CXO insights: Mohan Ramaswamy, CEO & Founder, Rubix Data Sciences

Rubix Data Sciences helps you to take prudent credit risks, build a robust supply chain and monitor compliance for your business partners in India and around the world.  Rubix helps you to collect payments in time from your debtors, helping generate predictable cash flows. Set up by highly experienced Risk Professionals who have worked extensively in the credit, legal, and supply chain information domains.

Mohan Ramaswamy (Founder, and CEO of Rubix) have an overall experience of 22+ years, of working with leading MNCs. Prior to setting up Rubix, Mohan headed the LexisNexis business for India and South Asia, transforming the company into one of the most respected brands in the Indian Legal Information world. He drove organic and inorganic growth at LexisNexis and also executed several prestigious projects, including with the Prime Minister’s Office (PMO).

In a recent chat with Mohan Ramaswamy (Founder, and CEO of Rubix Data), he talks about his startup journey and what Rubix Data has been up to in the latest edition of CxO of the Week.

Introduction - (A brief non-promotional profile)

Rubix Data Sciences is a business intelligence company offering technology and analytics-based B2B Risk Management and Monitoring platform. We leverage structured and unstructured data from 120+ sources, predictive analytics, and technology in our proprietary trademarked platform to help our customers assess and monitor the credit, supplier, and compliance risk of counterparties and validate their identity. We have also been appointed as India’s first validation agent for the Legal Entity Identifier by the Global Legal Entity Identifier Foundation (GLIEF) and the Legal Entity Identifier India Limited (a wholly owned subsidiary of The Clearing Corporation of India Ltd).

Tell us about Rubix Data Sciences, its specialization, and the services that it offers.

Rubix Data Sciences started its operations by providing banks, insurance companies, and corporates with Risk Scores and Credit Limits on their customers in India and overseas. To do so, we leveraged structured and unstructured data from 120+ data sources and predictive analytics and built a proprietary technology platform called Rubix Automated Risk Management and Monitoring System (Rubix ARMS) Platform. This platform helps Credit, Risk, Supply Chain, and Compliance professionals in banks, credit insurance companies, fintech, SMEs, and corporates with deep insights into their counterparty’s credit, supply chain, and compliance risk.

We have now evolved to cater to all 4 stages of the credit transaction cycle, namely—Onboarding Identity Validation, Credit Decisioning & Supplier Risk Assessment, Risk Monitoring, and B2B Collection.

For onboarding identity validation, we provide a Video KYC Solution, Key Registration Checks, and Promoter ID checks to help you validate the identity of your counterparties before you onboard them. As a validation agent for the LEI, we help applicants get their LEI within 24 hours of application. We have also been entrusted with creating greater awareness about LEI in India.

In the Credit Decisioning and Supplier Risk Assessment stage, we leverage the Rubix ARMS platform to assess our clients' prospective distributors, dealers, franchisees, customers, suppliers, vendors, or service providers, before they appoint them. This could be in the form of:

• Credit risk assessment and credit limit setting for distributors/dealers/customers
• Supplier Risk assessment for suppliers and vendors.
• Compliance Risk assessment of all counterparties from statutory, legal, PEP, AML, anti-bribery (FCPA, UK Bribery Act), and sanctions perspectives

We help banks, NBFCs, corporates, and Fintechs undertake Identity checks (KYC, AML, and compliance) at the time of loan or trade credit origination, followed by an independent credit risk assessment at the loan or trade credit decisioning stage. Our credit risk assessment also enables credit insurance companies to take risk underwriting decisions about businesses in India and around the world.

An entity’s risk profile changes rapidly and needs to be constantly monitored. Therefore, for the risk monitoring stage, we help you track changes in your counterparty’s risk and continuously monitor the key developments impacting it. The Rubix Early Warning System (EWS) collates key risk indicators on a near real-time basis from various data sources including statutory compliance and financial filings, news, and media to get a dynamic view of a company’s risk profile. It updates the risk score and credit limit of a company dynamically.

In the last stage of the transaction lifecycle, we offer end-to-end B2B debt collection solutions by combining our data, analytics, and technology expertise and the capabilities of leading legal firms and field collection teams to help our customers collect their accounts receivables and reduce their Days Sales Outstanding (DSO).

How can SMEs identify frauds promptly?

Scamsters go after small businesses, as they are plentiful in number and make easy targets. SMEs have to try and convert any sales opportunity they find with their limited means, making them very vulnerable to fraudsters who prey on them with malicious intent. Most types of frauds provide early warning signals or red flags that, if addressed swiftly, can reduce losses. These can be identified through vigilance, regular surveillance, and thorough scrutiny of abnormalities in a company’s key metrics.

Detecting and preventing B2B fraud is not a one-time effort. Constant monitoring and surveillance to detect any irregularities at all stages of a B2B transaction is the only way to minimise the risk of fraud. New technologies, tools, and platforms are available to help in the process of validating identity, conducting due diligence, and monitoring transactions with counterparties to red-flag potential fraud. Rubix’s ARMS and EWS platforms are designed for this very purpose.

Has managing transaction risk after the COVID-19 pandemic become more important for banks?

The pandemic has created a difficult situation for banks. Though the demand for small loans, both retail and business loans, rose due to the loss of livelihood and payment delays for businesses, the recovery rate of loans has reduced. Loan defaults have risen, and the credit scores of borrowers have taken a hit. The probability of NPAs, even from small businesses, has shot up. So, banks have to be more discerning about which sectors they lend to. They also need to consider the extent of government support offered to these business loan seekers as well as the extent of demand for their goods or services. Greater due diligence in credit assessment and monitoring are the basic minimum processes that banks need to enforce. I would like to emphasise the importance of credit monitoring. An entity that was a low credit risk 2 years ago maybe your biggest credit risk today. Your most critical supplier from a year ago may be on the verge of bankruptcy. On the other hand, many lucrative businesses have also sprung up.

To complicate matters further, cyber frauds are also rising. Everyone has been forced to transact online, resulting in numerous ways for fraudsters to try to commit digital fraud. KYC has also increasingly moved online, leading to a higher occurrence of identity theft, spoofing, and the like. Banks recognize that the only way to protect themselves is to take to technology like never before, and we are seeing artificial intelligence, machine learning, and blockchain solutions becoming catchphrases in the banking industry.

Therefore, continuous risk management is absolutely essential for the stability of the financial system and safeguarding the trust of customers.

What challenges do you observe in risk management in banks?

In the Deloitte India Banking Fraud Survey 2022, 50% of respondents highlighted that their banks conduct fraud risk assessments once a year. This is the crux of the risk management challenge in India’s banks. Most Indian banks, especially public sector banks, still use legacy systems and traditional methods of working. Though transactions and reporting have been digitised, the extent of analysis and reportage is still limited. Unless banks are willing to adopt new-age risk management solutions based on data science, technology, and analytics, their risk management systems will not be relevant or adequate for this rapidly digitising world.

Further, most data with banks are in silos within different departments, making it almost impossible to use it as is. Banks also need skilled personnel to manage technology and undertake proactive analysis, especially at the middle management levels, where it is an uphill task to find competent and self-motivated individuals.

The other concern that has amplified in recent times is data privacy and security. The rising number of cyber-attacks and cybercrimes is putting pressure on banks. With the sensitive nature of the data they handle, banks will need to adopt next-generation risk management platforms for reducing credit and transaction risk and keeping cyber-fraud at bay.

Do you have any solutions to help banks prevent digital fraud?

Most digital frauds occur when fraudsters obtain sensitive information through leaks from the bank or the customer inadvertently sharing such information. Therefore, strengthening the cybersecurity systems and creating awareness among customers to be wary of lurking threats while practicing safe banking are the top ways to curtail digital frauds. During digital transactions, the device used and the identity of the person undertaking the transaction must be validated. It goes without saying that KYC should be followed in letter and spirit to prevent fraud. Finally, to stem data leakages that compromise customer data, screening and auditing of employees is a must.

Banks getting together and creating a database of impersonation scams will enable law enforcement agencies to take swifter and stricter action against repeat perpetrators.

At Rubix, our focus is to help banks in the KYC and Credit Risk Assessment process. Our proprietary Rubix ARMS platform leverages data, analytics, and technology to provide risk scores on businesses in India and overseas and our Risk EWS System helps monitor their risks continuously. The more details you have about a counterparty and its risk, the more aware you are while taking credit risk decisions. Our credit scoring models, credit limit setting models, monitoring tools, and Early Warning Signals system are very powerful tools that banks leverage to reduce information asymmetry and risk.

Tell us about the use of alternative data in Credit Risk Management Platforms.

Traditionally, credit risk management has used data from credit bureaus, credit applications, or a lender’s records of an existing customer. All other sources of data constitute alternative data. This could be in structured and unstructured formats. Data analytics systems generate relevant insights from these data sets that supplement the information from traditional sources. Data from smartphones, social media, remittance history, utility bill payments, and psychometric data are all alternative sources of data.

For India, this data is significant because it will be handy to assess borrowers from the unbanked population with very little or no financial history on record. Traditional data sources are of no use to assess these prospective customers. Hence, not only are alternative sources of data necessary to achieve the goal of financial inclusiveness but also to sustain business growth in the highly competitive marketplace.

Alternative data is also beneficial in effective customer segmentation and can enhance banks' understanding of their customers based on various parameters such as age, financial capabilities, and demography. Data on user behavior on the internet can help understand what strategies can work for brands.

The Rubix ARMS^TM and EWS platforms have already integrated alternative data to provide deeper and more meaningful risk-related insights to our customers. We believe that as the digital footprint of Indians rises, the use of alternative data will become so prevalent that it will become the new normal.

What is the importance of Identity in B2B Transactions?

Our planet is home to 7 billion, more than 45,000 companies on the major stock exchanges, and millions of private businesses worldwide. How do you know who is who and who owns who and what? Doing business with unknown entities can be tricky. With more companies switching to online modes and doing business through e-Commerce, verification of counterparties and validation of their identities is of paramount importance.

Therefore, to lower counterparty risk, Know Your Business (KYB) is a crucial step in the due diligence process that a company performs on all prospective business partners. KYB helps identify and verify the legitimacy of the counterparties with whom the company has relationships and is an important component of risk mitigation. Information about counterparties, their ownership structure, and compliance track record helps prevent companies from dealing with firms that are involved in money laundering, tax frauds, and other financial crimes.

Currently, banks, financial institutions, and companies globally use many different identifiers while onboarding new clients; this process can take a couple of days. It can sometimes lead to inconsistencies that need to be resolved resulting in considerable cost overhead and an adverse impact on customer service. However, all that time, money, effort, and goodwill can be saved by using a simple 20-digit alphanumeric code called the Legal Entity Identifier (LEI) as the identifier in the KYB process. The LEI connects to key reference information that enables a clear and unique identification of legal entities participating in financial transactions. Each LEI contains information about an entity’s ownership structure and answers the questions of ‘who is who and ‘who owns whom. Various regulators in India including RBI, SEBI, and IRDAI require entities to have the LEI for certain transactions.  In fact, regulators around the world recognise the LEI as the key business identifier.  The LEI data pool can be regarded as a global directory that greatly enhances transparency in the global marketplace.

Rubix Data Sciences strongly encourages the business community in India to adopt the LEI widely for long-term tangible (cost, time, and effort savings) and intangible (fosters trust, enables prudent decision making, opens up greater growth prospects) benefits.

How has your revenue grown with the brand evolving during the pandemic?

The pandemic has resulted in a tremendous increase in credit, supplier, and compliance risk.  Global supply chains have been hugely disrupted, causing cash flows to dry up.  In this period of high risk, risk platforms such as the Rubix ARMS Platform have played a key role in helping companies assess the risk of counterparties in India and around the world.  Rubix revenues have grown rapidly during this period, doubling each year of the pandemic. Our team size has grown from sub-20 before the pandemic to over 80 people currently.  The adoption of WFH and digitization has resulted in companies becoming more open to adopting platforms in all areas, including Risk Management. This has encouraged us to innovate and we have launched several products including the Rubix Early Warning System (EWS) platform as part of our growth roadmap.