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What are the Key Differences Between Fintech and NBFC?

Fintech and NBFC
Karan Singh
| Updated: May 07, 2021 | Category: NBFC

If we exist in urban areas, there are good opportunities that we come across various loan options to choose from like banks, Fintech Start-ups, NBFCs (Non-Banking Financial Companies). But, each of them offers loans but still has an exclusive place in the fiscal environment.  It can sometimes become a tough choice to find out what option to select when we have a requirement for the money. Scroll down to check the primary difference between Fintech and NBFC and how to pick the one medium that fulfils your necessities.

What are the Meanings of Fintech and NBFC?

To know the difference between Fintech and NBFC, it is essential to know their meaning and importance first:

NBFC or Non-Banking Financial Company

NBFC or Non-Banking Financial Companies are also recognized by the name of NBFIs, or Non-Bank Financial Institutions are a financial organization that offers various banking facilities but doesn’t have a banking license, so to regulate the activities of NBFC; first, they need to obtain NBFC Registration from the Reserve Bank of India. Exceptionally, this establishment is not certified to take traditional DD or Demand Deposit or any eagerly available funds, like those in checking or saving accounts from the general public. This limitation keeps away from the extent of predictable misunderstanding from State and Union financial regulators[1].

Fintech

Fintech (Financial Technology) is used to describe new technology that seeks to advance/improve and automate the use of financial services and delivery. Within such description, Fintech companies or firms generally operate to facilitate company’s owners, corporations, and consumers to handle their functions of processes, financials, and lives by taking advantage of committed software and the algorithms process. This can be executed by computer applications and Smartphone users. The work Fintech is a combination of Financial Technology.

Fintech also consists of the development and use of crypto-currencies consisting of bitcoins. One segment of Fintech may see the most headlines; a massive amount of money still comes under the established global banking industry and its multi-trillion dollar market capitalization.

Taking Loan Through Fintech and NBFC

Loan Through Fintech and NBFC
  1. Loan through NBFCs: Such types of financial companies are the next foremost class of formal lenders. Non-Banking Financial Companies generally focus on financing certain asset classes; for instance, Bajaj Finance has a robust hold on sturdy consumer financing. They are stretchier than normal traditional banks, but they still have a slow acceptance of technology and manual processing steps.
  2. Loan through Fintech Start-ups: Financial Technology start-ups are power-driven tech business whose aim is to innovate concerning the products, technology, and customer service methods. They generally have a speedy disbursal of loans and provide the best user experience along with some offers of endorsement.

Comparison Table between Fintech and NBFC

Characteristics        Fintech NBFC
Time to Get Money Around 1 to 3 days Around 4 to 6 days
Interest Basis 20 to 27% 14 to 20%
Product Specialization Regularly Regularly
Convenience High Medium
The Flexibility of Rules Medium Low
Paperwork Low Medium
Loyalty of Customer Service High Medium

Comparison Process

Process Fintech NBFC
Documents Verification Automated Manual
Agreement Signing Automated Manual
KYC or Know Your Customer Electronic KYC or upload based or virtual methods are adopted. It based on the signing of copies, self-attestation, or e-KYC for digitally greater NBFCs
Other Paperwork Typically Low Typically High

Suggestion to Select between Fintech and NBFC

In terms of interest rates, it is crystal clear that both the NBFC (Non-Banking Financial Company) and Fintech are not proficient when compared to established banks.  It is proof that Fintech entities are helpful in the user’s convenience and the speed of services. Non-Banking Financial Companies are more beneficial in terms of financial products.

Following are some suggestions to opt between Fintech and NBFC:

  1. If any individual needs a loan for more than Rs. 2 lakhs, the individual must consider bigger Non-Banking Financial Companies. Another aspect that is needed to consider is your profile;
  2. If individual works in a small entity or firm or a start-up or have switched many jobs or moved between many cities presently, the huge Non-Banking Financial Companies will reject your loan application. For having such as profile is suggested to apply for the Fintech start-ups;
  3. For the necessity for the particular asset, then it relevant to choose for the Non-Banking Financial Companies (NBFCs);
  4. Suppose any person has any obstacle in previous loans or credit cards. In that case, it is best to go for Fintech Companies are desire to be more methodically look at the individual’s profile than their credit score. Other lenders in the same market waste your valuable time in reconsidering your loan application and then let you know that it is refused due to preceding delays which shall be more than five years;
  5. For the intention of the quick personal loans, the apparent choice for the same are Fintech companies;
  6. If a person needed a quick personal loan of less than Rs. 2 lakhs, it is always recommendable to opt for Fintech companies rather than huge NBFCs or Non-Banking Financial Companies or banks.

Conclusion

It is concluded from the above conversation that NBFCs and Fintechs have their benefits and drawbacks. Each of them delivers loans but still has a different place in the financial environment. It can be sometimes become a hard choice to find out what option to pick when any individual needs money. It totally depends upon the loan amount, the necessity, your profile, and the loan usage to form the correct option of loan for the individual.

Read our article:Studying New Budget Through the Viewpoint of NBFC and Banking

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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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