Marking the Crucial Facets of Financial Fundamentals

Capital is an important component of every commercial enterprise. Business organizations need funds for their development, revamping, expansion, and new initiatives. The Non-Banking Finance Companies also known as NBFCs have played a pivotal role in meeting the financial needs of individuals and businesses that have traditionally remained un-served or underserved by banks.

With stricter regulations on NBFCs, the cost of borrowing has increased and NBFCs are focusing on niche markets and personalized products and services. This has propelled the NBFCs on developing innovative products and catering to low-income, urban customers in unorganized sectors.

Supported by the innovations in the fintech, NBFCs are adopting business and operational models powered by technologies that seamlessly facilitate the design, launch, implementation and execution of tailored products and services. Investing in new technologies and strategic partnerships with incumbent financial institutions and FinTechs also allows NBFCs to lower their costs when it comes to increasing their customer base, lowering customer acquisition costs, servicing existing customers or de-risking the portfolio while trying to overcome the increasing formal credit penetration in a growing economy.

Today’s FinTech companies are efficiently making use of new-age technologies to overcome challenges and build products and services such as last-mile reach and delivery, alternative credit models, fraud detection, regulatory compliance, enterprise automation for accounting, treasury, and reconciliation for traditional NBFCs.

Artificial Intelligence

Artificial Intelligence (AI) is a cutting-edge technology for the NBFCs, that has elevated their decision-making process and has expanded their 360-degree perspective. In the beginning, AI and ML tools assisted NBFCs primarily with credit and risk management; AI is now a necessity that can be effectively leveraged across departments. It has helped in the scrutinization of the credit aspects for the MSMEs and developed a deep understanding of the micro market. NBFCs use a lot of data and external applications to create their underwriting models which consider the business segment, hyperlocal geo-analytics and other behavioral attributes of the small entrepreneurs.

Robotics Process Automation

The developments in technologies have helped in automating several processes in the functioning of the NBFCs. The recent applications of Robotics Process Automation (RPA) have contributed to executing data management, document verification, scrutinization, analytics and processing. RPA has enabled paperless processing with immediate real-time reconciliation thereby expediting the business cycles at a faster momentum. RPA has assisted in faster loan processing from origination to disbursement.

Advanced Analytics

Progressive NBFCs have implemented process-driven analytics solutions to showcase the flexibility provided by data analytics and advanced analytics models to forecast customer defaults. Adopting Software as a Service (SaaS) models have minimized the upfront hardware and infrastructure cost. The solution features an analytics platform allowing users to slice and dice data across various dimensions to gain insights into loan application portfolio, exposure and funding aspects, customer, and loan performance The solution offered analysis to enable decisions for corrective actions in terms of their response time, application aging, collection performance, sales team performance, and more. It has helped in exploring, tapping and serving the undeserved and unserved strata of the economic table. Advanced analytics has offered 24X7 customer support with higher scalability and agility.

API Advantage

Modern tools like Application Programming Interface (API) are recent trends in Banking and Financial Services. They are a set of general information that allows the admittance of software programs. This technology enables NBFCs to share their data through third-party applications.

APIs are transforming businesses by offering endless possibilities to banks and financial companies. According to a Research and Market report, by the end of 2024, the global API management market is expected to reach $6.2 billion. As competition rises between traditional banks and fintech startups, banks have started opting for APIs to embrace a digital ecosystem and assimilate more globally.

By embracing APIs, NBFCs are enhancing their services and rapidly adapting to the evolving demands of the customers. Banking APIs facilitate easy and fast KYC and onboarding, opening accounts (virtual accounts, savings or business accounts), fintech payments, debit cards, and launching BNPL products, this makes way for better business growth, customer engagement, and retention.

Blockchain Technology

The Blockchain can streamline banking and lending services, reducing counterparty risk, and decreasing issuance and settlement times. It allows authenticated documentation and KYC data, reducing operational risks and enabling real-time verification of financial documents.

The modern blockchain enables more open, inclusive, and secure business networks, shared operating models, more efficient processes, reduced costs, and new products and services in banking and finance. It enables digital securities to be issued within shorter periods of time, at lower unit costs, with greater levels of customization.

Digital financial instruments may thus be tailored to investor demands, expanding the market for investors, decreasing costs for issuers, and reducing counterparty risk. Blockchain enables real-time, multi-party tracking and management of bank guarantees and letters of credit.

Automated compliance

Depend on faster and more accurate reporting with an automated compliance process that draws on immutable data records. Benefit from the near real-time, point-to-point transfer of funds between financial institutions, removing friction and accelerating settlement. 91% of Banks have invested in Blockchain technologies in 2018. Approximately 66% of financial institutions are running at scale with blockchain.