Non-Banking Financial Services (NBFCs), while not as tightly regulated as banks, come with its set of challenges. For one, it doesn’t enjoy the CASA ratios (ratio of Current account and savings account to total accounts) that banks enjoy. Hence, the cost of funds is higher which means the pressure on margins is higher right at the point of origination of loans. Furthermore, if underwriting inefficiencies and collection delays creep in, the margin pressures will be much higher. The crux is to keep the costs low – fixed cost, operational costs, administrative costs, etc. while also ensuring that the quality of customers is high so that non-performing assets (NPA) are kept in check.
How can technology help?
Digitization and leveraging new-age technology could be immensely beneficial to NBFCs.
Creating Omni-channel customer experiences:
Its all about breaking the siloes. The traditional NBFC would employ channels such as direct sales, agents, digital enquiries, phone queries, leads assimilated by the customer care team etc. The process led to a lot of interested prospects and it was difficult to arrest leakages. Meanwhile, IT systems had to treat each channel as a siloed one and not an inter-connected edifice.
A digital first smart NBFC would ensure cloud native systems wherever possible and would have multi experience development platforms which would enable building consistent experience across web, mobile and all other digital channels and all these experiences can be centrally managed.
Curated and customized Lending:
With micro-services as compared to monolithic architecture at applications and the underlying technology layer, a digital first smart NBFC can create a very curated and customized experience for each customer. The fluidity of the underlying technology, scalable provisioning and seamless access to compute, network and storage on the go can enable NBFCs to offer a unique lending product to every customer. This level of hypertargeting backed by sharp insights enables an NBFC to target the apt customers and offer them the perfect product. Thus, the entire lending lifecycle is positively impacted, collections are improved, and NPAs are better controlled.
Data and behavioral analytics to enhance repeat customers:
Digital First Smart NBFCs spend a lot of money on data analytics skills. They hire the smartest data scientists who enable them to build algorithms that leverage digital footprint and data across customer preferences. It enables creation of products and delivering experiences that attract the customers who are least likely to be delinquent. While the cost of a great data science unit is very high, it can enable the smart NBFC to save money across the lending cycle with rich and valuable insights about the customers.
Customer Engagement, Loyalty and Retention:
It is common that customers might default because they forget to ensure funds in the bank account before the EMI due date. A Digital First Smart NBFC can ensure that a customer journey is created and then executed through digital channels. Customers receive SMSs, push notifications on their mobile phones, web notifications, emails etc. informing and intimating them to ensure sufficient funds or to pay their EMIs on time. Furthermore, the customers are communicated through these various digital touchpoints on the importance of ensuring a good credit score by paying on time. The customers are also incentivized to pay in-time. Due to this, a digital first NBFC ensures that collection cost per customer is reduced drastically. The recall due to communication is very high and so is the probability of retention. Hence, a smarter digital first NBFC can ensure significant increase in customer lifetime value (CLTV) which directly adds to the top line and bottom line of the NBFC.
A Smart Digital First NBFC can save huge costs across customer acquisition, collections, operations, administration, field force etc. These costs are used to accentuate digital, data and technology initiatives. The result is a huge fillip across customer acquisition and disbursement of loans, customer engagement, loyalty, and retention.
An experienced technology partner with expertise across digital, data, cloud and related technologies can enable NBFCs to become smarter and reap rich benefits.