By Shilpa Pophale
With competition at an all-time high, the NBFC sector needs to adopt a customer-centric focus by accelerating digital transformation and introducing tailored products that can fulfil the ever-evolving credit needs of India’s underserved population
While non-banking financial companies (NBFCs) emerged as an alternative to traditional banks in December 1964, these financial institutions have been increasingly fulfilling the underserved financial needs of individuals and businesses in 21st-century India. In fact, their role in providing credit to micro, small & medium enterprises (MSMEs) and low-income households has been especially important in boosting overall economic development. However, with increasing competition from FinTech lenders who are ushering in new levels of customer convenience, the need to better understand customer preferences and expectations has never assumed greater importance for the NBFC sector. Let us look at why maintaining customer centricity is the top-most priority for NBFCs in the country and how they can facilitate the same through technological adoption and have a consistent focus on improving service delivery standards.
Improving customer experience levels with an MSME focus
Even though the MSME sector contributes to more than 29% of India’s gross domestic product (GDP) and accounts for more than 50% of the country’s exports, traditional financial institutions have been wary of providing MSMEs with loans to fund their business expansion needs. This has been largely due to the perception of higher credit risk on MSME and SME loans, contributed in no small measure by the limited or inadequate credit history of these enterprises. That said, with the Indian government launching several schemes to improve credit access to MSMEs and SMEs, these businesses are increasingly tapping into the formal credit market to serve their credit needs.
With greater digital adoption and improving financial literacy levels amongst entrepreneurs in the MSME sector, NBFCs ought to understand their needs and provide bespoke products and services that are attuned to their credit requirements. Offering innovative financial solutions for purposes like rooftop solar finance, machine finance and loans against used machines with quick processing and disbursement times has become the need of the hour. Moreover, NBFCs need to continue their pioneering approach towards using technology to provide hassle-free solutions. This coupled with an extensive branch network and last-mile connectivity will ensure true customer centricity. This approach towards mitigating the various financial challenges faced by the MSME sector through personalized solutions will ultimately bode well for NBFCs looking to capitalize on the Indian growth story.
Integrating advanced technologies to improve operational performance
In order to achieve customer centricity and fulfil the ever-increasing credit appetite of India’s burgeoning MSME sector, NBFCs will have to adopt business and operational models that are powered by advanced technologies. Important among them are artificial intelligence (AI), machine learning (ML), robotic process automation (RPA) and big data analytics; helping them to automate manual processes, streamline operations and replace traditional risk assessment strategies with data-driven credit risk models. Not only do these technologies help increase operational efficiencies and reduce turnaround times, but also support NBFCs in tapping into new markets and customer groups with relative ease.
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As a result, emerging MSMEs with no bureau history and limited borrowing experience will not be judged based on traditional credit scoring methods and can avail of various credit products to meet their capital requirements. What’s more, this reliance on data-backed credit assessment strategies can help NBFCs holistically meet the financial needs of India’s unorganized sector and bring more businesses into the formal economy. Thus, technological adoption is vital for NBFCs looking to improve their service delivery levels and widen their customer base, without taking on inordinate risks or increasing their costs of operation.
Supporting customer journeys by constantly upgrading product and service standards
With consumers, whether individuals or businesses, looking for consistently high standards of excellence when dealing with financial lenders; NBFCs need to upgrade their services across all customer touchpoints and deliver uniform experiences across online as well as offline channels. This necessitates adopting a customer-centric approach that is supported by the introduction of ground-breaking products and services, with a focus on ensuring last-mile delivery and a sustained push for stoking constant improvements.
As the Indian economy marches ahead towards its goal of breaching the US$ 5 trillion GDP mark by 2027, the importance of the country’s NBFC sector in facilitating the same cannot be overstated. Warding off stiff competition from new-age lenders and widening their customer base by intensely focusing on exceeding both retail and MSME consumers’ expectations will therefore be extremely crucial. For NBFCs embracing emerging technologies and committed to making constant advancements in service delivery standards, the journey ahead could be both profitable and rewarding.
Shilpa Pophale is the Managing Director & CEO, of Electronica Finance Limited. Views expressed are the author’s own.