From NPAs to Innovation: The Future of Lending in India

Sunil Pandita

Sunil Pandita, Vice President, South Asia, Newgen Software shared his insights at the Elets 13th NBFC100 Tech Summit, organised by Elets Technomedia and the Banking & Finance Post. He shared his views on the topic Digital Transformation in Lending.

In recent years, the financial services industry as a whole has reached a turning point, particularly in India. All indicators, whether on the demand or supply side, are performing exceptionally well, with a strong demand for credit that banks are not fully equipped to meet. Therefore, there is significant room for growth and competition. As leaders in this market, it is crucial to prioritize efficient and speedy fulfillment to remain competitive.

As India is currently thriving, many new players are entering the financial services industry, and banks are also seeking to leverage their position. It is crucial to focus on HR and product innovation, as well as technology adoption, to remain competitive. Mobile technology has been a significant driver for customer interactions in all sectors, including microfinance. There is also a growing trend towards platform-based solutions, and many investments made in lending and digital technology over the past few years, which are being modernized and integrated onto platforms for greater flexibility and scalability. Therefore, it is crucial for industry players to embrace platform-based solutions to keep up with technology trends.

From an investment perspective, significant regulatory interventions have taken place, and new regulations are being implemented, which is positive for the financial services industry. Non-performing assets (NPAs) have been under control and have gradually improved due to better governance and the implementation of RBI mandates, including risk management and improved underwriting tools. Additionally, there is an increasing use of alternate data collection methods to gather customer information.

Moving forward, innovation will be crucial, particularly on the product side. Products must be designed with technology in mind, as lending products are essentially technology projects. Operations must also be streamlined to meet customer demands, such as the average cost of servicing a loan and efficient cycle management. Risk management is also important, but the key is to focus on the customer experience, from onboarding to customer service and collections, as it will ultimately determine the success of the industry. However, there is a challenge of siloed data that makes it difficult to connect various applications, and investments should be made inside-out, prioritizing the customer experience. In summary, technology and solution providers are important, but the most crucial factor is the customer.

We discussed earlier about the importance of customer-centricity in today’s diverse customer landscape. Whether it’s catering to GLT or mass-market customers, speed, simplicity, and accessibility are key factors that determine the customer experience. To this end, investment in digital infrastructure, mobility technology, social media integration, and data analytics is critical to transform the customer journey, from onboarding to collections.’

Also Read | Decoding Co-lending: Is it driving the global popularity?

Regulatory changes are also driving the need for a strong technology framework that is flexible enough to adapt quickly. Key questions to consider include the ability to provide loans quickly, robust underwriting models, and efficient servicing and collections processes. The common theme across these questions is the customer and the need to prioritise their experience at every step of the lending journey.

We believe that digital acceleration requires three pillars: customer experience, operational excellence, and continuous innovation. To provide an excellent customer experience, you need to be channel-agnostic, provide a choice of channels that the customer prefers, and ensure that your mid-office and operations layer is equipped to handle downstream processes efficiently. Additionally, you need to continuously innovate and leverage data to provide productive and prescriptive analytics for better customer servicing.

Also Read | Digitisation of the lending sector: Decoding the disruption and the impact

To transform lending, we recommend a nine-point mantra: end-to-end journeyoriented learning, real-time closures, device compatibility, document management, intelligent document classification, open platform for API integration, productive analytics, prescriptive analytics, and intelligent automation. By adopting these practices, you can keep the customer at the center of your digital transformation and create a successful digital lending experience.

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