Over the years, NBFC sector has witnessed a huge surge of technological revolution. With the rising innovation and growth in the NBFC sector, newer technological trends are undoubtedly catching pace. To keep up with the current market environment, lets put some light of the digital trends which the sector should focus on in 2019
AI – Driven Predictive Financing
One of the most exciting innovation trends in 2019 will be the continued movement to predictive financing. For the first time, the financing industry can consolidate all internal and external data, building predictive profiles of customers and members in real time. With consumer data that is rich, accessible and financially viable to deploy, financial institutions of all sizes can not only know their customers, but also provide advice for the future.
This enhanced use of data will enhance the consumer experience, while increasing security and efficiency. By moving from a rear-view-mirror perspective of customer communication to services deployed by robo-advisors and AI-driven chatbots, financial institutions will provide consumers with value through ‘next-best actions’ as opposed to blind selling of products.
Voice & Vernacular - The Next frontier
Voice will be big in terms of reaching the next set of users new to the internet. The upcoming trends would see applications of voice in digital payments, which will be further enabled by vernacular (Indian languages). Vernacular continues to be a gap in payments and other financial services till now.
Voice recognition will finally make an entry into Indian fintech. The top 200 million users are the only ones typing in English. So, voice search and recognition are a natural progression. Voice will make experiences more interactive and reach the masses soon.
Video KYC – a great enabler
Video KYC would soon become the future of identity verification because no other solution can come this close to eliminating identity fraud online.
Currently, the financial institution needs to establish that the application is indeed from you. So, it meets you, verifies your documents, and takes your signature on its forms. This has been the way of business for years. These methods, however, aren’t as safe as authenticating you through your live digital footprints. Through a combination of digital video KYC checks, the applicant’s identity can be established beyond reasonable doubt and remove the possibility of identity theft, which is what the industry wants to guard against.
Video KYC would require an investor to upload identity proofs such as photograph, address proof, PAN card and signatures on the mobile application or website. On uploading all documents, you are required to start real-time video recording using the front camera on your smartphone and simply display a hard copy of all the documents for 10 seconds each.
Hence, we know that paperless finance has become a reality. Now, it’s time to work towards presence-less finance.
Blockchain – The Game changer
It has been estimated that up to 80 percent of the effort associated with KYC is dedicated to information gathering and processing, and only 20 percent to assessing and monitoring that information for critical insights. At the same time, the tiresome process, repetitive questioning and long processing times create a frustrating experience for customers.
As a result of this, the financial services sector has been looking for a new solution to the identity problem and it is only now that a viable solution will soon be trending this year in the form of Blockchain.
By introducing blockchain solutions to handle the KYC process, data can be available on a decentralised network and therefore be accessed by third parties directly after permission has been granted. This KYC system will also offer better data security by ensuring that data access is only made after confirmation or permission is received from the relevant authority, eliminating the chance of unauthorised access.
Cloud Integration – bringing in Ease and Efficiency
Leveraging on numerous IT-backed industry firsts, NBFCs will be able to script many success stories in Indian BFSI sector in a relatively short span of time through cloud integration.
Cloud computing would help in creating a flexible business model that ensures growing business needs. Some of the key benefits of cloud services are lower costs, quick implementation, and near-universal availability.
Further, since the need for buying and deploying hardware is not there, a web-based end-to-end Loan Origination Software (LOS) platform can be swiftly deployed in a matter of days unlike the case with legacy systems. Such systems are designed to be scalable easily to accommodate the requirement of an expanding business.
Automation – Actualizing Speedy Outcomes
Another important future innovation which can be strongly harnessed by NBFCs is the power of Automation i.e. a technology that speeds up the lending processes and facilitates consistency in decisions.
A typical automation process is characterized by a series of predetermined decision rules that facilitates faster and more accurate processing of loan applications. Thanks to automation, as a transaction is happening, it could be possible, in less than a minute, to do credit rating on real-time basis. This way, Anti Money Laundering (AML) or other frauds that might be happening in real time can be identified.
Chatbots & Robo-Advisors
Most of the NBFCs would soon be employing chatbots and robo-advisors for interactions with prospects and customers for self-onboarding of the customer, customer servicing and employee-related services.
In most cases, these chatbots and robo-advisors have vernacular capabilities, making them well-suited for rural and semi-urban India. Today, thanks to these chatbots and robo-advisors, the entire process of availing various financial services by masses will become much easier and hassle-free.
Social Profiling Score
Know Your Customer (KYC) once used to be the only norm to assess credit-worthiness of customers. Today, thanks to a culture of promoting a holistic view of a prospective customer and assessing his ability to eventually service a loan, things have come down to the level that now besides LinkedIn and Facebook posts, even Swiggy’s (food delivery app) orders history is being taken into account by many NBFCs players for evaluating the credit-worthiness of customers.
To assess customers’ creditworthiness, apart for making use of info provided by the borrower, the latest trend is to match the data with whatever is available in public domain, e.g. on the Ministry of Corporate Affairs (MCA) and GST portal, then cross-verify this using the social media profiling of the borrower. This gives us a holistic picture of the customer in question.
Biometrics – Fingerprint, Face & Iris Recognition
Last but not the least, through biometric-based authentication, an individual is uniquely identified by evaluating one or more of his distinguishing biological traits. These distinguishing biological traits can be their fingerprints, voice waves, or retina and iris patterns. For customer’s KYC authentication, the entities use either the iris patterns or fingerprints of an individual to authenticate their identities.
Biometrics verifies individuals based on who they are i.e. the characteristics inherent to the individuals. These characteristics (also known as modalities) uniquely identify individuals from an entire population based on their intrinsic physical or behavioural traits.
These modalities have various key advantages such as non-repudiation, not transferable, not guessable and also provide a very high level of protection against fraud. The technology has been successfully implemented in various real-life applications and is rapidly being used in the financing industry as well.
Each of the different modalities has something to recommend them. For example, some traits are less invasive and can be done without the knowledge of the subject while others are very difficult to fake.