Way forward for NBFCs while thriving in the digital era

Shaji Varghese

Digital transformation is key to every sector in today’s era. India’s digital growth and prowess now is an inspiration to countries across the globe. Various industries and segments have transitioned to digital mode while maintaining traditional services, especially in the financial sector. NBFCs in India have been at the forefront of adopting newer technologies to meet the demands of rapidly changing customer requirements and expectations. The impact of these technologies has been tremendous across various aspects, including acquisition, servicing, governance, analytics, operational efficiencies, customer experience, risk management, and many more.

On the acquisition front, the adoption of digital technologies has enabled them to reach one-to-many customers in one go where they can avail a plethora of solutions from financial service providers. Companies have significantly invested in technology in operations resulting in more efficiency and productivity while ensuring to reduce the error rates. eKYC process, digital verifications, and e-signatures have helped organisations to complete the processes quickly and more effectively. The digital public infrastructure of India, including Aadhaar, UPI, etc, is coming in handy for the stakeholders to capitalise and enhance efficiency. The recent Digital Personal Data Protection (DPDP) Act passed in Parliament in 2023, aiming to create a comprehensive data privacy law in the country, is a welcome move.

Technology adoption to improve customer experience is pivotal. Data analytics play a significant role in helping organisations make informed decisions. The institution can gain access to insightful data, including customer behaviour and preferences allowing them to provide customised offerings, thus ensuring better customer satisfaction and experience. Customers today can apply for financial services through the mobile apps of these NBFCs, enabling an anytime anywhere service enabling them to avail of financial services at the click of a button.

With the growing digital landscape, it is critical to strengthen the monitoring and security systems to prevent any possible cyber threats. The Central Bank recently stressed the need for the banking sector to be alert regarding any potential cyber-attacks. Robust cybersecurity measures and adherence to the evolving regulatory frameworks are of paramount importance while adopting innovative technologies among the NBFCs.

Also Read | NBFCs Evolving Lending Landscape in India

An interesting point to note is that when it comes to financial inclusion, ‘only digital’ may not be the right approach. Organisations today prefer a ‘phygital’ approach as there are many customers, especially in the underpenetrated areas, who still prefer to visit the physical branches for an in-person conversation regarding the suitable services they can avail. They prefer to meet the representatives while making crucial financial decisions. It is important to know your customers, and a seamless blend of physical and digital–phygital model will be the right strategy to ensure more Indian families are joining the formal financial services. While NBFCs must embrace digital innovations, it is also paramount to do away with manual processes in practice.

NBFCs must continue to ensure high levels of governance while expanding their digital ecosystem to meet the constantly evolving customer expectations. Embracing innovations, and strategic partnerships, building customercentric solutions, and focusing on agility and resources will pave the way for NBFCs in the coming days.

Views expressed by Shaji Varghese – Chief Executive Officer, Muthoot FinCorp Limited

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