Today the regulations have become stricter, the cost of borrowing has increased and NBFCs’ are making their hay by focusing on niche markets. Hence it has become crucial for NBFCs to sharpen their business agility.
Customers are vital to business and have become a focus area for NBFCs to differentiate. NBFCs all over are focusing on developing innovative products and also catering to low-income, urban customers in unorganized sectors. In such a scenario, it has become necessary for NBFCs to adopt business models which are powered by technologies that will facilitate the design and launch of tailored products effortlessly. Investing in new technologies will also allow NBFCs to lower their cost whether it is increasing their customer base, servicing existing customers or de-risking the portfolio while trying to overcome the increasing formal credit penetration in a growing economy.
The new age customer is savvy and with increasing knowledge has justifiably newer demands in terms of credit facilities. To cater to this new age customer, NBFCs need to look beyond the regular and invest in analytics and artificial intelligence capabilities which will allow them to connect and cater to the customer in a personalised manner.
Moreover, most public sector banks and some private banks are being gripped with bad loans for the last few years and it has presented a a tremendous opportunity for NBFCs to step in with its offerings and aim for growth and business success. With the NBFC segment growing at a sharp rate in the last six years, (a credit growth CAGR of 24.3 percent compared to 21.4 percent by the traditional banking sector), the dynamics between traditional banks and NBFCs are changing rapidly. Hence, it is even more crucial that NBFCs bring in technology to boost their growth. It is an investment that is guaranteed to pay off in a big way.
Here are five reasons why NBFCs could benefit greatly from technology.
Today it is apparent that one of the major reasons that have lead to the rise of the NBFCs is the reduced risk appetite in public sector banks to lend money as they are keeping an eye on their bad loans, mounting debts and NPAs. A lot of times, NBFCs target the rejected applicants of the leading commercial banks along with the general population in rural areas. This is a huge opportunity for NBFCs to expand further and an understanding of their target audience could help them reach their goals. Technology is the only way that can help them accurately capture, analyse and leverage data about their current and potential customers. It will help them understand their customers better and make better lending decisions.
NBFCs need to be on their toes and constantly draw up a host of strategies to reach their target audience. They need to think beyond the existing home loans, car loans and personal loans offered to low income farmers or small business owners and need to continually bring out creative and tailored products. Technology would help to achieve their objectives of personalisation and flexibility that customers value. With the help of technology, customers would be able to transact just the way they want. Technology will also allow NBFCs to tailor make products and customise services. They can send out well targeted automated messages, provide more personal access to customers and provide more efficient service.
One advantage of technology is it helps to reach out to otherwise difficult to reach customers by giving them digital access to services. For example, Kolkata-based NBFC Magma Fincorp has incorporated technology to better focus on the rural business and has equipped all their on-field sales personnel with a tablet. This allows them to multi-task and handle various loan products efficiently on the spot, and in a cost effective manner. This is an ideal way to bring in new customers giving them every service and facility at their fingertip.
Moreover, NBFCs by adopting technology get access to a wide ranging network as a technology platform brings huge numbers of consumers, financial institutions and merchants together. Joining a collaborative platform, NBFCs would get instant access to a huge data of positive customers.
Text messages and email updates are a fantastic way to serve banking customers. With technology NBFCs could among other personalised messages also share loan bill payment reminders or send statements to customers. This would help NBFCs build a personal relationship with the customers and continue the communication. A satisfied customer always offer great references to their friends and word of mouth advertising is definitely the best way to bring in more business.
Technology makes business operations and expansion much easier for NBFCs as the cost of administration becomes lower. It also allows for better utilisation of the available assets and manpower within less time and resources, and also provides better services and business processes.
Adopting technology, however, has been a struggle for smaller NBFCs due to the high cost. But the introduction of Cloud and SaaS-based models has made it easier. Today technology solutions are easily available on-demand and at affordable prices.