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Fintech

Published on: June 28, 2021, 9:21 a.m.
Karza zooms high in the BFSI sector
  • Shirhatti: identifying competition across verticals

By Lancelot Joseph. Executive Editor, Business India

Those in the BFSI sector, be they banks or NBFCs, are all looking at automation to speed up processes. And, they have come to look for a fintech partner. “Chances are high they will have to reach out to several players to automate different processes, thereby increasing the number of vendors their teams are required to work with,” explains Omkar Shirhatti, co-founder and CEO, Karza Technologies Ltd.

“Not only that, all solutions are not scalable, based on an independent entity’s requirements or, in some cases, do not allow seamless integration into their work flows.” Karza is a single touchpoint for clients offering solutions across the entire spectrum. “We identify competition across verticals of our offerings, with some key differentiators,” adds Shirhatti, a CA, who previously worked as a senior consultant at Ernst & Young, for over 12 years in the fields of fraud investigations and background checks.

 In 2015, he roped in Gaurav Samdaria, as a co-founder and CBO and Alok Kumar, as a co-founder and CTO. The trio’s aim was to revolutionise the BFSI industry, and make Karza a single source for all due-diligence, fraud & risk management and for all on-boarding verifications. With extensive backgrounds in fraud investigations, entrepreneurship and data science, Shirhatti, Samdaria and Kumar came together to establish Karza – with the intent of creating a unified solution to aid in creating an efficient and fraud-free financial ecosystem.

Karza is also backed by pedigreed financial investors and experienced industry veterans, including Rajan Anandan, Singapore Angel Network, DIBS; Anirudh Damani, Singularity Ventures; Harish Engineer; Vineet Rai; among others.

 “All of Karza’s solutions originate from a study conducted by us, the founders, across 2,000-plus caution notices issued by the Indian Banking Association on the various frauds conducted across banks. The two primary reasons for frauds identified were falsification of documents and promoter diversion of funds into ‘related’ parties. To tackle these problems, we have developed products and platforms,” says Samdaria, also a CA, CS and CFA (US), who was earlier co-founder & director, Schbang Digital Solutions, an integrated marketing solutions agency, with digitisation at its core, which he created from scratch. He had also worked as CFO, Foxy Moron, a marketing & advertising firm, besides being an independent director of Spenta International.

 “Our TotalKYC is a verification and on-boarding platform,” says Kumar, who has created a slew of cutting-edge fintech solutions for their innumerable clients. “It is India’s largest collective of proprietary APIs that automates checks across identity, address, employment, utility bills, vehicle and property ownership related authentications through our data API pipelines built across 800-plus official sources. The platform grew to further facilitate transparency through a multi-regulator (RBI, SEBI and IRDAI)-compliant VideoKYC service, along with Amazon’s AI award winning scoring and matching APIs to promote digital straight through processing.” 

“These patent-pending tech-driven new-age products have helped cement the company,” adds Kumar. During his study at IIT, Kharagpur, he set up their first big data cluster. After completing his master’s with a focus on machine learning and big data, Kumar was with the global team of Morgan Stanley’s research division for over three years. There he worked on data science use-cases with a special attention on problems related to text mining and natural language processing (NLP) and real-time fraud detection using machine learning. 

“The platform has cut on-boarding times by at least 70 per cent over the past five years and has prevented $350 million in fraud by weeding out fraudulent applications at the outset,” says Shirhatti. “To drive this contextually, the number of fake PAN cards identified in the first two months of the lockdown in 2020, submitted across loan and merchant types, were to the tune of over 80,000 every day. This is just one authentication type across the 50 others that the TotalKYC’s platform enables”.

Karza Scan is one more product that started as an offline due-diligence favour to an investor, where the novel nature of the outcome gave the founders a goal that took over three years to achieve. K:Scan today has automated pre-populated profiles covering 22 million businesses across the country to generate a point-in-time intelligence report by leveraging over 800-plus disparate but credible sources. “One can expect to identify shareholding, management profiles and history, deep financial analysis on the entity vis-à-vis its peers, red flags across multiple regulators, litigation screenings with advanced entity search algorithms and negative news screening,” observes Samdaria. 

“An offering unique only to Karza includes graphically representing entities sharing the same addresses, email ids, contact details, fiduciary relationships, domain ownerships, to name a few,” claims Kumar. “This implies that using just a mobile number or PAN as an input, Karza can identify every associated entity to an ‘nth’ degree of connect and any critical negativity associated with it. This feature single-handedly offers a solution to problems such as money-laundering, hawala transactions and promoters siphoning funds or mis-representations of group assets and entities. All of this happens within seconds of a search.”

Then there is K:Watch. It drives K:Scan’s engine for continuous monitoring across a corporate’s clientele, key suppliers, complete loan portfolio independent of the entity type to allow early warning signals to take actions before a fraud or default occurs. “Our consent-driven GST and ITR solutions complement our diligence suite and ensure up-to date monitoring of a business’s financials, as well as providing the means to conduct financial diligence on smaller entities that may not be required to publicly disclose their returns. Our GST and ITR solutions are ideal to expand the credit base that our clients lend to, improve credit accessibility to SMEs and conduct a detailed analysis of the financial health of a business,” discloses Shirhatti.

For skip tracing, Karza has K:Lookup. It is a one-of-a-kind Skip Tracing & Asset tracing solution, helping financial institutions to identify relevant incremental contact, address, e-mail and employment related information on the basis of limited demographic information, by leveraging data collected from 100-plus alternate data sources. “K:Lookup is used for loan default tracing, defaulter contact prioritisation, and by insurance companies who are no longer able to contact their customers and policy holders,” affirms Kumar. “It has had the benefit of boosting collections by as much as 30 per cent after implementation on assets that have been written off by banks as bad loans”. 

Traditionally, the BFSI industry has relied on self-declarations made by their customers for the identification of related parties, resulting in money laundering through undeclared associations and entities. “By unravelling more than four-billion associations amongst the existing 25 million businesses across the country, Karza hosts one of the most comprehensive network graphs detailing how individuals and business are associated with each other,” says Samdaria.

 With the services it offers, Karza has acquired a diverse portfolio of over 200 live clients. Starting from the credit bureaus, such as TransUnion CIBIL, Experian, Equifax and CRIF to the ‘big four’ accounting firms like Deloitte and Ernst & Young. Leading payment services providers like GPay, Paytm and Razorpay, besides banks like Axis Bank, HDFC, ICICI and IDFC First Bank use Karza too.

“Leveraging Karza’s solutions, for seamless form-filling and identification of potential customers for on-boarding and underwriting, the client was able to reduce the turnaround time (TAT) on loan applications to one to two hours, with minimal documentation and intervention,” acknowledges a private sector bank official, engaged with Karza.

“Not only this, a Centralized Data Lake created by Karza has strengthened the roll-out of pre-approved offers. The integration of our solutions also enabled the implementation of a stronger policy decision framework for the client, thus resulting in higher efficiency of processes.”

Some of the notable challenges faced by their team included lengthy on-boarding processes with multiple documentary requirements, inefficient TAT for application processing and approval – 25-30 days; increased operational costs due to high volumes of applications and a lack of credible intelligence on small businesses to effectively underwrite them.

For another private bank, the challenge lay in volume of applications increasing beyond manual capacity to handle efficiently. The absence of digitised backend processes also resulted in non-standard review mechanism, limited sample screening and limited screening of data sources against applications. “The implementation of Karza’s solutions enabled the client to authenticate applications digitally, resulting in 100 per cent coverage, while standardising a comprehensive screening process that employed 150 APIs to digitally screen each application. The solutions also included a comprehensive application risk score to seamlessly pass through applications while rejecting the fraudulent ones,” says the banker.

In terms of business transaction volumes, Karza Technologies processed an average of 18.88 million APIs in 2020-21. “Not only have we recorded a 1.5-time increase in revenues, we are also profitable and cash flow-positive, having achieved this within three years of commencing operations and maintained our profitability through the pandemic,” concludes Shirhatti, who posted revenues of Rs70 lakh in 2017-18, Rs4.6 crore in 2018-19 and Rs23.5 crore 2019-20. Despite the onslaught of Covid, Karza has grown over 50 per cent in 2020-21 and has been profitable for the last three years.

The company has been in the process of raising funds during the year, which is intended to boost product development, scale middle management and focus on larger strategic projects. There are plans to expand to other geographies, towards which also the trio has started working. 

Trifecta of digitisation

With product suites spanning across the entire transaction journey, right from pre-profiling, on-boarding, underwriting, due diligence, fraud and risk management, disbursal, monitoring, and collections, Karza stands at the trifecta of digitisation: automation, enhanced diligence, and robust decision-making, creating a state-of-the-art digitisation process without compromising on security and quality. 

KYC Solutions Suite (TotalKYC): This competes against players such as IDfy, Signzy, and Jocata, etc. Within this, it offers the widest suite of microservices for digital on-boarding with computer vision and NLP algorithms. 

Diligence Solutions Suite (K:Scan):  It competes against companies such as Probe42, SaveRisk and Toffler, to name a few. Its solutions give clients access to 22 million pre-profiling businesses, as against 2.2 million offered by other players.

Portfolio Monitoring & EWS Solution (K:Watch): It competes with companies such as Crediwatch & CRISIL. Within this category, the company offers coverage and delivery of over 130 red flags, which is more than double the standard 45-50 alerts delivered by other players in the market. 

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