NextGen NBFCs: Survival of the fittest and fastest

NextGen NBFCs

NBFC sector is at the forefront in driving new credit disbursals for the country’s underserved retail and MSME market playing a key role in India’s march towards financial inclusion. The NBFC sector in India has gone through a significant turmoil and transformation over the past few years. NBFCs play a key role in credit delivery constituting to 18 percent in the overall composition of total credit. NBFCs have pursued aggressive business growth by building distribution capabilities across new, untapped and under-penetrated geographies and customer segments. Although the sector has now come to be recognized as systemically important component of the financial system and was growing quite consistently year-onyear, it has taken a beating with defaults and liquidity challenges, specifically related to one large NBFC and the domino effect faced by other NBFCs in the sector. Although the problem seems isolated, it has concerned regulators due to the risk of contagion effect and the overall governance in the sector.

Sabyasachi Rath

Due to the significant risk involved the sector is now being imposed by new compliance measures by the regulator, lending slowdown and potential consolidation by larger players. Additionally, NBFCs are facing stiff competition from new-age FinTechs which have been capturing a greater market share with their technology-heavy low-cost operating models and by setting high standards for customer experience. In the wake of these developments, it has become imperative for NBFCs to get their act together and gear themselves to be the NextGen NBFC. To be the NextGen NBFC the NBFCs need to focus on below.

 Leveraging AI and Machine Learning

Arti SomaniArtificial intelligence (AI) and Machine Learning (ML) are at the peak of its hype cycle now. From advanced scorecards to computational power to understanding natural language to recognizing visual objects, AI brings a multitude of capabilities and augments human intelligence multifold times. Financial industry is also leveraging AI to automate lending, create customer centric products, create new efficiencies, reduce turn around time and support decision making. Frauds are another pressing issue for the financial institutions.

 AI and machine learning could be leveraged by FI’s to detect frauds and any outlier activity. Globally financial-services firms are undergoing digital transformations and trying to innovate a centuries-old service model. Existing providers are being encouraged as well as threatened by external investors to innovate and reinvent use of technology in financial services. While banking sector has had a history of resisting or delaying deployment of modern methodologies— agile development, open source, cloud computing, platforms—leveraging artificial intelligence is one area that the industry appears to be readily embracing.

NBFCs should leverage such synergies and thereby achieve their ultimate goal.

Developing Customer-Centric Operational Model

Achieving customer centricity is no longer a differentiator. In the digital age it has become a matter of survival. To hit a customer’s sweet spot with a tailored product, NBFCs must invest in powerful machine learning solutions that automatically collect and analyze data including financial transactions and account details, real-time and historical market data, as well as information mined from social media for a 360-degree view of a prospective customer. E.g. your lending app could provide a personal saving/financial planning tool and help customer setting a savings goal, develop a personal spending plan based on his budget, which would help him to avoid getting overleveraged.

Also a smart visual of loan offer could be sent to customer from time to time. Customer centricity is not only a growing trend but a winning strategy for any organisation that is trying to attract and retain prospects, foster loyalty, and improve its bottom line in this process. Customer-centricity gets a boost when a chatbot or digital assistant takes up routine, mundane tasks while the relationship manager’s time is freed up for more complex tasks that may require human interaction and emotion.


Clearly, NBFCs have begun to dance to the tune of technology. Automation does not mean fewer jobs. No!, robots cannot replace humans fully. It just means the replacement of certain old or mundane jobs with newer profiles and more time to spare for quality services for customers. It is imperative for modern workforces to upskill and reskill themselves to keep pace and step into the future. It is ideal that we empower ourselves with knowledge of new technologies such as data analytics, artificial intelligence and machine learning to step into a world where it’s no longer physical vs. digital but a beautiful amalgamation of both leading to PHYGITAL! The faster we adopt the above, the fitter we become to face and survive the future.

 Co-Authored by: Sabyasachi Rath, ED & CEO – Essel Finance Business Loans Ltd. and Arti Somani, Head- Product & Policy – Essel Finance Business Lo


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