After the COVID-19 pandemic, an accelerated shift has been witnessed in the adoption of innovative technologies by nonbank financial companies (NBFCs). The primary focus of digital lending is on lenders and borrowers as they navigate the digital ecosystem of banking services. NBFCs and smaller banks are now able to provide better customer service, make superior decisions, cut expenses, and shorten the turnaround time for loan applications and approval thanks to the procedure.

Yet, “digital transformation” is a broad term that frequently denotes a significant commitment of time, effort, and resources. To help NBFCs disburse credit where it’s needed the most in the most optimum condition possible without having to fret over building the in-house digital credit expertise and systems, this blog offers actionable suggestions to enhance their digital lending capabilities.

1. Enabling Strong DSA Partnerships

Every component in the ecosystem is keen to build agreements with one another since lender partnerships are crucial for platforms and vice versa. This lowers the possibility that digital items in the financial services industry will fail and permits the flawless execution of digital lending. Third-party agencies and DSAs, which collectively make up about 30% of digital lending retail books on average, play a significant role in NBFCs and banks‘ ability to distribute loans. Nevertheless, misselling, a lack of concentration, attrition, a lack of transparency, and a lengthy turnaround time are problems that most lenders face with DSAs.

Thus, it is essential to invest in a cutting-edge, technologically advanced DSA management system that integrates all the data, guarantees creditors have a real-time view of every loan application and guarantees DSA incentives are monitored in detail.

2. Data-Driven Customer Segmentation and Analytics 

A user experience strategy aims to optimize digitisation for different populations. Make sure the change is having a good effect on all categories of your clients across geographies before making your organization or process semi-digital or completely digital lending.

Customer segmentation is a requirement of going digital and presents an urgent challenge for NBFCs. Better conversion rates, cross-selling chances around every corner, and increased collection efficiency can all be achieved by utilizing analytical tools for customer profiling and developing segment-specific sales tactics. These technologically advanced goods that are driven by analysis typically offer a 360-degree perspective of a customer.

A borrower of today seeks a simple and personalized digital lending solution. A self-help hotline for questions can further help with this to enhance client engagement. Using local language on the platform increases accessibility for users in suburban and rural locations. This is another practical option that might set you apart from your rivals.

3. Creating a Sound Digital Lending Strategy 

The digitization of services guarantees that NBFCs provide greater customer service, increased operational effectiveness, and lower operating costs. Digital lending assists NBFCs in expanding their consumer base and keeping hold of current clients. 

In order to preserve a competitive advantage over other providers of financial services and keep on top of innovation in this disruptive era, NBFCs have begun implementing digital transformation plans. By delivering new services that fit their demands, this strategy seeks to offer clients a better value proposition. Its primary goal is to create cutting-edge items that are distinct from those offered by competitors.

Financial services should formulate an adroit strategy and adapt to modern technology. An effective CRM and a structured operational process are necessary to accomplish this. The relevant CRM should possess the following attributes: 

• Automation
  • Reduced turnaround time
  • Provide a solution on-the-go
  • Processing of documents online

• Analytical Response of customer’s wealth data    
• Dashboard
  • Real-time data tracking 
  • Reminders and notifications 

Here’s what the optimized operational procedure entails: 

• Disbursal: A technologically advanced lending system accelerates the disbursement time.
• Loan Underwriting: The solution should be designed to evaluate loans from a variety of demographic groups, including geography and market segments. By utilizing Machine learning and artificial intelligence capabilities, you can use information like personalized interest rates for clients with the prior lending experience to your advantage.
• Credit Application: The credit or loan application serves as the initial step in the API integration process with Credit Bureaus, and it is essential functionality for any digital lending application. 
• Customer Onboarding: Financial services, such as banks and NBFCs, now utilize video KYC/eKYC as a means of onboarding customers, resulting in reduced turnaround times.
• Connection with Customers: Cross-selling potential is increased when there is an existing customer base. The system you create should inform clients about the latest news, goods, and services.

4. Choosing the right Co-Lending Schemes 

Co-lending enables NBFCs to obtain funds from banks at a reasonable rate. The 80:20 model prevents NBFCs from originating loans of low quality because their 20% share would suffer greatly in the event of any losses. Nonetheless, the co-lending method benefits banks, NBFCs, and borrowers equally. Aligning credit policies, complicated accounting, whether banks can or cannot verify loans generated by NBFCs, and the various regulatory standards concerning KYC and collateral standards for banks and NBFCs are the problems that come up.

Good co-lending schemes have the following features:

• A Business rule engine that runs parallel between NBFCs and banks
• Dashboard for reporting, ticketing, and automatic analytics. 
• A single, integrated dashboard to manage disbursals and repayments
• LMS bridge to support multiple LMSes simultaneously

5. Balancing Human Touch with Digital Lending

In today’s world, digital lending has become increasingly popular due to its efficiency and convenience. However, it’s important to balance the benefits of technology with the human touch for a successful implementation of digital lending. Here are some key considerations that organizations and stakeholders should keep in mind before venturing into the digital lending ecosystem:

• Consider customers in localities with poor connectivity and lower smartphone penetration. Such customers might require more physical contact for loan or credit services.
• Assess customer willingness and ability to use a digital product for lending services.
• Size of the loan or credit availed by a customer is also to be considered. With a bigger sum, physical disbursement might be risky, and a customer’s digital savviness becomes important.

Before setting up a digital lending system, a lender should analyze customer attributes such as age and usage to determine whether to go digital with a mobile or desktop application. Furthermore, the latest news from the Reserve Bank of India on evaluating fair practices in digital lending in India can help strike a balance between human touch and technology.

Conclusion

In conclusion, NBFCs must prioritize digital transformation to avoid stagnation and stay ahead of the competition. By leveraging cutting-edge technologies and implementing digital KYC procedures, NBFCs can simplify processes and improve customer experience. Although digitization may have been slow in the past, NBFCs have the potential to adapt quickly with their consumer insights and the support of financial infrastructure companies. 

The shift towards data-driven, contextual lending architecture can increase efficiency, lower risk, and facilitate scalability. With the rapid pace of technological advancements, it is evident that embracing digitization is no longer an option, but a must-have for every financial institution.