During their recent visit to Australia for the COBA23 Summit, I got to chat with Pennant’s founders and Head of Growth regarding the company’s vision of expanding in the Australian market. In this article, I present excerpts from the conversation covering the vision behind the company, its flagship lending platform, the execution, and what’s in store for the company in the future.
(Since this conversation, Bajaj Finance Ltd.,India’s biggest non-bank lender, has announced its plans to acquire 26% stake in Pennant, as a strategic investment to strengthen its product and technological roadmap. This has given wings to Pennant’s vision of international expansion.)
Rama Raju (RR) – CEO & Co-Founder, Pennant Technologies
Pradeep Varma (PV) – Director & Co-Founder, Pennant Technologies
Ganesh Ramani (GR) – Head of Growth & Partnerships, Pennant Technologies
Satish Wadhwa (SW) – Growth Advisor & Partner, ANZ, Pennant Technologies
SW: It’s so good to see you in person after a long time, Raju! Before we get into the conversation on Pennant’s growth, could you tell the readers a little bit about the idea behind Pennant?
RR: Thanks, Satish, for such a warm welcome! It’s great to be here, in Australia, as part of the COBA23 delegation. What’s even better is that this event and our sponsorship of Intersekt23 have helped us gain critical market insights, start important conversations, and build a presence in the Australian market.
Coming to your question, Satish, I believe Pennant was the natural next step for Pradeep and me, given our IT and fintech backgrounds. We had worked hands-on on core banking, payments, cards, and core systems experiences with Banks in the Middle East and the US for several years before starting Pennant. With this new venture, we’ve stuck to our core capabilities of working on complex systems that run core business processes in financial institutions. That our vision is finally taking shape has gotten us all the more excited.
SW: That’s fascinating, Raju. Pennant’s platform-based operating model construct for Lending has been successful in emerging markets like India, ME, and the Philippines. Australia is a relatively mature market. Could you tell us more about what prompted you to start a platform like pennApps Lending Factory and launch it in a market like Australia?
RR: These are important questions, Satish. Let me take a step back and address the ‘Why Pennant’ question first.
Pennant’s existence with the pennApps Lending Factory (PLF) as a platform, is driven by treating Lending as a Value chain. This means that the platform caters to the ‘lifecycle’ needs of borrowers, often agnostic of the loan product in context. Typically, origination & digital onboarding activities in a lending value chain get attention, owing to the uptick in digital investments. Functions like servicing the needs of borrowers, restructuring debt, and delinquency management, amongst others, tend to be left to the mercy of core banking systems, where there is often a lot of technology debt. This is where a holistic, modular, yet platform-based approach to the entire lending as a value chain, like a Loan Management System, brings differential impact. We have found this platform-based approach of PLF delivering enhanced value and accelerating business outcomes for our clients including banks, Non-Banking Financial Companies and Fintechs. PLF brings powerful capabilities, strong rigour and rich heritage of enabling banks and financial institutions to innovate, adapt and scale their lending operations. For example, a leading financial institution in India with diverse loan product portfolio including Housing Loans, Retail Loans, Business Loans, Gold Loans, etc., has been able to successfully use PLF’s composable, scalable and resilient capabilities to innovate (40% CAGR in new loan products), drive loan portfolio growth (25% CAGR in AUM growth between 2018-2022) and increase market share.
Coming to Australia, yes, it’s a very mature market with a chequered history of core banking transformations and multiple Loan origination platform options for Financial Institutions, Non-Bank lenders, Mutuals, and Embedded Finance marketplaces. Yet, we see patterns of disintermediation and disaggregation in the Lending sector. We believe that there is a need for the Australian market to look at Lending, beyond Origination in the present economic context and focus on the lifecycle needs of borrowers. This calls for product innovation, restructuring and diversification by exploring modular, composable loan lifecycle management platforms that can complement other Fintech platforms and not necessarily compete with them.
SW: Thanks Raju. Those pointers make a lot of sense! Pradeep, you’ve been associated with Pennant since conception. Were there any initial observations (outside-in)? Have those observations around the Non-Bank lenders, Mutuals, and diversified financial institutions, especially given the high ‘member/borrower’ centricity ingrained, changed through your COBA visit?
PV: Thanks, Satish. Honestly, my outside-in view of Australia was skewed towards the Big 4. However, through our meetings at COBA and our subsequent interactions across cities with prospective customers and partners – it became evident that the Non-Bank lenders, Mutuals, and other diversified financial institutions are member/customer-centric to the core, however, they are challenged by regulatory constraints, industry consolidation, capex investments to be able to undertake major digital / core transformations. Some of them have implemented Loan origination case management systems, however, the lifecycle needs of their members can only be digitalised through a revisit of their core banking platforms and at the very least, to digitalise loan servicing & delinquency management with a modular platform approach.
SW: That’s quite reflective, Pradeep! I’d imagine these observations have a profound impact on how Pennant builds its product to cater to the Australian market. Ganesh, do you think the platform-based approach to the Lending value chain has to lend itself only to the Non-Bank lenders, Mutuals & NBFCs? How have the major Banks in the emerging markets looked at leveraging the PLF platform?
GR: Thanks Satish.
To answer your question, PLF today runs the core lending operations for the 4th largest financial institution in the world by AUM, as part of migrating loan management or loan servicing capability from their incumbent platform into PLF for a critical line of business.
Besides, larger Banks in Australia, with a myriad of lending platforms and digital lending interventions, are leaning towards ‘lending value chain business services’ being formed as a result of the ‘refinancing & interest rate cliffs’ era we are in, where technology patterns or re-usable components from PLF are immensely valuable. We are seeing interesting MVP conversations emerge for such patterns / reusable components from our PLF stack that can complement a large bank’s lending value chain today.
SW: Thanks, Ganesh, for those insights! In my experience, capturing the Australian market has a lot to do with being ‘100% Australian’, whilst still bringing in global best practices. Raju, how are you immersing yourselves and Pennant into Australia for the brand to be recognised?
RR: This is super-critical for us Satish; thanks for bringing this up.
So far, we sponsored and participated in Intersekt23 and COBA23. Additionally, we are members of Fintech Australia and have signed up for the LIXI membership for lending messaging standards in Australia as well. As Ganesh mentioned, we are taking a very considered approach towards an ecosystem of partnerships-based approach to lending value chain digitalisation in Australia.- We are implementing a 360-degree network of local influencers, consulting & SI partners, customer advocacy leaders and potential venture accelerator partnerships. Besides that, we’re also exploring strategic investments from venture accelerators towards portfolio synergies. We believe this will create a localised impact and help us focus our energies towards Australian customers and businesses who need hyper-care in their lifestyle needs as borrowers.
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