Main menu


How NBFC is using technology to innovate new age financial products

featured image

If financial inclusion is the battle, non-banking financial companies (NBFCs) are its foot soldiers. Yes, banks power economic activity, but all that economic power would be underutilized without the active participation of non-bank financial institutions. For decades, his NBFC in India has reached where banks couldn’t, accepting customers that banks wouldn’t and servicing use cases no one else thought possible. rice field.

And now, these loyal participants in the financial system are turning to technologists to build the next generation of financial products, business models, and operational strategies.

First, let’s understand how important NBFC is. RBI said:

In countries such as India, they have acquired particular importance in a country characterized by limited penetration of banking services, traditional lending models, and large populations without access to formal lending. I’m here. His RBI report published last year revealed that NBFCs accounted for the largest number of loans (60%) authorized through digital platforms.

The roots of domestic NBFCs go back to the 1960s, but it is only in the last decade or so that they have truly established their own position. Their meteoric rise can be attributed to several factors, including changing customer demands, increased digitization, and the factor we’re going to focus on in this part: technology.

They have kept pace with rapid advances in technology, leveraging artificial intelligence (AI), machine learning (ML), and big data to develop breakthrough credit products and processes to bring formal lending to the masses. (or at least it helped). it gets there).

See how NBFC is making the most of new age technology.

AI and ML

Risk assessment forms the very foundation of all lending decisions and has far-reaching implications for a lender’s (in this case, NBFC) business metrics.

AI and ML models reveal insights into how NBFC leverages a variety of alternative data (tax invoices, device data, transaction volume, etc.) to assess creditworthiness and manage delinquency and risky accounts helps simplify credit decisions. Research shows that using alternative data and ML resulted in 27% more applications being approved and a 16% lower average annual rate (APR) than traditional lending models.

This is especially important in the B2B context where underwriting becomes more complex due to factors such as stakeholder management, service capabilities and industry risks. A streamlined, AI-driven pre-approval process reduces rejection rates and optimizes loan approval rates.

AI-driven intelligence also enables detailed personalization of loans. Customers can be segmented based on their ability to repay with the help of alternative data (device data, bill payments, etc.). NBFCs can leverage this segmentation to offer loan products with relevant amounts and repayment guidelines.

When it comes time to collect, ML can help identify potentially defaulting borrowers by mining previously unidentified insights. This allows lenders to optimally allocate resources and adopt the most effective strategies for each borrower group based on default risk.

Robotic Process Automation (RPA)

NBFC is known for its speed of operation. In fact, this is one of the main advantages over traditional banks. They achieve this speed by leveraging RPA to automate multiple repetitive processes. This will help NBFCs to automatically capture data from the application form, verify KYC instantly (in just 3-5 seconds), verify eligibility, and pay out loans quickly if the application is successful. . While increasing operational velocity, RPA also helps NBFCs reduce costs, generate leads, and improve customer service.


NBFC has the option to build this tech stack themselves, but they can also partner with fintech companies to leverage their technical prowess. They can integrate the latter’s pre-built underwriting model and last mile collection process and work with them to improve their onboarding and KYC processes.

The future of lending is therefore not in one hand or the other. Fintechs, NBFCs and even banks need to leverage their unique strengths and integrate them to serve those who need it most.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect those of YourStory.)