Synopsis: Digital transformations such as artificial intelligence, data analysis tools, and third-party integrations can help NBFCs streamline operations and boost customer experience. Read along to learn more about how NBFCs can adopt digital transformation and cloud-based solutions.

One of the benefits of digital transformation for NBFCs is that it enables them to optimize their operations and enhance their lending capabilities. By adopting intelligent and data-driven solutions, NBFCs can reduce operational expenses by 20% while increasing loan volumes. This becomes especially advantageous when non-banking financial institutions face stiff competition from microlending firms and fintech start-ups.

Fintech has gained market share by reducing operating costs and improving consumer experiences. Razorpay and Paytm, for example, have teamed with financial institutions to provide loans to their consumers.

So, NBFCs must pencil in implementing cloud-based digital solutions in their growth strategy. They must transform their operations using technology to sustain and stay relevant in this competitive and dynamic market. How can they do that? We’ve shared four strategies NBFCs can adopt to power their business with technology and cloud-based solutions.

Why Should NBFCs Adopt Digital Transformation And Cloud-Based Solutions?

Some ways digital transformation and cloud-based solutions are helping NBFCs overcome challenges and thrive in their industry are:

• Risk Assessment: By harnessing the power of data analytics and machine learning algorithms, NBFCs can analyze vast amounts of data in real-time to evaluate a borrower’s creditworthiness.

• Compliance: Cloud-based solutions enable NBFCs to streamline compliance processes by centralizing data storage and automating reporting.

• Data Security: NBFCs can leverage identity and access management features offered by cloud providers to ensure data security and compliance with data protection regulations.

• Credit Scoring: Cloud-based machine learning models can continuously refine credit scoring algorithms based on evolving data.

• Credit Portfolio Management: Cloud-based solutions provide real-time portfolio monitoring and analytics tools. An NBFC can track the performance of each loan, identify potential risks, and adjust lending strategies accordingly.

• Tailored Products: With the help of cloud-based Customer Relationship Management (CRM) systems, you can track customer preferences to offer tailored financial products. Additionally, you can integrate these systems with natural language processing (NLP) technology to facilitate vernacular interaction, leading to a more inclusive and customer-centric experience.

• Customer Experience: With an cloud-based CRM system, customers get a centralised platform to digitally access their account information, request assistance, and track the progress of their applications, allowing them to have a seamless experience.

4 Ways To Adopt Digital Transformation And Cloud-Based Solutions

Leveraging digital and technical tools gives NBFCs a competitive advantage, helps them create customizable solutions, and increases their overall efficiency.

Here are four ways in which NBFCs can adopt digital transformation and cloud-based solutions:

1) Customizing Credit Management Solutions

Customized credit management solutions are tailored processes and systems companies use to evaluate, assess, and manage credit management operations.

NBFCs can use these customizable solutions to modify credit scoring models, workflows, and decision-making processes to align with their objectives and lending practices.

For example, an NBFC can use historical customer data and external data sources (e.g., social media activity) to fine-tune credit scoring models, resulting in better loan approval rates.

Additionally, through data analytics and cloud-based platforms, NBFCs can offer personalized loan options tailored to individual customer profiles. They can analyze a customer’s financial behavior and offer customized loan terms, interest rates, and repayment schedules. This increases the likelihood of loan approval and enhances customer satisfaction.

2) Using Microservices

Using microservices, you can have independent blocks communicating with each other using language-independent Application Programming Interface (APIs). Language-independent APIs mean every microservice could be developed using a different programming language, and they would still communicate with each other.

NBFCs can use these services to update a particular application part without worrying about affecting other features. It helps break down your business applications into more minor, independent services that can be developed, deployed, and scaled independently.

Companies can also use it to authenticate and validate data given by borrowers. Some examples of how NBFCs can use microservices are:

• APIs can be used for PAN and KYC verification, e-stamping, and e-signing loan papers.
• Payment gateways, such as electronic National Automated Clearing House (e-NACH) and Unified Payment Interface (UPI), can facilitate a fast and portable fund transfer system.

3) Using An Omni-Channel Approach

NBFCs have traditionally relied on direct sales through agents, phone queries, mail inquiries, and leads acquired by service teams. Data silos form when different teams use different systems without a centralized database. So, when one team obtains data from another, the prospect may have contacted your competitor.

Employing an omnichannel approach can help NBFCs provide a seamless and consistent customer experience across various digital channels. This includes web, mobile apps, social media, and more.

For example, an NBFC with a diverse customer base can deploy an omnichannel CRM system to centralize customer information from multiple touchpoints, such as websites, mobile apps, call centers, and physical branches.

Then, when a customer interacts with you, you can offer a customized solution based on the customer’s financial history and preferences.

4) Leveraging Robotic Process Automation

Traditional lending systems require human intervention at various levels, which delays loan processing. Instead, automating the lending process—from loan origination and underwriting to closing—can significantly reduce labor cycles.

Robotic Process Automation (RPA) is a technology that uses software to mimic human interactions. You can use RPA for tasks like data entry, invoice processing, and customer support, freeing your employees to focus on more strategic, value-added tasks.

For example, when processing loan applications, RPA bots can automatically verify the authenticity of submitted documents and cross-reference them with regulatory requirements.

Conclusion

Digital and cloud services in loan management can make it easier for NBFCs to engage with their consumers and meet business goals despite limited resources.

AI-powered chatbots, for example, can be a significant technology asset, assisting in lead creation and giving valuable customer insights through data analysis. These technologies are programmed to follow strict data security protocols, ensuring that sensitive customer information is kept confidential.

Furthermore, mobile technologies such as payment gateways and mobile-based lending platforms can make financial services more accessible to people living in remote locations. They also reduce the time needed for cutomers to access funds by automating tasks like document verification and credit scoring.

Frequently Asked Questions

1) What is the role of NBFC in digital lending?

NBFCs’ digital lending function allows borrowers to apply for personal or business loans from any internet-accessible device and any place.

2) How is new technology helping NBFCs evolve?

New-age technology has helped NBFCs to streamline processes such as loan approvals and disbursements, making them faster and more accurate. This has also enabled them to reach out to underserved segments of the population and promote financial inclusion.

New-age technology has enabled NBFCs to automate tasks like loan decisions and payments, saving time and reducing errors.

3) What are the digital trends in NBFC?

Some digital trends in NBFCs are:

• Open Banking and APIs
• Artificial Intelligence (AI) and Machine Learning
• Chatbots and Virtual Assistants
• Big Data Analytics
• Hyper Personalized Customer Experiences