2020 was the year of adapting to the unexpected for businesses worldwide. Like every other financial institution, non-banking financial companies (NBFCs) and housing finance companies (HFCs), also had to face the ramifications of a major economic slowdown and increased regulations due to the pandemic.
The Road Ahead
Globally, central banks have tried their best to neutralize the economic impact of the pandemic by implementing a number of loan programs, among other things. Now, the effects of the crisis are beginning to subside and economies everywhere are slowly getting back on track. According to industry experts, for NBFCs and HFCs, the key segments that will drive growth in the coming months and years, are personal, gold, vehicle, and home loans.
NBFCs and HFCs are in a unique position to come back even stronger post-pandemic. In fact, ICRA expects NBFCs and HFCs to witness a healthy bounce back in FY22 after witnessing a sharp contraction last year.
The forte of NBFCs and HFCs is developing innovative products and catering to low-income, urban customers in unorganized sectors. However, they must adopt technology-centric business models to drive the creation and delivery of such tailored products and services.
Technology: A New Paradigm for NBFCs and HFCs
NBFCs and HFCs must harness the power of technology to enable connected banking and streamline their processes, including lead generation, customer onboarding, underwriting, loan disbursement, and collection. Let’s have a look at the five main technologies that can aid these financial institutions in optimizing their assets and workforce:
- Low Code Platform
Low code enables financial institutions to design and develop applications and processes, reduce IT dependency, increase operational efficiency, and deliver an end-to-end customer experience. A robust low code platform features:
- A form builder to design forms using easy drag-and-drop functionalities
- A rule engine to configure business rules and logic
- An enterprise mobility framework for rapid mobile app development
- Robotic process automation to automate mundane tasks and integrate easily with other tools
- A business activity monitoring tool that provides a dashboard and comprehensive performance reports
- Retail Loan Origination Solution
NBFCs and HFCs require a solution that can automate the complete range of loan products, from pre-screening, application processing, and underwriting to disbursal. An effective lending solution can reduce the cost per application, improve the speed of application processing, and help financial institutions keep up with evolving regulatory requirements.
- Loan Management System
A loan management system helps NBFCs and HFCs manage the day-to-day servicing of loans and any operations after disbursement, such as interest accrual, receipts and payments, rescheduling, deferment, and foreclosure. Once a loan is disbursed, the related data moves from the loan origination to the loan management system. It features a built-in accounting engine that enables event-based accounting and the defining of NPAs and provisioning norms
- Collections Management System
A collections management system acts as a delinquency management solution, allowing NBFCs and HFCs to take follow-up action against delinquent cases. The system features a real-time, interactive interface for agent-customer interactions, provides advanced routing and escalation capabilities, and enables rule management in case of a breach
- Customer Onboarding and Video KYC
A video KYC solution can be integrated with any onboarding solution and significantly reduces the turnaround time for account opening. It eliminates the dependency on physical documents and improves customer experience, thereby allowing NBFCs and HFCs to go completely digital
In a Nutshell
To scale their businesses, drive innovation, and bring real value to their stakeholders, NBFCs and HFCs must recalibrate their strategies in the post-pandemic world, with a heavy focus on digital. Investing in new-age technologies can go a long way, especially by enabling these financial institutions to overcome existing challenges, expand their customer base, and stay competitive, no matter what the future holds.
By Jayant Tandon, Head of Banking Excellence, Newgen