What are the Contributions of Emerging Technologies towards NBFCs? – An Overview

Contributions of Emerging Technologies towards NBFCs
Karan Singh
| Updated: Mar 30, 2021 | Category: NBFC, RBI Advisory

In recent years, the Non-Banking Financial Companies (NBFCs) have achieved unmatched value in the financial area because of hassle-free advancement or loaning. These financial companies are generally pushed to distribute simple and easy financial help to businesses or individuals without striking any strict regulations, unlike a regional bank. These companies also take minimum time and documentations for providing loans to businesses and individuals. The Reserve Bank of India is consistently struggling to strengthen the rules and regulation for Non-Banking Financial Company to make sure that they control better. This rises to the expansion of borrowing rate and its compelling Non-Banking Financial Company to find out for another role market. Also, NBFCs are more focusing on the products advancement that provide to the need for the low wage group, and urban areas exist in the disorganized sectors. In this blog, we are going to discuss the contributions of Emerging Technologies towards NBFCs.

Planned Partnerships and Contributions of Emerging Technologies for NBFCs

In India, NBFCs have been precious for many businesses and individuals. NBFCs (Non-Banking Financial Companies) has aided businesses and individuals to meet their financial necessities that have been conventionally underserved by the traditional banks.

With the norms for Non-Banking Financial Companies becoming more severe in recent times, the borrowing cost has rapidly increased, and Non-Banking Financial Companies have concentrated more on niche markets and modified products and services. Non-Banking Financial Companies are also looking for developing innovative products and providing them to low-income groups and urban areas in unorganized areas.

In this case, Non-Banking Financial Companies are accepting the business models and operational modes supported by emerging technologies that successively facilitate the launch, design, and execution of services.

Investment in planned partnerships and emerging technologies with mandatory FinTechs and financial companies’ also allows Non-Banking Financial Companies to cut their costs when it comes to growing the customer base, decreasing customer acquisition costs, servicing present customers or endanger the portfolio when looking to overcome the increasing formal credit infiltration in the expanding economy.

The new-age Non-Banking Financial Companies are using the latest technologies and attaching partnership eco-systems around the value chain of lead generation, customer onboarding, credit or loan collection and expenditure.

Things like AI or Artificial intelligence, data analytics, and machine learning have aided lenders to evaluate individual visions and building models of alternative credit scoring. The saturation of mobile phones has permitted Non-Banking Financial Companies to link with low-income customers who might use their mobiles during the complete cycle of an application, e-KYC, engagement, and e-sign for expenditures.

The process of robotic mechanization has permitted the restructuring of the operational workflows, growing accuracy, cost-savings and productivity. Non-Banking Financial Companies are testing with distributed record and cybersecurity. APIs (Application Programming Interfaces) are also constructed and tested for energetic, connected eco-systems of different stakeholders and foundations.

Also, Read: What are the Major Challenges and Remedies by NBFCs? – An Overview

Model of Traditional Operating and its Challenges

There are numerous challenges connected with the conventional operating model, and you can check the same below:

  • High Operating Expenses;
  • Long-term loans with small financing;
  • Processing time and extensive lead generation;
  • Growth Threshold;
  • Restricted Data Governance and Legacy Systems;
  • Credit appraisal and restricted risk describing;
  • Human judgment and manual work;
  • Non-Performing Assets (NPAs) and the huge fund cost;
  • Lending based on credit score or CIBIL score, income, etc.

How are the Contributions of Emerging Technologies setting up new Standards for NBFCs?

Following are some crucial points of the contributions of emerging technologies for NBFCs in India:

  • NBFCs Synchronizing with FinTech for Automation: Some Non-Banking Financial Companies are eager to implement and test solutions in synchronizing with FinTech software to automate the workflows that search for manual intervention. These companies are also searching for organizing middleware software that would be accountable for processing inputs from the customer and formed well-structured data for more usages.
  • FinTech Companies Providing Advance Technologies: This is the most important contributions of Emerging Technologies for NBFCs by adopting new and innovative technologies. FinTech has been craftinga lot of buzz around the value chains in the financial areas. Because of its immense potential of disorderly the current baking system, the FinTech paths are spreading in the various regions of deposits, lending, and assist management. In the present situation, the FinTech Companies providing new advance technologies to leading the difficulties and create services regarding the delivery, regulatory compliances, accounting automation, and fraud finding. Usually, lenders have utilized a standardized way, thus analyzing customers from various backgrounds against a single credit policy which has led to the rejection of creditworthy customers. Now, the FinTech Companies are accepting Artificial Intelligence and machine learning. This will definitely help them to form a system that can easily coordinate with required sources of data so that lenders can name proper decisions to twist their workflow and services as per their requirements.
  • Enlarged Database for Better Examination: For many years, the mainstreamof Non-Banking Financial Companies take benefits of customer’s credit scores and account balance to prioritize NPAs (Non-Performing Accounts) and plan methods for its collection. With such differences at disposal, the lenders have to upsurge the sets of data and capabilities of processing the data to extract and blend awareness and present & old sets of doubtful accounts by concentrating on massive sets of information.
  • Boost Work Efficiency and Productivity: Advance Technology encouraged Non-Banking Financial Company and strike the correct balance between quality services and work efficiency. The incorporation of the advance and new technology in the system boosts cost-effectiveness and makes sure that reversal time as differentiated from conventional lending, the new technology such as robotic technology can pull such resources for better results.

Conclusion

NBFCs are now leveraging emerging technologies, which has helped them create a simplified process and strengthen the customer service system. The contributions of emerging technologies have immensely shaped the way in which NBFCs function. Artificial Intelligence and machine learning initiation will aid Non-Banking Financial Companies to take a massive rise toward digitization.

Also, Read: Operational Manual of the NBFCs: A Complete Guide

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Karan Singh

A legal writing enthusiast, a wanderer, and a zealous reader. After gaining a lot of knowledge about the diverse legal topics and developing research skills, Karan joined the league of legal content writers to deliver quality-rich blogs.

 

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