Banking Tech Unicorn Zeta Launches Digital-Native Credit Line on UPI Solution for Banks Zeta, a banking tech unicorn, recently launched its digital credit-as-a-service solution for banks. The solution helps banks launch their credit products on NPCI's Credit Line on UPI scheme, which has the ambitious goal of reimagining the distribution of credit in India.

Zeta, a banking tech unicorn, recently launched its digital credit-as-a-service solution for banks. The solution helps banks launch their credit products on NPCI's Credit Line on UPI scheme, which has the ambitious goal of reimagining the distribution of credit in India.

We had the opportunity to interact with Ramki Gaddipati, CEO APAC & Global CTO at Zeta, at the company's Democratizing Credit 2024 event held in Mumbai. Our conversation delved into a number of topics, including the company's mission, the tech-related challenges facing the banking industry, how Zeta's new solution will accelerate credit issuance, and the future of banking. Continue reading to learn more.

What is Zeta's mission and how does it help banks address technology challenges?

Zeta is a banking tech company that is helping banks break away from decades-old legacy banking systems. "Our platform enables financial institutions to launch any banking product, asset, or liability, rapidly and with complete assurance of it being scalable and compliant. This is made possible on our modern, fully cloud-native platform that is 100% API-enabled and supports processing, issuing, lending, core banking, fraud, loyalty, digital banking apps, along with many other capabilities," explained Ramki.

And, even though the banking sector has been constrained by siloed and legacy technology, Zeta believes that change is inevitable. "Legacy systems will eventually need to be replaced and retired, as many were built long before most of us were born," said Gaddipati. "Technology has advanced far beyond what was imaginable 40 years ago. Today, we carry multiple computers on us and utilize numerous digital services, including for our banking needs. However, most banking systems were not designed for this digital age. We are confident that banks will recognize the need for change and adapt accordingly," he added.

"The only question is, do they have a credible alternative? Do they have a reliable alternative? I think we have been able to establish Zeta as one such player, as someone they can trust to run their entire business that is currently managed by the current core processing systems," he continued.

How does Zeta view credit issuance on UPI rails?

The company predicts that by 2030, the transaction volumes on NPCI's Credit Line on UPI scheme will surpass USD 1 trillion. And, with its digital credit-as-a-service solution, Zeta wants to capture 50% of this market and assist banks in swiftly developing and introducing new digital-native credit products.

"Today, we are discussing with bankers and the ecosystem the possibilities of launching new products on NPCI's Credit Line on UPI scheme that the RBI rolled out in September last year," explained Gaddipati. "Zeta is deeply committed to enabling credit access and inclusive banking for all. We believe this new product represents a paradigm shift that both banks and the ecosystem should embrace. That's the goal of our event today," he added on the sidelines of Zeta's event.

Gaddipati also explained that the Credit Line on UPI scheme will require banks to be prepared to serve millions of customers. "We saw UPI volumes put a strain on core banking systems when it was first introduced. We anticipate similar volumes on the Credit Line on UPI, and this calls for population-scale banking infrastructure capable of processing hundreds of millions of credit accounts," he said.

What is the future of banking?

"UPI has numerous ways to influence us, providing a transparent and omnipresent approach to transactions and payments," predicted Gaddipati. "Currently, UPI is predominantly mobile-oriented, but in the future, UPI will be formless. Authentication mechanisms will evolve, allowing users to authenticate in various ways. UPI will soon be embedded into numerous appliances and systems, integrating seamlessly into our daily interactions. This will enable smooth identification and authentication in any commercial activity. It's just a matter of following the roadmap," he explained.

Zeta, which was founded in 2015 by Gaddipati and Bhavin Turakhia, provides financial institutions with an omnistack platform for managing fraud and risk, processing and issuing debit and credit cards, and lending. Zeta's cloud-native, next-generation core banking and payments platform powers a number of large global banks and card issuers. Its latest offering, known as digital credit-as-a-service, enables banks to manage digital credit operations from originations to collections.

In contrast to a loss of INR 20.7 Cr in FY22, the company's India business declared a profit after tax (PAT) of INR 21.94 Cr in the fiscal year 2022-2023 (FY23). The Bengaluru-based banking tech unicorn had an increase of about 33%, to INR 816.20 Cr in operational income in FY23, up from INR 615.05 Cr in FY22. Zeta shared with us that it has multiple global entities and that its India business represents only a portion of its global operations.

Zeta became a unicorn in May 2021 after raising $340 million in total capital, with a $250 million funding round led by Softbank. Among its other investors are organizations like Mastercard and Sodexo.