‘Leveraging technology with human touch will be the key to success in 2020’

Anand Agarwal

In 2020, Non-Banking Financial Companies (NBFCs) with wide coverage and deep penetration in rural India can play a pivotal role by partnering with various players in the BFSI sector and consumption space with innovative products like Micro ATM, Cash deposit/collection, selling home appliances, bundling Insurance life and health, says Anand Aggarwal, CIO, Capital Trust, in an interview with Elets News Network (ENN).

We have just stepped into a new year. What new technologies will emerge in 2020 and how will they assist Non-Banking Financial Companies (NBFCs)?

In 2020, in my view, NBFCs will have no choice but to leverage technology heavily to keep costs and Non-Performing Assets (NPAs) low. Alternative credit scoring tools/models – social profiling, psychometric tests etc, RPA, Bots and Data analytics will play a major role this year. These tools will help in better customer credit profiling, reduce cost, launch new products quickly and help in bringing transparency and improving customer servicing.

The key drivers for these would be changing customer needs and behaviour. With the passage of Data privacy law by Parliament, data security will be a critical piece to work upon and technological development will take place in this space.

Do you think NBFCs have progressed as compared to banks in tech-deployments in the last two years?

 In the last two years, NBFCs have taken a quantum leap in adopting latest technologies as compared to any other sector or industry. It is necessitated due to their need to keep costs low, offer differentiated products and have low bad debt along with a need to be seen as different from other players. Without innovation, NBFC can’t achieve growth in assets and at the same time keep Non-Performing Assets (NPAs) low. In the BFSI sector, NBFCs are in the forefront in adopting new technologies. Customer servicing is key and to keep costs low, technology plays a pivotal role. By investing in new technologies, the NBFCs will have a lower cost to acquire new customers while retaining their existing customers. Banks already have brick & mortar setup; huge manpower and it would require a huge amount of efforts both in terms of money and culture change.

How far are the NBFCs from innovations namely chatbots, cloud computing, Machine Learning (ML) etc?

NBFCs are aggressively adopting new technologies be it Cloud, chatbots, ML or RPA to be able to keep costs and Non-Performing Assets (NPAs) low and quick disbursal of loans. In a short period, many NBFCs have scripted success stories by riding on technology and have created disruption in this space. Adoption of cloud is essential to keep pace with demands for business growth and also launch innovative and differential products in the least time.

In Capital Trust, we are completely on public cloud and already working on to deploy these technologies in this calendar year. Blockchain is another technology that will start seeing traction this year.

What are your views on the liquidity crisis prevailing in the NBFC sector?

Liquidity is one of the main concerns bothering NBFCs that are not well capitalised or do not have good balance sheet, otherwise funding is available through at a higher rate as compared to the previous year. Lenders have become selective and technology and process robustness have become extremely important. However, with government focus, the situation seems to be improving and banks have started disbursing funds to financially sound and technologically innovative NBFCs. The Reserve Bank of India (RBI) recently introduced a new liquidity risk management framework to holistically prevent risks in the sector.

Tell us about the major learning from 2019. How will they help in overcoming future challenges?

Top learnings from 2019 would be –

  • Survival of fittest and business continuity planning
  • Robustness of internal processes especially Credit and Risk management
  • Leveraging Technology but with a human touch will be the key to success in 2020

Would you like to tell us about the growth opportunities with regards to NBFCs in 2020?

There is still a large unbanked population in India who doesn’t have access to formal banking channels. MSME contribute significantly to India’s Gross Domestic Product and this is a sector where delinquencies are extremely low and huge potential for growth but limited access to funds from traditional banks and Financial Institutions.

 NBFCs with wide coverage and deep penetration in rural India can play a pivotal role in serving these areas by partnering with various players in BFSI and consumer space with innovative products like Micro ATM, Cash deposit/ collection, selling home appliances, bundling insurance life and health.

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