NBFCs have played a critical role as a key contributor to the economy by providing a fillip to infrastructure, employment generation, wealth creation and access to financial services for the rural and weaker sections of society. The health and success of the Non-banking Financial Company (NBFC) sector have far-reaching implications on the inclusive development of the economy, financial inclusion of diverse population segments, capital formation and eventually the growth in Gross-domestic Product (GDP).
So, people claiming that they have a digital app for their customers, does that imply the digital NBFCs of tomorrow? Today if you look at the industrial lending model, it’s three businesses in one. The approach goes in the order like back, middle and front.
Talking on this line, Sushmitshri Babu, co-founder, EPIKInDiFi said during the NBFC100 Tech Summit in Chennai, “Back office does the product innovation, comes out with product offerings; front office is interacting with the customers, getting documents made for the customers and pushing it to the middle which would do various checks and ultimately disbursement. So it’s not that there is no digitisation today, the customer may have an app, credit maybe underwriting, there is definitely useful for people and processes and digitisation of today’s lending as well. Today if you look from a Micro, Small and Medium Enterprises (MSMEs) point of view and 20 million of them are being served in the rail of credits and a deficit of about 35-40 million looking for credit and for that, you can’t take a one-size fit. “
India is currently the second-biggest smartphone market, with a user base of 220 million, and is expected to cross 300 million users by 2017, according to the India Brand Equity Foundation (IBEF) report, December 2018.
To stay relevant in such an environment, NBFCs need to rethink their strategy to enhance their product portfolio (positioning and pricing), processes (internal and customer-facing) and end-to-end customer experience. NBFCs that have focussed on traditional data sources to extend lending need to realise the value of alternative data and the need to invest in technology and analytics to develop advanced credit scoring models that incorporate non- traditional data sources. Only then will they be able to participate in the wave of change that has the potential to extend lending to India’s creditworthy yet financially excluded population, and also simultaneously assisting the Indian government to achieve its goal of full financial inclusion.
