Microservices in play in a Systems and Business setting

 

Want a loan, but have no Credit history or Collateral

How did I get to this story?

Data and its visualization had always been of interest to me and given a choice between reading pages of analysis and data summary my eyes would always rover to discover the latter first. Because of the strong interest towards it, I picked up writing Python snippets that automated reading any kind of dataset from the web and display a visual representation of it. Having felt satisfied with the outcome I wanted to explore datasets from Domains that I had worked in viz Banking and Retail. While on a subconscious intent to search for Credit rating datasets my mind seem to have hooked upon a newspaper article on a leading Indian NBFC start-up having received another round of funding this Nov 2019 and I felt why not find how differently  they assess Credit worthiness of their Customers before hunting for public datasets

What is the traditional criteria of receiving a loan?

Traditionally individuals or businesses receive loan from Institutional lenders (Banks, NBFCs) based on a sound Credit score residing with Credit Bureaus (CIBIL,CRIF High Mark, Experian, Equifax). The score is arrived based on the entity’s loan repayment history.  However barely one-fifth of the Indian population has a valid credit score thereby constraining their access to credit and creating the vicious cycle – no score hence no credit and no credit hence no score³.

The additional factors which discourage this segment of credit-less borrowers from receiving a loan are the high Operational costs incurred for disbursing small sized loans by Institutional lenders. These Lenders also insist on Collateral to enforce willingness to pay by borrowers. High regulatory obligation by these Lenders mandate submission of elaborate documentation coupling it with increased loan processing time ². 

What is the Market overview?

The population size of these underserved entities is very huge launching the government to push forth a slew of policy changes and initiatives to drive up financial inclusion. The Retail front has close to 400mn customers in the banking sector with no credit history. Of them around 300mn customers have one account and the rest 100mn have no account¹.

On the Business front MSMEs remain largely underserved in comparison to large sectors. There are 55.8mn MSMEs with 15% (8.2mn) being registered and remainder 85% (47.6mn) unregistered. They together generate more than 124 mn jobs and contribute to 31% of nation’s GDP and 45% of country’s overall exports. Their source for credit requirement estimated at INR 87.7tn comes from Debt (INR 69.3tn) and Equity (INR 18.4tn). The below figure summarizes their overall Credit supply sources ².

Figure 1: Total debt supply to MSMEs

What challenges are being addressed to get the outcome?

This cohort of Borrowers seek Lenders to offer differentiated services in their loan products: Unsecured loans with Low regulatory obligations, Minimal operational requirements, comfort with higher risk profile and alternate Credit Assessment methods ².

Figure 2: Fintech Lenders service offering

How have these challenges been overcome?

An expanding Internet penetration (636.73 mn users, 47% as of March 2019) and increase in the number of smartphone users since 2010 (468 million as of 2017), has paved way to the growth of many digital Businesses and subsequent adoption by Consumers to a digital way of life. This technology disruption pressed the rise of many Fintech Lender firms who created Alternate lending models and drove majority of their processes online with automation.

Figure 3: Alternate lending models of Fintech lenders

These Alternate lending models operate on alternate data from external sources along with traditional data from Credit Bureaus, for Credit underwriting and approval. The merit in alternative data is access to behavioural patterns of individuals who may not have a loan account or collateral, but have a phone connection. Any behavioural pattern is predictive and can be analysed for decision making ¹.

Figure 4: Data source for alternate and traditional lending models

References

1. https://economictimes.indiatimes.com/markets/stocks/news/alternative-data-can-gauge-creditworthiness-if-law-permits/articleshow/68748552.cms?from=mdr
2. https://www.intellecap.com/wp-content/uploads/2019/04/Financing-Indias-MSMEs-Estimation-of-Debt-Requireme-nt-of-MSMEs-in_India.pdf
3. https://www.pwc.in/assets/pdfs/publications/2016/non-banking-finance-companies-the-changing-landscape.pdf

Retail eCommerce policy and it's implications

     

        When I was working on integrating one of our ERP products with Amazon's Sandbox environment sometime in Feb 2019 , I happened to come across news articles, introducing India's draft eCommerce policy. I wondered what it is all about and what would be its impact to the existing eCommerce players in India, Amazon and Flipkart and thereon their strategy to counter it.  So I went about reading associated articles and concluded the impact would be for the players like Amazon,Flipkart to divest their Equity stake in Companies who were directly selling on their Platform ( Amazon's Sellers Cloudtail and Appario) and thereby also lose control over the Sellers inventory and their ability to control Product prices. [1],[12]

      However a month later an older article that caught my attention made me believe that there was more to an eCommerce policy posturing as government's strategy to maintain fair competition for India's small and medium retailers.[2]. For a company as big as Reliance to roll out a plan to enter into the eCommerce space there definitely would have to be some background and substantial statistics.So I decided to pull out some data and this is what I obtained.

1. As per IBEF eCommerce Report May 2019 [3], India's eCommerce Industry is worth 50 bn USD as of 2018 and overall Retail industry is worth 672 USD bn as of 2017.The IBEF Retail report May 2019 [4], conveys that a significant opportunity for expansion in the segment exists owing to Traditional/ Unorganized Retail, Organized Retail and eCommerce segments that account to an estimated 88%, 9% and 4% market share. The 88% is what caught my attention and I realized that's a huge market for potential stakeholders - Business,Government and Policy formulators.

2. A summary of the Top ten Indian Retail companies [5] based on their Annual turnover for 2018 are predominantly brick and mortar entities with a small eCommerce presence compared to the larger players (Amazon,Flipkart and Paytm). It is very likely then the next strategy for these Companies would be to expand their presence in the unorganized and organized retail space.

3. Walmart's entry into Indian retail in 2007 and it's subsequent acquisition of a 77% stake into Flipkart in May 2018 to enter the eCommerce space ushers Amazon's acquisition of Aditya Birla's More in India. [6] A year earlier Amazon USA had acquired the grocery brick and mortar chain, Wholesale foods.

4. A summary of top 10 US retailers by Revenue and eCommerce market share shows [7],[8], Walmart leads in revenue and holds a 3rd position in eCommerce at 4% market share. Whereas Amazon is positioned at 3rd in revenue with a top position in eCommerce at 48% market share. Both definitely then would want a firm share in the Asian market

5. A summary of the FDI Retail and eCommerce policy [9] since Jan 2018, stating what is allowed

• An automatic Funds routing and 100% FDI in Single brand retail trading with a 30% local sourcing of goods for FDI >51% if local sourcing is feasible . eCommerce trading and holding inventory in this scenario is allowed.
• A government approval for Multi brand retail trading with maximum 51% FDI only.
• eCommerce Business models that can be run in India are Marketplace, Inventory and Hybrid (combination of former two). FDI in eCommerce is only allowed in the Marketplace model. [10],[1]

In retrospect and in summary Reliance's entry into eCommerce is well positioned for the country to promote business and create livelihoods by keeping competition alive and protecting small retailers.[12] I am yet to determine the implications of the Policy on food tech firms ike Swiggy,Zomato or on Travel firms like MakemyTrip, Ola etc however that is for a later time.

References:-

1. https://www.livemint.com/Companies/ydACAnoRhf9dYZCOklb3jN/India-ecommerce-norms-Amazon-may-have-sell-Cloudtail-Appa.html

2. https://www.bloomberg.com/opinion/articles/2018-08-16/amazon-has-a-new-rival-in-india-and-it-isn-t-walmart

3. https://www.ibef.org/industry/ecommerce.aspx

4. https://www.ibef.org/industry/retail-india.aspx

5. https://www.bizvibe.com/blog/food-beverages/list-of-retail-companies-in-india/

6. https://www.bloombergquint.com/business/why-amazon-wants-to-acquire-the-more-supermarket-chain

7. https://www.investopedia.com/articles/markets/122415/worlds-top-10-retailers-wmt-cost.asp

8. https://techcrunch.com/2018/11/16/walmart-passes-apple-to-become-no-3-online-retailer-in-u-s/

9. https://www.vantageasia.com/retail-fdi-india-restrictions-solutions/

10. https://factordaily.com/how-reliance-shaped-the-india-first-agenda-in-the-draft-ecommerce-policy/

11. https://dipp.gov.in/sites/default/files/pn3_2016_0.pdf

12. https://www.businesstoday.in/current/economy-politics/new-fdi-policy-on-e-commerce-how-marketplaces-are-to-be-affected/story/305098.html

Problem Solution tree Analysis template

Project Goals/Objectives - How do we arrive at it

   

When I start to build a skill,competency in a certain area, my tendency is to refer to broad sources of information (articles, books) so that the subject can sink in conceptually.

   

During my early years in Software development, Waterfall model was the prevailing methodology of delivering a solution and PMP was the defacto Certification that one should pursue if one aspires to become a Project Manager. Eventually I did undergo a PMP training and delivered few Projects. However I kept at bay the pursuit of getting Certified which entailed writing a paid Exam. Retrospectively, I think this was primarily because PMP was not answering some of the fundamental burning questions pacing my mind which went like these :-

1. How does an Organization's Business work

2. How does my Manager and his Manager know what priorities to chalk up for a Performance year and how do they keep focus

3. How are Business Unit Leaders able to measure performance of it's Business unit in terms of Financial, Processes, Risk, People at a fundamental level

With these questions in pursuit, I took up role in the Business area of my IT Company to broaden my perspective in the Business of Non-IT Operations. It was definitely challenging but the experience enriched me tremendously. The foremost experiences which stand out for me are, in the Business area there is a lack of comprehension of how Technology serves as a Business enabler, as a Process productivizer, how Technology solutions are delivered within stringent process frameworks viz Waterfall, Change Management, Service Management etc and therefore a lack of appreciation and enthusiasm to what could be achieved.

  With the insights and experience I gained I decided the time was swell to get Certified in the more prevalent Project delivery methodologies viz Scrum and Prince2. Having an insight of all the 3 frameworks PMP, Scrum and Prince2 now I wanted to succinct my learning with a Conceptual visual representation.

   So I decided I will start with the PMP process as that was most traditionally followed process then and now. As I skimmed through the high level process view I realized there were 2 aspects in the Initiating phase that I was not very grounds-on confident on how it should done.

1. Determine Company Culture, Process and Systems

2. Create measurable Objectives

I decided it would be no point proceeding further until I fundamentally understood how the above 2 could be determined by a novice like me. The former has been covered in another article of mine. And there latter has easy techniques here.

Simple technique to arrive at Project Goals/Objectives and Results using Problem and Solution tree (PST) analysis

    We are usually accustomed to start writing Goals/Objectives by asking ourselves what do we want to accomplish. Well that's a fair enough approach to apply in personal life. But in the Business area it works differently wherein one sees a Problem or an Opportunity in terms of Market potential, performs a feasibility study by doing Research and then seeks approval for funding a Project to realize the Opportunity.

    So which means one needs to start with the Problem statement, check if there is consensus on the existence of the Problem with Stakeholders, targeted user base, an Opportunity to seize. 

So here are few pointers to be kept in mind when using the PST analysis technique:

1. When defining a Problem start with a Verb/Adjective. One would have to keep in mind the term 'Problem' intends to convey 'Needs wanting to be fulfilled by key users who could be'...Customers, Organization, Shareholders, Suppliers, Employee etc.

2. Apply the same rule for Goals (or Objectives. We will use this term interchangeably here.)

3. The rule is to apply Causal logic that is 'Cause and Effect' statements

4. When framing DIRECT AND INDIRECT CAUSE  statements use 'because' as interjunct between the Problem statement and Cause statement definition.
       4.1 'Direct Cause' is one that directly branches from Problem statement.
       4.2 'InDirect Cause' is a sub-branch from a 'Direct Cause' .

5. When framing DIRECT AND INDIRECT EFFECT statements use IF THEN statements. Eg: IF 'Cause' then 'Effect'
      4.1 'Direct Effect' is a statement that directly branches from a 'Direct Cause' statement
      4.2 'InDirect Effect' statement is subbranches from a 'Direct Effect' statement

      6.  This is how each of the components map into finally.

              Problem = Single Goal

             Direct Cause = Sub Goals         InDirect Cause = Activity

             Direct Effect = Result                InDirect Effect = Impact    

      7. Refer to the Matrix having an example to arrive at Goals and Results from Cause and Effect

 Hierarchical relationship between Problem, Cause and Effect

Keeping focus during Change initiatives

Have there been times at work when you have been asked to deliver on an assignment that does not fit into any of the Objectives of your Performance targets. Or have you been asked to write your own Performance objectives though falling under the umbrella of the broader Functional units Key Performance Objectives (KPO). And you have always wondered if this is done, how does it fit into the broader scheme of things. Even if fits semantically because your objectives and Function's objectives have used a couple of similar words to breed familiarity and alignment, you are yet unable to visualize the steps that lead you to the end outcome. 

Let's weave a narrative to bring familiarity to the topic. For example an Organization is bringing in a new Technology Infrastructure which will soon replace the existing one. A Project has been commissioned to migrate the current Business operations and Staff to the new platform. The project has a strong Business Case on Benefits to be realized. You have been assigned to the Project and Lead one of the Project stream which is responsible to migrate an Operational process onto the new platform. Well that's your Key Result Area "Migrate ABC operational process onto the new platform". 

You now wonder what are the steps to get there. Who are the Stakeholders you should speak to as there are so many who want to have a say and control, should you consult anyone as you have never taken up something as unstructured as this.  What are the questions to be asked, what should be written as Outcome for this Initiative when it has dependencies on other Change initiatives. Anyways you proceed with a draft Plan and start having conversations with Stakeholders presuming they will assist you in actioning your plan. However things do not go as you anticipated. Stakeholders avoid you, they delegate staff who are inexperienced in giving relevant Process data, some Stakeholders are new to the role and are all excited to assist, however they are disconnected from their existing Teams issues, requirements, Some of them are so aggressive that you tend to go into a Lymbic mode ( Fight, Flight, Speechless) that the entire focus of the conversation goes off as an instant Camera flash and now your mind is occupied with something else instead of the steps  to reach the Outcome. You wonder what is the right way to get there. Who has the right information. Is your judgement right. You wonder why conversations are so unstructured. If there is a Cost, Effort and Time going into an initiative why cannot there be logical rationality to get there. Nobody is giving you the answers or your questions are being deflected by spinning unnecessary stories. Everyone is chaotic, nobody is listening to one another, the atmosphere gets impatient, insecure and stressed.

Businesses run on rationality else they would not be a running business.However there few within an Organization, I call them the 'Heart Leaders'  who influence the here and now chaos back to normalcy. One can recognize it if one is paying close attention to oneself and others during the chaotic interactions. But what do you do then, when you constantly loose direction (mentally) because of the noise.

Well in that case then, let's get back to Business and understand how your Business Unit works. Because if we get to know WHAT or HOW your Business keeps it's Operation productive and WHY it exists you may find the right questions and thereby the right answer to stay focused on an initiative.

1. Why does your function exist. A key input to have a story for the Business process
2. What is your Function's Key Performance Value or simply stated what Services does it Offer.
   
   • How does it contribute to your Organizations ROI
3. To whom does it offer these Services
   • Are they delighted with the Service or they look forward to having something else or more
4. How are the Services delivered. Is the mechanism good?
   • What are the Infrastructure and Assets used to deliver the Services     
   • Who are the resources who support the Services
   • What are the Costs to deliver and manage the Service from start to end
   • How long does it take to deliver
   • How do we know we are doing a good job

Some of the above questions should give you sufficient data that allows you to place a Metrics for current Business process performance, Issues, Risks, Opportunities. And thereby you will have a good Business narrative around the Process, why it exists, what it delivers, to whom and what are the Opportunities to improvise.

The next step is to spend time with your Stakeholders and have genuine conversations around what they feel about their Process.If the conversations turn chaotic now, you should pursue keeping focus because you now have the right data and questions, thereby focused conversations should be pursued.

When conversations are chaotic, one needs to pay attention closely to the person and find what is it that S/he wants that could create a Win-Win scenario for them as well as for the Organization and yourself. Win-Win is a key aspect that plays a very strong role when you want to deliver a Change initiative. 

Thank you for reading this post :)