Lokyata: Fostering Financial Inclusion Using AI

Tommy Eastman, Director, Product & Data Science; Santosh Thiruthi, Co-founder & CEO; Steve Bireley, Chief Technology Officer and Sanker Gopinathan, Director, Operations & Client Engagement Today, one in three consumers in the US are considered subprime borrowers and nearly all but excluded from affordable loans. Lenders turn down qualified borrowers who don’t fit the standard profile. Lokyata, an AI-powered fintech company, aims to change that.

Thin-file borrowers with low credit scores find it highly difficult to obtain credit through traditional lenders. When they can get loans, these borrowers receive much less favorable terms than prime borrowers. A recent study by Columbia Business Law Review found that subprime auto loans can have interest rates that exceed 29 percent. The CFPB found that payday personal loans, which subprime borrowers may turn to as a last resort, can charge fees that translate to annual percentage rates (APRs) of nearly 400 percent.

Observing a dire need to foster financial inclusion, a team of passionate serial entrepreneurs, tech evangelists, credit scoring experts, and data scientists embarked on a journey to create technology that can intricately analyze borrowers' financial records and make them eligible for loans, despite low credit scores. Lokyata leverages state-of-the-art AI solutions to drastically improve the underwriting process and, in turn, change the stigma surrounding subprime borrowers. "Over a hundred million people in the US are not able to attain affordable credit. Our mission is to make credit underwriting more effective such that lenders can make more informed decisions and ultimately drive down costs for thin-file and no file borrowers," begins Santosh Thiruthi, Co-Founder and CEO.

Creating Effective and Accurate Underwriting 

Unlike traditional credit data that paints a narrow view of borrowers, Lokyata aims to create a more holistic understanding of the borrowers' financial lives using alternate information aggregated from sources such as bank statements, daily transactions, employment verification, fraud networks, and more. Lokyata then uses this holistic borrower profile to provide lenders with a more comprehensive credit risk analysis. "We set up our company to allow lenders to perform more accurate credit risk analytics and understand the borrower better," adds Steve Bireley, CTO.


We set up our company to provide a platform that allows lenders to perform more accurate credit risk analytics and understand the borrower better than is possible with traditional bureau scores

Lokyata’s team of credit experts and AI experts have worked together to build an underwriting platform which produces results. The team works alongside lenders to understand their business goals, what demographics they aim to serve, and how they utilize existing data. Lokyata’s platform has built-in API hubs to connect to a suite of data sources, allowing clients to plug in at any point within the origination workflow and automate the underwriting process,. Lokyata stands apart as the only workflow decisioning engine which also recommends underwriting strategies, explains Bireley. “Our USP is within the field of continuous optimization. Rather than deploying a lending model and walking away, we use tools to regularly monitor the borrowers' loan payment behavior. We then use that data to further tune the underwriting models,” he says. Constantly measuring improvements and retraining models is critical in reducing lenders' costs per funded loan, default rates, and increasing their overall ROI. Thiruthi adds that Lokyata's solutions have been reported to increase loan approvals for clients by an average of 20 percent, decrease default rates by 22 percent, and improve clients' financial incomes by 21 percent.

Great results require collaboration and transparency. Lokyata has built explainable AI into its platform such that lenders can see why each decision was made. “The fact that AI is a black box is a myth”, says Thiruthi. “Our ideology is that if AI is transparent, it makes it much easier to trust”. Moreover, the openness of the software dramatically helps borrowers understand how they can improve their financial health and profiles. 

Analyze Cashflows and Prevent Fraud

Many borrowers may have no or low credit scores, but have strong cash flow in their bank account to demonstrate ability and willingness to repay credit. In such scenarios, customers can use Lokyata's BankAnalyze solution—with its open banking API technology—to share their bank statements instantly with lenders. The platform analyzes these bank statements and generates a transparent financial profile of the borrower to help the lender decide the risk gradient while sanctioning loans.
For enders, BankAnalyze can provide more predictive and accurate risk profiles than conventional credit bureau scores and results in lower interest rates and higher loan amounts millions of borrowers deserve. The solution helps automate funding decisions based on borrower cash flow, affordability, and AI-driven behavior analytics. Reports suggest that the use of alternative financial data, such as that used by BankAnalyze, broadens thin file borrowers' access to financial services and has the potential to lower interest rates, making loans more affordable.

The global pandemic has been a driving catalyst behind an increase in digital lending fraud as more lenders have turned to fully digital and automated underwriting. Lokyata's real-time identity verification and fraud detection solution—FraudBlock—has therefore grown increasingly valuable to lenders. FraudBlock is a multi-layer service. It starts by verifying user identity, then identifies fraud schemes across a massive network of billions of transactions and blocks fraudulent customers from getting through. “Fighting fraud is a constant battle. As lenders’ detection models get better, borrowers’ fraud behavior becomes more sophisticated and complex”, explains Tommy Eastman, Director of Product & Data Science.“Lokyata helps lenders stay one step ahead of fraud, before it hits them”.

"Lokyata helps lenders build and scale credit decisioning excellence. Our approach is one of continuous optimization. Rather than deploying a lending model and disengaging, we use tools to regularly monitor the borrowers' loan payment behavior, then use that data to further tune the underwriting models"

An Open Ear to Clients' Needs

As a company founded by serial entrepreneurs with a passion for innovation, Lokyata follows a culture of curiosity and openness where new ideas are constantly explored. This culture is also at the heart of the company's interactions with clients. "We work in-hand with customers and listen carefully to their needs and goals, and develop solutions to ensure that they succeed," adds Sanker Gopinathan, Director of Client Engagement. 

Chris Rief, Vice-President Operations of Clear Nexus, a consumer lending company in the US, says, “We went with Lokyata because they do something nobody else does. They bring data science expertise to continually improve the underwriting process. They let the data lead the way.”

The team at Lokyata has built a platform to enable instant credit and better performance. With their deep expertise in the lending and AI spaces, Lokyata helps lenders, banks, credit unions, and community development institutions stay in charge of their lending strategies and automate their business.

Company
Lokyata

Headquarters
Washington DC

Management
Tommy Eastman, Director, Product & Data Science; Santosh Thiruthi, Co-founder & CEO; Steve Bireley, Chief Technology Officer and Sanker Gopinathan, Director, Operations & Client Engagement

Description
Lokyata’s platform creates a holistic understanding of borrowers' financial lives using alternate information aggregated from sources such as bank statements, daily transactions, utility payments, employment history, and more. Our team works closely with the lenders to understand their current business goals, which demographics they serve, and how they currently utilize existing data. Lokyata’s platform employs an API hub and digital decision workflow automation architecture to connect to these various data sources and decision on the data. Outcomes from the portfolio, in the form of good and bad repayment behavior, are feedback to the AI models to constantly improve their performance

Lokyata