How can Technology affect the NBFC sector in India? | #cybersecurity | #cyberattack


Technology in the 21st century is transforming businesses by increasing efficiency, productivity and resilience on multiple levels. It is helping industries in various sectors to stay competitive in the markets after the economic breakdown and catering to the needs of their customers by boosting their business operations. However, there are some domains which are still under technological development and are not able to reach their full potential. Among these sectors, NBFC (Non-Banking Financial Companies) sector is rising in terms of market share, popularity and customer reach. It is gaining prominence because it is tapping the customer areas that banks and other financial institutions have not yet reached. In addition, Bad loans and NPAs (Non-Performing Assets) in the banking sector are also some of the factors leading to the rise in popularity of NBFCs. However, to keep pace with other sectors, technological development is needed in this sector. 

Technology: A Catalyst for Sectorial Growth

To fulfil their financial needs, individuals are turning toward NBFCs. Also, NBFCs are catering to the segment of low-income individuals in urban and rural areas by providing them with mini loans. However, with a vast size of customer segment comes a need to streamline the operations, reduce customer acquisition costs and de-risk the existing portfolio with an increase in credit penetration in the emerging markets. Technology has the power to produce solutions that could cater to these demands and take the sector to a new height. 

Reducing Manual Dependency

Technology can either be used to elevate a specific operation or used in a combination to deal with multiple domains. With a lot of areas to cover, AI (Artificial Intelligence) can help leverage operations in domains such as customer service. By incorporating Chatbots in the process, numerous customer queries can be solved which arrive on a daily basis. The customer waiting time is reduced, and dependency on a customer service representative is also diminished.

NBFCs have to follow statutory regulations which are laid down by the government and the Reserve Bank of India (RBI). However, when dealing with multiple products and customers, there is a chance of manual error. AI technology can help NBFCs to comply with regulations and scan the transactions for any issues or discrepancies 24/7 without getting exhausted. 

Lowering Operational Complexity 

Financial operations can be complex with a myriad of transactions happening simultaneously making it difficult to track. Organizations can use technology to create their own platforms that could increase operational efficiency. The use of various software can increase productivity and improvise operational management. Companies can create low-code platforms to reduce IT dependency. The daily operations of NBFCs include loan disbursement, credit checks, interest accrual, foreclosures and documentation. To appropriately manage these operations, a lending solution can be developed to improve the speed of processing, reduce cost, improve employee engagement and keep in line with regulatory requirements. In addition, a loan management system can be set up to facilitate event-based accounting and data management. Another help technology can provide is with the fund management system that helps to manage the ongoing finances and take action in case of any discrepancies. For onboarding new customers, digital KYC solutions can be incorporated to reduce manual paperwork and improve customer experience (CX).

Better Security Options 

NBFCs can opt for cloud technology to reduce data breaches and data leaks. Cloud technology not only reduces the cost of the overall operations but also provides an extra layer of security when incorporated into the organization. In times of crisis, when the data gets corrupted in the offline system, the cloud technology has a copy stored that can be retrieved in a hassle-free manner. It is a crucial aspect as sensitive data is stored on servers that are prone to hackers and scammers. The data can be protected with cloud technology such as encryption, data masking, user authentication and an in-built firewall. 

In a Nutshell

Competition in the NBFC market is increasing as organizations are attempting to understand their customers, and following a personalized approach while catering to their needs. Initiatives such as Direct Benefit Transfer (DBT), Adhaar Pay Bridge System and India Stack have increased the accessibility of customers for NBFCs. In addition, the increase in the usage of smartphones in tier-2 and tier-3 cities has led companies to tap an untouched market of credit needs. To understand the demands of new-age customers, NBFCs must follow a data-centric and analytical approach to make strategic decisions.  Technology in this sector can open many gates with newer opportunities while reducing risks and operational costs.  Technologically sound companies tend to perform better in domains such as resource utilization, manpower management and administration. 

 

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Disclaimer

Views expressed above are the author’s own.



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