2020 was an extremely challenging year for the financial services industry, especially on account of the worldwide economic slowdown, coupled with stressed borrowers and a liquidity crunch in the market. The situation, however, provided a unique opportunity for non-banking financial companies (NBFCs) and housing finance companies (HFCs). As central banks across the globe work to neutralize the economic impact of the pandemic through new regulations and loan subsidization, the need for agile, non-traditional financial institutions is growing.
NBFCs and HFCs are the answer—with their digitally-driven approach to providing flexible financing, delivering new and timely products, and reaching a wider range of banking customers. In fact, a recent research suggested that NBFCs are expected to grow their assets by 7-9% in 2022, while HFCs are expected to grow by 10% in the same timeframe.
The Evolution of NBFCs and HFCs
NBFCs have typically focused on traditionally underserved or un-served sectors of the market, be it, individuals or businesses. However, increasingly they seem to be shifting their energies toward developing innovative products, creating strategic partnerships with fintechs, and catering to lower-income customers grouped in unorganised sectors, all while minimizing operational and customer acquisition costs.
In order to successfully execute these initiatives, NBFCs and HFCs are investing in modernized business models, powered by a variety of new-age technologies, to enable the seamless design, launch, and implementation of unique and customized products and services.
With the goal of catering to a wider range of customers, NBFCs and HFCs are looking at digitally transforming their end-to-end processes, thereby differentiating themselves from incumbent banks and delivering a superior experience.
How Emerging Technologies are Transforming NBFCs and HFCs
By implementing a huge range of modern technologies, including artificial intelligence (AI), machine learning (ML), robotic process automation (RPA), mobility, predictive analytics, chatbots, and blockchain, NBFCs and HFCs are completely redefining the way they transact with internal and external customers.
By accelerating their digitization efforts, NBFCs and HFCs can enable:
- · Remote customer interactions, through video KYC and eSignatures
- · Anytime-anywhere accessibility with mobile apps and self-service portals
- · Contextual, personalized, and omnichannel engagement with customers
- · Streamlined operational workflows for greater productivity, accuracy, and cost efficiency
- · Alternative credit scoring models to empower non-traditional customers with financial freedom
- · Increased data security, using distributed ledger technologies
- · And much more!
However, many NBFCs and HFCs do not currently have the infrastructure to effectively modernize their operations and leverage these new-age technologies.
How Can NBFCs and HFCs Gain A Competitive Advantage?
The need of the hour is a robust, platform-based solution that can allow NBFCs and HFCs to implement the right mix of technologies, supported by an agile IT framework.
Such a solution should be able to support:
- · Instant loan disbursal through open-API banking
- · Mobile- or portal-based loan disbursal
- · AI-driven credit assessment
- · Online services on low-end mobile phones
- · Multiple languages
- · Real-time access to relevant information, to facilitate rapid processing by backend teams
- · Collaboration amongst and reporting by multiple agents, simultaneously
- · The unique needs of NBFCsand HFCs
NBFCs and HFCs have an opportunity to gain a significant advantage over their traditional banking counterparts by rapidly adopting new-age technologies. A platform-based solution can help them optimize their resources and processes, expand their customer base to reach a wider socioeconomic audience, leverage strategic partnerships, and increase revenue, all while staying risk-free, compliant, and competitive.
Views expressed in this article are the personal opinion of Jayant Tandon, Head of Banking Excellence at Newgen Software.