“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.

Digitization: The Only Way Forward

NBFCs that embrace digitization are guaranteed to be next-generation ready. Deployed across the entire gamut of operations, products, and customer touchpoints, digitization offers NBFCs the ability to provide flexible and personalized products and services at scale.

Risk detection
Artificial intelligence, analytics, and big data can analyze several unrelated pieces to understand a customer’s financial viability better, thereby providing NBFCs with additional checks and balances in the lending process. The problem with lending to the unreached is that their credit score is non-existent. They don’t have adequate financial footprints from which to draw conclusions. However, with access to information from their mobile data, social media, digital wallets, and more, NBFCs can create an alternate credit scoring system to spot high-risk customers. Digitization can also proactively monitor the health of the NBFC and check for risks in the internal and external functioning through trend analysis and more.

Faster customer onboarding
For NBFCs, the customer acquisition process is critical. Make it too cumbersome, and the customer is lost for life. Too ‘light’ and the NBFC runs the risk of not doing adequate due diligence or, worse, being seen as untrustworthy by potential customers. In addition, the pandemic compounded the NBFCs existing onboarding problems by making it impossible to conduct in-person interviews and verifications. Today, NBFCs have the freedom to onboard customers in various ways, including video-KYC (Know Your Customer), based on each customer’s specific needs. However, finding those perfect strategies that engage customers and win them over in a short time requires analysis and deep experience that modern technology provides.

Engaging digital customer experiences
Providing consistent experiences across all touchpoints is vital to attracting, converting, and retaining customers. Accenture’s Global Consumer Pulse Research indicates that over 58% of customers purchase financial products online through an NBFCs website. Over 60% of customers also leveraged digital channels like portals, text, and voice chat for post-purchase self-service. Additionally, 15% use tele-helpdesks and IVR for addressing their servicing needs. Equipping customers a seamless way to connect, apply, transact, and resolve their issues will only deepen the relationship and build loyalty. Digitization also allows NBFCs to be transparent about the process, thereby increasing customer retention.

Effective resource utilization
NBFCs are notoriously understaffed for the size of the market they serve. With the help of technology, NBFCs can provide 24/7 customer support without increasing their headcount. Loan applications can be processed faster and more efficiently. And identity theft and fraud cases can be minimized through digital ‘Know Your Customer’ checks that provide more robust video digital identity verification than traditional signature verification. In addition, with a paperless process, the NBFC saves considerably by not incurring printing and couriering costs.

Creating customers for life
Cross and upselling to existing customers are how NBFCs increase the lifetime value of each customer. Using analytics and artificial intelligence, NBFCs can identify customers who are perfectly primed and matched for a particular value-based offering and the best way to reach them. Turning information into data-driven insights enables NBFCs to manage customer relationships proactively. It also gives NBFCs the intelligence required to create unique, personalized products that are precisely what the customer was looking for—almost as if the NBFC was reading their minds.

Faster time to market
Digital platforms and tools provide NBFCs with the required agility to go from idea to launch in a short time. With access to customer data, NBFCs can analyze trends and determine which instruments outperform the others. Customer surveys and quick opinion polls provide NBFCs with additional means of gathering inputs. New products can be tailored around what customers want and will give the NBFC the best results. Digital platforms offer NBFCs the ability to have an ongoing dialogue with their customer base, whether for gathering feedback, introducing new products, keeping them updated on the status of their application, upselling personalized instruments, and more.

In conclusion, as with other industries post the pandemic, NBFCs will have to reimagine how they do business. Digital platforms and tools have changed the goalposts yet again. However, the benefits for NBFCs are evident. According to the Accenture study, digitization increases loan volumes by 15 to 20% while reducing operational costs by 20%. That’s a competitive advantage that cannot be ignored.

Jishith Gangadharan

Jishith is a marketing strategist with more than 16 years experience in IT industry. He has extensive experience across various facets of marketing in the industry. Jishith spearheads marketing and communications for Clayfin. Outside office, he enjoys travelling, reading and aquascaping.

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