Are you Profiting from Digital in Lending?

Rapid changes in technology and the growing expectations have created tremendous opportunities in many industries including financial services, writes Nitin Garg, Associate Vice President Marketing, Nucleus Software for Elets News Network (ENN).

Customers are now demanding products and services that are customised to meet their individual needs, and they expect to be able to transact at a time and a place of their choice.

Capitalising on the gap between customer expectations and the services offered by banks and Non-Banking Financial Companies (NBFCs), FinTech companies, have prospered by offering a unique combination of business innovation and advanced technology. They created winning propositions for both the lender and the end customer. As a result, there has been a wave of digital transformation in financial services globally. Consequently, it can be very easy to say that the reasons for going digital are driven solely by customer expectations. But there is more to it than that.

Clearly, it helps to reduce costs and this may make it more appealing for younger customers. If competitors are all going digital and if the regulators are pushing digital, the pressure builds. While all the above are valid reasons for adopting a digital proposition, it is also essential to ensure that it delivers an additional source of revenue. This is when things become tricky – how can financial institutions actually ensure that they profit from digitising lending?

  • Become ubiquitous with virtual – Digital helps you originate and service loans without requiring your customers to visit the branch. It means that you can grow your business anywhere, even in places where you don’t have any physical branches. This is perhaps the easiest and fastest way to scale up for fast growing companies in a market that is expanding rapidly.
  • Reduce time-to-market – With fast changing customer demands, dynamic economic conditions and evolving regulatory landscapes, there is a continual need to roll out new products, perhaps anticipating market needs in certain cases. The first mover advantage in a highly competitive market can be tremendously valuable and market leaders need to be able to conceptualise, design and launch innovative products very quickly. A digital setup empowers you to do that effectively.
  • Sell more with targeted products – Targeting customers with the right offer at the right time is tremendously challenging. A digital infrastructure powered by insights from analytics can help you identify who to target, with what product and when they are most likely to react.
  • Leverage the agility of the cloud – A cloud-based setup helps you focus on your business while leaving the Information Technology (IT) to be managed by the experts and leading cloud providers. Supported by market leading security, the cloud model assures scalability, cost-effectiveness, and faster implementations. In case of lending implementations, customers go live in as little as four days.
  • Enhance credit quality – By making better credit decisions faster, you improve the quality of your credit portfolio, which, in turn, reduces the level of non-performing loans (NPLs) translating into higher returns. An end-to-end digitised infrastructure eliminates manual intervention, reduces errors, standardises decision-making (not relying on individual, case-by-case judgment) and identifies pre-delinquent cases early (which can help prevent them becoming delinquent).

While the buzz around digital focuses a lot on the channels and front-end, it is essential to understand that for a seamless customer experience, the back-end needs to work with the front-end. So, the question is when do you plan to begin your journey to profit from digital in lending?

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