Breaking Barriers with Tech: NBFCs redeflning Financial Inclusion

Breaking Barriers with Tech

Where banks fear to tread, Non-Banking Financial Companies (NBFCs) step up to serve. For years, NBFCs have been at the forefront of the battle for financial inclusion in India, providing financial services to communities that have been overlooked or rejected by banks. Despite facing regulatory hurdles, NBFCs have continued to serve the underserved, empowering individuals and small businesses with access to credit, insurance, and other financial services. But NBFCs are not content to rest on their laurels. In collaboration with technology innovators, NBFCs are now shaping the future of finance, developing new financial products, business models, and operational strategies that promise to transform the financial landscape of India.

The integration of digital technologies has led to the emergence of new business models, changing consumer preferences, and an increased focus on data analytics. This has enabled NBFCs to provide a more personalised and seamless customer experience, improve operational efficiency, and reduce costs. From Artificial Intelligence (AI) and Machine Learning (ML) to Blockchain and Robotic Process Automation (RPA), the technologies transforming the NBFC industry are driving innovation and reshaping the way financial services are delivered.

Digitalisation of the NBFC industry
The digitalisation of the NBFC industry has been one of the most significant trends in recent years. With the advent of new technologies such as Cloud Computing, Big Data Analytics, and Artificial Intelligence (AI), NBFCs are now able to offer digital solutions to their customers. It has enabled NBFCs to reduce costs, enhance efficiency, and offer personalised services to their customers.

According to a report by KPMG, the digitalisation of the NBFC industry in India is expected to grow at a CAGR of 27 per cent by the end of this year, driven by the increasing adoption of digital technologies. The report also highlights that digitalisation will enable NBFCs to reach out to new customer segments, improve customer experience, and enhance operational efficiency.

Technologies defining a new paradigm for NBFCs

Artificial Intelligence (AI) & Machine Learning (ML)

AI and ML have emerged as game-changers in the NBFC industry, enabling NBFCs to automate several processes and enhance decision-making capabilities. They are revolutionising the way NBFCs operate by providing insights and analysis that enable them to improve decision-making, reduce costs, and enhance customer experience. According to a report by PwC, AI, and ML are expected to add $1 trillion to the Indian economy by 2035. AI and ML are being used for various applications in the NBFC industry such as credit underwriting, fraud detection, customer profiling, and risk management. With the ability to process large volumes of data quickly and accurately, AI and ML are enabling NBFCs to gain a competitive edge in the market.

Blockchain technology is another emerging technology that is being explored by NBFCs. This technology offers several benefits such as transparency, security, and efficiency. It is being explored by NBFCs for its potential to revolutionise the way financial services are
delivered. According to a report by NASSCOM, the Indian blockchain market is expected to grow at a CAGR of 58 per cent by 2025.

NBFCs are exploring various use cases for blockchain technology such as KYC verification, loan disbursement, and asset management. By leveraging blockchain technology, NBFCs can improve their operational efficiency and deliver a more secure and transparent financial service to their customers.

Robotic Process Automation (RPA)
RPA is transforming the NBFC industry by enabling them to automate routine tasks such as loan origination, loan servicing, and collections. It is helping NBFCs to reduce costs, improve operational efficiency, and enhance customer experience. According to a report by Gartner, the global RPA market is expected to grow at a CAGR of 19.5 per cent by 2027. With RPA, NBFCs can automate repetitive tasks and reduce errors, freeing up employees to focus on higher-value tasks.

It can also help NBFCs in complying with regulatory requirements, such as data privacy and anti-money laundering (AML) regulations. RPA bots can monitor transactions, flag any suspicious activities, and generate compliance reports, ensuring that NBFCs are adhering to the regulatory framework. It can also provide real-time data analytics, enabling NBFCs to make informed decisions and improve their customer experience.

Internet of Things (IoT)
The Internet of Things (IoT) has become a transformative technology for many industries, including the financial sector. Non-Banking Financial Companies (NBFCs) are no exception. IoT in NBFCs is its ability to provide real-time data on customer behavior, such
as spending patterns and credit worthiness. This data can be used to provide personalised products and services to customers, which can lead to higher customer satisfaction and retention.

NBFCs are also exploring the use of IoT devices to enable new financial services such as usage-based insurance. According to a report by MarketsandMarkets, the global IoT in the BFSI market is expected to grow at a CAGR of 25.4 per cent by 2026. IoT has the potential to transform the way NBFCs operate, by enabling them to make data-driven decisions, improve customer experiences, and streamline their operations.

Cloud Computing
Cloud computing is transforming the NBFC industry by enabling them to store and analyse large amounts of data, improving decision- making and efficiency. According to a report by IDC, the Indian public cloud services market is expected to grow at a CAGR of
22.2 per cent by 2025. Cloud computing is enabling NBFCs to leverage big data analytics, enabling them to gain insights into customer behavior, improve risk management, and
offer personalised financial services to their customers.

Cloud computing also enables NBFCs to reduce their capital expenditure by replacing on-premises hardware with pay-as-you-go cloud services.

Another benefit of cloud computing in NBFCs is its ability to enhance security. Cloud providers typically invest heavily in security measures, such as firewalls, intrusion detection and prevention, and encryption, to protect their customers’ data. This can help NBFCs to improve their security posture and reduce the risk of data breaches.

Biometrics is transforming the NBFC industry by enabling NBFCs to provide more secure and personalised financial services to their customers. Biometrics such as facial recognition, fingerprint scanning, and voice recognition are being used for authentication and verification purposes, reducing the risk of identity theft and fraud. According to a report by MarketsandMarkets, the global biometrics market is expected to grow at a CAGR of 15.6 per cent by 2026. It is also enabling NBFCs to offer more convenient and personalised financial services to their customers.

The Future of NBFCs
Technology is set to be a game-changer for Non-Banking Financial Companies
(NBFCs) in the coming years. With the rise of digitalisation, NBFCs have an opportunity to harness technology to improve customer experience, streamline processes, and reduce costs. The use of Artificial Intelligence, Machine Learning, and Data Analytics will enable NBFCs to gain insights into customer behavior and preferences, allowing them
to offer customised solutions and services. Additionally, the adoption of Blockchain technology can enhance transparency and security in transactions, while also enabling faster and more efficient processing.

However, technology adoption comes with its own set of challenges, such as cybersecurity risks and the need for skilled personnel. NBFCs will need to invest in robust security measures and upskill their workforce to ensure they are equipped to handle the new technologies. Furthermore, the regulatory landscape will need to evolve to keep pace with the changing technological landscape. Overall, NBFCs that successfully embrace technology will be better placed to meet customer demands and stay ahead of the competition, while also contributing to the growth and development of the financial sector in India.

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