Nehal Gupta
When it comes to the small commercial 2W and 3W categories, financial institutions in India are playing a crucial role in accelerating the expansion of the EV industry. In fact, the sector might expand at a rate 10–20 times faster than its current rate with the increased engagement of legacy banks, NBFCs, and startups.
According to available data, India purchased more EVs in the past year than it did collectively in the last 15 years. Small towns, despite the limited availability of credit, are making up a considerable share of the total number of EVs being bought. This is where NBFCs and digital lenders are deploying themselves quite uniquely. They are overcoming multiple barriers and continuing to build deeper roots in the EV financing segment.
To a significant extent, this can be attributed to the increasing reliance on automated and data-driven technologies used by financial institutions to make underwriting decisions. Thereby, there is a greater likelihood of providing loans to low-income, small, and micro communities. Moreover, the share of transactions completed by digital payment methods is growing in this sector.
In most cases, first and last-mile delivery is handled by drivers who can complete their transactions online, including repayments of their loans. All of these can make them a part of the formal economy, opening up a slew of new future prospects. The use of technology has also eliminated the need for human interventions and minimized overall expenses.
Likewise, people have started to embrace new ways to pay for and experience new products and services thanks to new technologies, innovative business models, and tech-friendly regulatory policies. However, institutes still need to help consumers understand and adapt to these new technologies to strengthen and sustain their connection with them.
In order to succeed, banks, NBFCs, and fintech companies are increasingly adopting a “phygital” approach. It essentially connects the online and offline worlds in a way that would allow digital lenders and legacy banks to create a closer, more human, and more efficient customer experience.
Maintaining Efficiency and Personalization with Phygital Approach
The phygital approach is becoming the new normal, and as more transactions move online, the value customers get from digital lenders is also growing. Simply put, today, financial institutes can only acquire and retain existing customers via a personalized phygital experience.
In addition, digital services and physical onboarding—a mechanism that provides easy and frictionless customer services without the traditional 2–12 week onboarding process—are essential for accommodating new customers. This is especially true when it comes to nurturing the “unbanked” segment of our population.
Looking at younger generations, both millennials and Gen Z find traditional banking obsolete. At the same time, the entire onboarding process when done digitally can still be lengthy and complex for new customers, leading to a high abandonment rate. However, with phygital approach, NBFCs can streamline their onboarding processes and overcome various challenges associated with both traditional and digital-first customer journeys.
That’s probably why we see most NBFCs opting for on-field representatives and relationship managers to reduce their customer churn and offer better services. If customers, especially the most unfamiliar users, are keen on accepting online banking with physical support as a primary option, then a phygital approach is simply the first step in that direction.
This way, banks can also increase their security and reduce fraud cases by effortlessly checking the customer’s identity, EV asset quality, and more. Similarly, customers also get a first glimpse of what they can expect from a bank. Overall, the success of EV financing depends on building a truly digital experience in harmony with physical channels that offer a human experience.
EV Financing: Profitability, Convenience, and Advantages
There is a large window for digital lenders to interact with their customers in a new way by adopting a phygital approach. There has been a recent uptick in the sale of electric vehicles, and in response, specialized EV-financing firms have started to offer unique offers to customers.
The importance of EV financing in boosting the rate of EV adoption in India has been stressed in a number of recent reports. When considering overall lifecycle costs, commercial fleet operators benefit the most from EVs, and because they have been in operation for longer, they have an easier time gaining access to traditional financing. Many barriers exist when it comes to accessing finance, primarily for smaller businesses and individual consumers. Getting enough funds to buy EVs could be challenging for them because of their limited credit histories. And digital lenders are well-positioned to immediately address this issue thanks to phygital interventions.
There is a broad range of products and services available from NBFCs and fintech startups alike, and they are all well-established in tier 1, 2, and 3 cities. This framework should help them not only expand their businesses but also improve the financial literacy of the general population. Banks and other financial organisations can boost their bottom lines while also facilitating more widespread economic growth and people’s access to credit.
The widespread use of electric vehicles in India is a prime opportunity to spur innovation, technological breakthroughs, economic growth, and domestic production. It is unlikely to overstate the importance of phygital EV funding in developing India’s EV industry and unlocking these benefits.
The author is Director, AMU Leasing.
Disclaimer: Views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproducing this content without permission is prohibited.
