Banking Finance 2023, Banking Finance August 2023

5Key Customer ExperienceChallenges that NBFCs Need to Solve

The NBFC (Non-Banking Financial Company) sector has emerged as a driver of inclusive growth in the Indian economy, playing a crucial role in providing credit to the under served segment. What sets them apart from the multitude of players within the financial sector is their ground-level understanding of customer profiles and their ability to customize the product as per their credit needs.


In the last decade, the BFSI segment witnessed large-scale technology adoption in order to make the process agile, eliminate customer pain points, and provide a seamless lending experience. The findings of a recent survey published by FICCI and PWC underscore the importance of technology in improving the customer journey. According to this survey, 83% of Indian financial organizations say AI helps enhance their customer service.


Some of the key challenges faced by organizations in the sector are outlined below:


1) Simplifying operational complexity


As NBFCs perform a wide range of functions like offering loans and advances, credit review, interest accrual and foreclosures, keeping a tab on these various financial operations could be difficult. Lenders working without an agile and well-defined process may face heightened operating risk.


An efficient CRM system can potentially revolutionize and reduce many difficulties associated with manual procedures. As per a PwC survey, the operations and finance functions have seen increased RPA adoption and demonstrated a remarkably high ROI.

A majorNBFC recorded a 25-30% reduction in turnaround time for their loan application process through digital channels after it leveraged Robotic Process Automation to reduce administrative effort and the bulk of paperwork.


2) Cost optimization


Covid-induced liquidity crunch has led to higher borrowing costs, making it imperative for NBFCs to improve margins through cost optimization. Automation can help businesses scale up and optimize costs by reducing paperwork. NBFCs can not only optimize cost across customer life cycle management, but also reduce the cost of customer acquisition by up to 30% by leveraging digital channels over traditional ones. Effective use of IVR, chatbots, and other self-service channels also helps reduce cost.

For example, a large NBFC recorded a 20-25% increase in the adoption of its payments platform by asking its field collections agents to enroll and educate customers about the application. The NBFC immediately saw an increase in field agent productivity and a reduction in CTC by 10–15%.


3) Understanding evolving customer expectations

Misalignment in product offerings with customer needs is another key challenge faced by NBFCs. Over 91% of people unsubscribe from emails, 44% of direct emails go unopened and 60% opt out of mobile notifications, to avoid a glut of irrelevant messages. This makes micro-segmentation more crucial than ever.


As they are flooded with choice, customers only focus on products or services that are most suited to their needs. This makes micro-segmentation more crucial than ever. Integrating your customer communications platform with your CRM software can help you deliver personalized engagement at scale.


NBFCs need to build better communication strategies and identify smaller segments of people to whom a specific product, service or feature of a product could be vital.



4) Managing IT infrastructure

NBFCs with legacy systems struggle to bring down their capital expenditure due to the skyrocketing cost of managing IT infrastructure. Expenses on maintaining a server, storage hardware, physical space, along with data security software licenses constitute a substantial portion of CAPEX and affect profitability.


Cloud-based technology such as CCaaS (Contact Centre as a Service)can substantially reduce infrastructure costs while elevating the customer experience.

So, there is an increasing necessity to move from legacy technologies to cloud solutions. If done with right planning & factoring in contingencies, transition to cloud can happen smoothly with minimal efforts and bottlenecks.


5) Data Privacy

Financial services have always been the top target of cyber criminals. Particularly post pandemic, the dependence on digital channels has increased manifold. Hackers have multiple entry points to steal sensitive information and compromise systems. Hence, it has become imperative for lenders to build tight information security controls. Cloud technology not only brings down the cost of overall operations but also provides an extra layer of security when incorporated into the system.

Despite covid-led disruptions, NBFCs have emerged stronger with the space leading the fray in retail lending. In FY2021, NBFCs disbursed 12 crores of loans and registered a 64% growth from the previous fiscal.


Technology has made round-the-clock connectivity a reality and enabled NBFCs to develop a deeper understanding of customer behaviour. However, with the emergence of new players in the retail lending space, NBFCs will need to reinvent their operational capabilities and rethink their customer outreach strategies.Considering the multitude of players in the financial sector, the new generation of consumers is spoilt for choice. Switching brands is just a click away. The key differentiator here is the customer experience.

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