How India’s NBFCs Can Cash in On the Huge Underserved Customer Base
February 1, 2019
Despite all the hullabaloo about financial inclusion and providing every citizen access to financial services, a dismal portion of India’s population is still unbanked. According to 2017 report by the World Bank, India has the second largest unbanked population in the world, with about 19 crore Indians not having a bank account. From an NBFC’s point of view, it hasn’t really been economically viable to provide financial services for these individuals, as most fail to meet the CIBIL score. However, technology has the power to change this, and can help NBFCs overcome the hurdles that restrict access to financial services – from poor last-mile connectivity, regulatory inaccessibility, to product mismatch, or simply lack of trust. Technology is slowly transforming the unbanked and underserved customer base into valued contributors to the Indian economy, while simultaneously ensuring economic growth for all.
What challenges do NBFCs face?
Almost every financial institution begins with no customers; the idea is to offer something that someone will eventually buy, and then buy again and again, based on how the product or service meets the market demand. These repeat customers constitute the core customer base for any organization. And as the shift to these high priority and high net worth customers increases, they constitute a larger source of income, and slowly become the main source of revenue. However, in spite of all the efforts NBFCs drive towards growing their existing customer base, there are several challenges they face while trying to bank the unbanked:
- Considering the fact that the financial industry is largely driven by the CIBIL score, for the unbanked Indian population with low (or no) credit rating, offering any kind of loan from an NBFC standpoint is extremely risky; even a small personal loan application is turned down as traditional NBFCs are unable to lend money to people with no credit score.
- Verifying documents submitted by the underserved customer base also poses a big challenge to NBFCs; with most documents in unstructured format – many of them even
handwritten – NBFCs have a tough time assessing documents.
- The entire loan process is excruciatingly long, especially for the underserved customer base with no credit rating. NBFCs have to spend lot of time in back and forth interactions, validating documents and assessing credit score.
- Considering how long, complex and expensive the lending process is, lenders often have a tough time onboarding customers and also in ensuring no bad lending decisions are made that result in loans having to be written off.
- Also, a large percentage of the unbanked Indian population looks for loans of small amounts, which is unprofitable for banks to accept, and also expensive to service – especially if the onboarding costs are high.
- In addition, to serve the underserved customer base, NBFCs have to cross several hurdles: they have to be able to provide services in the remotest of places, they have to offer services that meet their distinct needs and they basically have to build trust in the banking institution.
How IN-D can help overcome challenges
Ensuring seamless access to financial services and timely and adequate credit to the unbanked population at an affordable cost is no easy feat. However, in a country like India which has a large unbanked population, strong investor funding and modern technology can enable NBFCs to offer quick loans to consumers with poor credit history; consumers who could never imagine availing any financial services, can now have instant, hassle-free access to banking services.
Here’s how Intain’s AI-driven IN-D platform can help NBFCs cash in on a huge underserved customer base:
- Easy loan: The biggest benefit IN-D brings through its AI platform is the facilitation of easy loan; for people without a credit rating and no knowledge
of banking, handholding them through the entire loan process is extremely important to gain trust. By leveraging its deep learning algorithm, IN-D reads all loan application documentation – including identity and income documents – and sends it to the underwriting engine for quick closure.
- Fast onboarding: With IN-D, customers no longer have to wait in queues or wait to meet the bank manager or wait to have their loans to be processed. Instant verification of documents and quick bias-free decisions on loans can ensure fast onboarding of customers who have no experience of banking services while improving their trust in the financial services sector.
- Efficient underwriting: IN-D can allow NBFCs to overcome the lack of credit histories. The underwriting and credit scoring analytics capability can enable them to measure creditworthiness of the underserved customer base and assess their willingness to repay by analyzing their financial history and creating a credit rating.
- Quick turnaround: IN-D’s built-in AI algorithm can extract data from a picture taken a mobile or a scanned document, and match it with business rules. Instead of making people wait for a day or two for documents to be scanned, IN-D controls costs and can reduce a 24-hour turnaround to a mere10 seconds.
- Fast processing: By extracting data from structured (Aadhaar or PAN and account statements) or unstructured (contracts and utility bills) documents of
varying quality and processing them at the source, IN-D ensures no time is lost in interacting with back office staff and can contribute greatly to financial
- Low costs and errors: IN-D provides great convenience for customersand lowers costs for NBFCs. Not only can the solution be easily deployed, it reduces operational costs and also error rates as every process is automated.
- Accurate decision-making: IN-D’s AI-driven platform automatically analyzes and extracts a historical pattern from data, classifies them based on certain parameters, and advises loan executives with facts to improve decision-making accuracy. IN-D also supports the collection team by identifying loans that are more likely to default.
- Free from bias: Every loan application is evaluated based on a large set of variables; IN-D learns from actual outcomes of loans and provides the most
likely outcome of the loan – free from any bias.
Drive more revenue
With all the developments happening in the banking sector, there has never been a better time for NBFCs to drive growth and revenue through financial inclusion. Although effective financial inclusion might still be a distant dream in emerging markets, technology can help NBFCs build trust and confidence in the minds of the underserved customer base and streamline access to financial services. NBFCs that seize the opportunity presented by modern technology stand a better chance to capture market share and play a crucial and transformative role in the growthc of an emerging economy like India. If you want to offer seamless and convenient access to banking services to the underserved customer base, drive higher financial inclusion, and gain significant market traction, IN-D can work as the ideal platform to tap into India’s
underserved customer base; all you have to do is deploy the IN-D application and contribute to bringing a large section of the unbanked population into the formal financial credit system while simultaneously driving more revenue for your business.