Director of Marketing, Ezetap Mobile Solutions Pvt. Ltd.
Enabling NBFCs to sustain the recent high growth in consumer lending by focusing on digitisation
This growth has been possible with NBFCs playing an immense role in driving this growth. NBFCs have grown at a CAGR of 19% over the past few years, comprising 13% of the total credit now and expected to reach nearly 18%.
Close to customer
At a macro level, India has been the biggest growth story with GDP growth rates greater than 7%. Most important fact about this growth is that it is predominantly driven by domestic consumption. With retail lending to GDP ratio at 19%, India has lots of room for growth in retail lending (emerging economies at 35%). This incremental growth in lending is expected across tier 2 and tier 3 cities in the near future.NBFCs have an inherent advantage in this growth scenario with their excellent understanding of customer potential and risks, last mile reach and ability to build strong relationships with customers. This gives them a big advantage while building their consumer lending books fast.With such a big opportunity and possibility of fast growth, it is important to understand the risks of “irrational exuberance”, especially in the context of growth in non-performing assets in the banking sector.
Let’s begin with the end in mind..
With such strong macro growth factors driving retail lending, it is important for the industry to ensure this growth is sustainable. This becomes especially critical in the context of mounting NPAs due to industrial lending.Traditionally, NBFCs have followed strict regulations laid by RBI/self at the time of issuing any loan product. Also, data has been used diligently to decide on the most profitable segments available to them. Therefore, changes in sourcing process will only make them operationally efficient.To create a strategic impact, NBFCs have to look at the most manual of their efforts in the customer life cycle. This is the “Collections” stage where in most cases, is done by brute force. There is ample opportunity for use of technology to create efficiencies.
- Create new opportunities for customers to pay hassle-free at their convenience
- Expand and accept new modes of payments (allowed by regulation)
- Increase last-mile collection agent productivity with technology
These solutions are already available in the market and can be deployed immediately. For example, Ezetap’s EZECOLLECTION coupled with REMOTE PAY would enable NBFCs to amplify their collection effort by sending payment links to customers through a simple SMS or email even before meeting their customer. Another feature of the Ezetap solution is the capability to provide timely reminders and payment links to consumers which ensures that a possible cash/cheque payment is converted to a definite digital payment. This enables higher productivity and better cost efficiency.
Digital is sustainable
Augmenting collection efforts with a significant shift to digital mode of payments can help NBFCs to sustain this consumer lending growth and prevent any future bubble. Considering payments is the only point of interaction with customers in their life cycle, digital payments can give NBFCs immense flexibility, superior experience and a definite differentiator.