Technology Innovations Need of the Hour for NBFCs

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Punit JainToday , the regulations have become stricter. The cost of borrowing has increased and NBFCs are making their hay by focusing on niche markets. Hence, it has become crucial for Non- Banking Financial Companies (NBFCs) to sharpen their business agility.

Customers are vital to business and have become a focus area for NBFCs to differentiate. NBFCs all over are focusing on developing innovative products and also catering to low-income, urban customers in unorganised sectors. In such a scenario, it has become necessary for NBFCs to adopt business models which are powered by technologies that will facilitate the design and launch of tailored products quickly.

To cater to this new-age customer, the NBFCs need to look beyond the regular and invest in analytics and artificial intelligence capabilities which will allow them to connect and cater to the customer in a personalised manner.

Moreover, most public sector banks and some private banks are being gripped with bad loans for the last few years and it has presented a tremendous opportunity for NBFCs to step in with its offerings and aim for growth and business success. With the NBFC segment growing at a sharp rate in the last six years, (a credit growth Compound Annual Growth Rate (CAGR) of 24.3 per cent compared to 21.4 percent by the traditional banking sector), the dynamics between traditional banks and NBFCs are changing rapidly. Hence, it is even more crucial that NBFCs bring in technology to boost their growth. It is an investment that is guaranteed to pay off in a big way.

Here are five reasons why NBFCs could benefit greatly from technology:

Customer data acquisition and management
Today, it is apparent that one of the major reasons that have lead to the rise of the NBFCs is the reduced risk appetite in public sector banks to lend money as they are keeping an eye on their bad loans, mounting debts and NPAs.

A lot of times, NBFCs target the rejected applicants of the leading commercial banks along with the general population in rural areas. This is a huge opportunity for NBFCs to expand further and an understanding of their target audience could help them reach their goals. Technology is the only way that can help them accurately capture, analyse and leverage data about their current and potential customers.

Introducing customised products
The NBFCs need to be on their toes and constantly draw up a host of strategies to reach their target audience. They need to think beyond the existing home loans, car loans and personal loans and focus on low income farmers or small business owners and need to continually bring out creative and tailored products. Technology would help to achieve their objectives of personalisation and flexibility that customers value.

Increased customer reach and expansion of customer base
One advantage of technology is it helps to reach out to otherwise difficult to reach customers by giving them digital access to services. For example, Kolkata-based NBFC Magma Fincorp has incorporated technology to better focus on the rural business and has equipped all their onfield sales personnel with a tablet. This allows them to multi-task and handle various loan products efficiently on the spot, and in a cost effective manner. This is an ideal way to bring in new customers giving them every service and facility at their fingertip.

Better customer service offering
Text messages and email updates are a fantastic way to serve banking customers. With technology NBFCs could among other personalised messages also share loan bill payment reminders or send statements to customers.

Lower costs with digitisation
Technology makes business operations and expansion much easier for NBFCs as the cost of administration becomes lower. Adopting technology, however, has been a struggle for smaller NBFCs due to the high cost. But the introduction of Cloud and SaaS-based models has made it easier. Today technology solutions are easily available on-demand and at affordable prices.

The views expressed in this article are of Punit Jain, Chief Executive Officer (CEO), Nelito Systems. 

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