“Welcome to the world of opportunities.”
“Partnering in your passion.”
“We’re here to help you achieve your goals.”
If these affirming messages on Non-Banking Financial Companies (NBFCs) websites don’t encourage you to whip out your business loan application, perhaps the convenience and ease of banking with them will.
Across the board, NBFCs outperform traditional banks regarding ease of doing business, access to credit facilities, and more. However, as regulations become tighter, customer acquisition costs increase, borrowing becomes difficult, and Fintechs offer stiff competition, NBFCs need to find innovative solutions to increase their market share in this post-pandemic world.
The need for digitization in NBFCs
Known for face-to-face interactions and brick-and-mortar transactions in the pre-pandemic era, NBFCs, like most other businesses, were upended by lockdowns and social distancing norms. Technology adoption was primarily limited to a few customer-critical functions. Today, NBFCs will have to adopt large-scale digitization practices to remain competitive and attractive to the unbanked sector. Here’s why:
Changing customer preferences
Cash-strapped consumers worldwide are looking for ways to ease their financial burdens. Easy access to loans and customer-centric products are vital determinants in customers choosing their banking partners. According to an EY report, more than half of the respondents indicate that their future purchasing decisions will be impacted by banks actively supporting the community, being transparent in all they do, and ensuring they are doing good for society. The same survey shows that customer preferences regarding modes of payment are evolving with a 57% decline in cash usage, alongside a 31% increase in payments using cards and online methods. When customers are going digital, can NBFCs be far behind?
The quest for innovative products
Scarred by the uncertainties of the last few years, customers have become highly price-conscious across all aspects of their lives. They have increased their saving capacity while delaying non-essential expenses. Though things are looking up this year, customers are still wary. NBFCs must create innovative products that go beyond traditional loan-based instruments to ensure they attract customers. Products that are personalized and tailored to individual customer needs while offering a great deal of flexibility are exactly what customers want. This can only be delivered by harnessing the power of automation, artificial intelligence, and newer technologies.
The explosive use of mobiles
Technology adoption has increased substantially, especially amongst the unbanked and unreached in society, with the increased availability of mobile-first services. Today, those customers are willing to be found, onboarded, offered alternative credit scoring methods, apply for lending instruments, complete their e-KYC, and track their loans using their mobile phones. NBFCs must reimagine their operations to include an increasing number of digital products and customer touchpoints to keep pace with the changing landscape.
Increased operational efficiency, cost saving, and faster turnaround times
Today, NBFCs are under pressure to operate within narrow margins while responding quickly to customer queries and requests. To remain competitive, NBFCs must increase operational efficiency by using automation and artificial intelligence and enabling self-serve options. By automating a large portion of the loan application, underwriting, and closing process, NBFCs will be able to utilize existing resources better while catering to customer expectations of speed and instant delivery. In addition, AI chat-based options ensure quick resolution without the need to increase resources around the clock.
While there are several other reasons why NBFCs need to embrace digitization, the most crucial is that customers are increasingly demanding it, and NBFCs must respond accordingly.