really long run
We are 150+ strong team with 11 member top leadership founding team
We are handling 30+ customers with Rs 30,000Cr+ AUM. Large enterprise customers are already trusting Synoriq
Ok, I am convinced. What are the next steps?
Drop an email on growth@synoriq.in
Call directly on 9757418374 / 8823940905