The days of chasing customers with all available resources and without a scientific approach for debt recoveries — sometimes with outsourced and untrained manpower — seem to be over.
The digital transformation of rural India is getting strong support through a wider ecosystem-led push and enablement involving both the Government and the private sector. There have been significant advancements in connectivity, support infrastructure, and awareness of digital over the past few years. The pandemic further helped push digital adoption even in rural areas at a much faster pace.
Increased adoption in rural markets is set to take India’s smartphone user base to one billion by 2026, according to a global predictions report by Deloitte. In fact, the smartphone demand in rural Indian markets is projected to increase at a 6% CAGR by 2026, in comparison to a 2.5% CAGR for urban circles. The ubiquitous and seamless internet connectivity combined with anytime, anywhere, and convenient access to digital financing at the fingertips has helped in the deeper penetration of formal credit.
According to a CII report, Agri credit has grown 10% from INR 8 lakh cr in FY15 to INR 14 lakh cr in FY20. Rural microfinance gross loan portfolios also grew, rising from INR 132.9K cr in March 2020 to INR 146.7K cr in March 2021. Technology disruption has lowered loan servicing costs and enabled lenders to service lower-value loans in rural areas.
According to Anand Agrawal, Co-founder and CTO, Credgenics, “The days of chasing the customers with all available resources and without a scientific approach for recoveries, sometimes with outsourced and untrained manpower are over. End-to-end technology platforms such as Credgenics facilitate the financial institutions in connecting effectively with the rural borrowers and digitalizing the entire collections process, including legal management capabilities.”
Loan collections have traditionally been manual process-driven and human effort-intensive business functions. The traditional approach to collections relied on hostile recovery agents, persistent calls, repeated messaging, generalized communications, and outstretched dispute resolution, which appeared to be a crude attempt towards pushing the borrowers into paying their dues. However, the scenario is changing very fast.
Having witnessed the success of digital initiatives in urban India, banks and non-banking finance companies have been actively extending their digital banking services to rural India. There is a dramatic shift happening now with the immersion of technology-led digitization and automation initiatives in loan recoveries. The rural-focused FinTech, digitally-savvy NBFCs, and private banks have already taken a lead in this. The trends indicate better responses and outcomes when the traditional recovery approaches are replaced with modern tech-assisted, sophisticated, digitized, and data-driven collection approaches.
Customers are now easily reachable on multiple digital communication channels and prefer to be engaged on a channel and time of their choice. While it may seem that this is an urban phenomenon, an AI model, which analyses the behavioural patterns of a representative set of customers, is being readily applied to make outreach communications more relevant, useful, and effective for rural India.
The ease of personalizing the communications with relevant customer details such as name, account details, repayment amount etc in vernacular languages enables a different level of connection and trust building with customers. Usage of AI powered voicebots, which are extremely close to a human agent led the interactive call, are not only winning customer confidence but also enabling banks and non-banking lenders to automate their operations at a lower cost.
With customer journeys completely mapped and planned in advance, the customer responses automatically trigger next stage communications, thereby, slowly but firmly nudging the customer towards the desired outcomes. The personalized payment links are instantly generated and embedded in customer communications allowing them to make the payments in a secure, convenient, and trustworthy manner.
The complete digitization of last-mile operations with mobile collections app for field agents serves multiple ends. This is extremely useful to serve the rural customers who still prefer to be dealt with in-person for collections but want the convenience, simplicity, and customized experience that such digital platforms offer.
Digital debt collection reduces the costs of recovery and helps minimize delinquencies while improving speed and collection rates even in remote areas. It provides lenders with the requisite digital infrastructure to expedite recoveries across the delinquency buckets, including pre-due stages with reduced manpower for debt collections.
As collections get more cost-efficient, predictable, and faster, lenders with better recoveries would eventually consider lending to newer segments and remote areas, which have remained outside the credit umbrella for now. This is where a wholesome technology-led approach to collections can also contribute towards financial inclusion.
Anand Agrawal adds, “As a leading technology platform provider for loan collections and debt recoveries, Credgenics is committed to transforming this space and facilitating a unique win-win proposition for the entire ecosystem. We are already working with some of the leading banks and non-banking finance companies for digitizing their collections in rural India.”