This banking intelligence startup is making due diligence and onboarding simpler for banks and NBFCs

Indian banks have been struggling to deal with non-performing assets (NPAs) and frauds over the last few years. Carrying out manual background checks to assess borrowers’ creditworthiness and intent to repay is cumbersome. 

Keen to change this, college friends Omkar Shrihatti and Gaurav Samdaria in 2015 started business intelligence solution provider Karza Technologies in Mumbai.

The analytics, business intelligence, and automation platform aggregates and stitches together information from over 850 public databases, to provide automation, onboarding, due diligence, monitoring, and skip tracing solutions to the BFSI Sector. 

“We spent the first two years understanding the gaps in the market and building meaningful connects in the industry, while perfecting our solution and strengthening the backend and integration aspects,” Omkar says. 

Gaurav and Omkar had previously worked with global consulting firms such as EY, where they conducted numerous investigations of frauds, including loan frauds, hawala transactions, security market frauds, and enhanced due diligence, among others. 

While discussing these experiences, the duo identified a large gap in the banking ecosystem, which could be fulfilled using deep tech-based solutions. This is when Alok Kumar joined in as CTO and Co-founder. 

Alok holds a master’s degree in computer science from IIT-Kharagpur. He was with Morgan Stanley and worked on global tech data, AI-ML projects, wire transfer frauds, and transaction pattern recognition to detect wire frauds and anomalies, etc. 

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The workings of the platform

The platform uses big data analytics, business intelligence, and machine learning to analyse available financial information and trawls the internet for signals that raise a red flag about the credit worthiness of the borrowers.

Work began by automating the customer onboarding process, ensuring compliance by simplified and automated KYC verification and AML checks, and providing enhanced diligence solutions that allow financial institutions to analyse credit risk in a matter of minutes, as opposed to the days taken by legacy processes.

The team started by commercialising TotalKYC, which includes KYC verification, customer onboarding, and VideoKYC services. 

“Kscan is our primary diligence solution. It’s where we consolidate and make available information pertaining to any business registered in India, including details of litigation and negative news/red flags. This is complemented by our GST and ITR solutions,” Omkar says. 

The founders realised that processes such as on-boarding, verification, and collection of data, when undertaken manually, had a high turnaround time and led to huge operational costs. 

“Moreover, these processes are prone to errors and/or manipulation and can lead to frauds and misappropriations,” Omkar says. 

Karza focuses on minimising inefficiencies in the BFSI ecosystem using Big Data and AI. The core problem it solves for includes scattered and unstructured data.

The platform collects information from all available scattered data and identifies relevant sets. The data is stitched in one place using a unique identifier, the Karza ID. The dashboard allows clients to view the data in an easy, consumable manner. 

The startup has built its services in the form of micro-API’s, which can be integrated directly into the core banking systems of financial institutions. The API integrations are charged on the basis of the volume of transactions, while access to the dashboard is typically subscription-based.

“Essentially, this allows you to get a holistic view of all information available on an entity across hundreds of different sources, at a single place. We then build analytics on top of this information and offer it to clients,” Omkar says. 

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The challenges and way out

It took Karza time to clear the larger banks’ complex procedures, information security concerns, compliance requirements, audits, and to convince them about the robustness and security of its solutions. 

Another challenge was managing cash flows. 

“With minimal liquidity in our accounts, it was difficult to manage resources and ensure salaries were paid, while simultaneously trying to scale the company. We always wanted to be profitable. Since we officially began business operations in 2017, we have grown exponentially and are cash-flow positive and profitable,” Omkar says. 

The team, which has now grown to 150 members, recently added in ‘skip’ tracing solutions, improving the contacting capability of defaulters and improving recovery rates for financial institutions.

“We have received significant traction across several verticals such as banking, lending, payments, insurance, investments, and corporates for digitisation, verification, and diligence. We work with almost all large banks in India, powering vendor onboarding for most payment companies, and also work with credit bureaus,” Omkar says. 

Karza processes over 10 million transactions per month and creates custom pricing models, depending on the scope of work involved.

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Market outlook and future

According to an IBEF report, the public sector banks’ assets were at Rs 72.59 lakh crore in FY19. The digital due diligence platform’s competition in the KYC space includes Signzy, IDfy, CreditWatch, and Probe42. In diligence and monitoring, it competes with Saverisk. 

“Our main competitive advantage is that we provide solutions for the entire lending lifecycle. We are also able to build customisable solutions across different product offerings,” Omkar says. 

He adds that the tech stack, with name and address matching algorithms, is another differentiator and has the ability to detect shell entities with 98.5 percent accuracy, using financial and non-financial Parameters.

Karza Technologies has raised Rs 9 crore from notable angel investors like Rajan Anandan, Singapore Angel Network, Singularity Ventures, Harish Engineer (ex-HDFC), Vinit Rai (JM Financial), and Artha Ventures. It claims to be cash-flow positive since 2019. 

With the accounting framework in place, Karza is now exploring avenues to build products that can increase credit access and availability, enhancing financial inclusion in India. 

“We aim to expand and enhance our existing product suite with additional data, investing in technologies such as advanced NLP and computer vision to strengthen our analytics offerings and build automated solutions for our partners,” Omkar says.