In an era defined by rapid technological advancements and evolving customer expectations, NBFCs are at a pivotal juncture. To remain competitive and drive sustainable growth, they must adopt a comprehensive strategy encompassing digital adoption, strategic partnerships, and robust regulatory compliance.
Rajdeep Saha, Partner, Financial Services – Advisory, PwC India, elaborates on how NBFCs can chart a successful path forward.
Edited Exerpts:
In today’s dynamic era, how should NBFCs chart their growth strategy?
Saha: Navigating the complexities of today’s financial landscape requires NBFCs to strategically map their growth trajectory. This entails a multifaceted approach centered around digital adoption, strategic partnerships, leveraging digital public infrastructure, and adhering to evolving regulatory standards.
– Digital Adoption: Embracing digital technologies is crucial for NBFCs to achieve operational agility and scalability. Investments in technology infrastructure and digital capabilities streamline processes, reduce costs, and enhance decision-making, positioning NBFCs for sustained growth amid competition. The focus is on building super apps and segment-specific digital assets, leveraging automation, AI, and chatbots for efficiency. Additionally, cloud adoption is increasing, enhancing infrastructure scalability and operational efficiency.
– Strategic Partnerships: Collaborations with FinTech start-ups, banks, and financial institutions expand NBFCs’ market footprint. These partnerships facilitate access to new customer segments and innovative products, promoting joint product development, analytics sharing, and new distribution channels.
– Digital Public Infrastructure: India’s robust digital infrastructure offers NBFCs significant growth opportunities. Platforms like Account Aggregator (AA), Open Credit Enablement Network (OCEN), and Open Network for Digital Commerce (ONDC) enable secure financial data exchange, optimizing credit assessment and risk management. They also broaden access to underserved customers, enhancing financial inclusion.
– Dynamic Regulatory Landscape: NBFCs must navigate evolving regulatory standards with a resilient approach. The RBI’s heightened vigilance and stricter compliance on risk management and consumer data protection aim to build trust, mitigate risks, and support sustainable growth in the ecosystem.
What are the new business models that NBFCs are getting into?
Saha: NBFCs are exploring innovative business models to drive growth. Some prominent examples include the marketplace model, co-lending, embedded finance, and niche segment focus.
– Marketplace Model: We are seeing an increasing trend of NBFCs building tech-driven platforms powered by Gen AI and analytics, hosting a variety of financial products for customers. For instance, a large upper-layer NBFC has created a marketplace offering financial products across categories like loans, cards, insurance, investments, payments, and value-added services.
– Co-lending: NBFCs are embracing co-lending, where banks and NBFCs collaborate to facilitate the joint contribution of credit for priority sector lending. This model enables risk sharing and seamlessness between current account–savings account (CASA) funded balance sheets and NBFCs.
– Embedded Finance: Another key model is embedded finance, where NBFCs provide financial services through technology-focused non-financial entities such as marketplaces and e-commerce platforms.
– Niche Segments Focus: NBFCs are increasingly concentrating on value offerings to niche segments like MSMEs, investing in creating digital assets like super apps focused on these segments to drive growth.
How can NBFCs adopt emerging technology faster?
Saha: Rapid adoption of emerging technologies is crucial for NBFCs to stay ahead in the market. This requires fostering a culture of innovation, forging partnerships, and empowering teams through talent development initiatives.
– Innovation Culture: Fostering an innovative culture is essential for driving technological progress. Many NBFCs promote this through collaborative initiatives with start-ups, innovation labs, and accelerators, implementing cutting-edge technologies to improve financial services and customer experiences.
– Partnerships with FinTechs: Relevant partnerships can fast-track technology adoption, optimizing processes to provide best-in-class customer experiences and drive growth.
– Talent Development: Investments in talent development and upskilling programs are vital. The CIO role is evolving from just being a technology enabler to a business leader and strategic advisor, emphasizing the importance of continuous learning and adaptation.
How important is it to leverage a digital operating model?
Saha: Leveraging a digital operating model is imperative for NBFCs to meet changing customer expectations and respond agilely to market dynamics.
– Enhanced Customer Experience: An omnichannel digital operating model enables NBFCs to deliver personalized and seamless experiences across digital touchpoints, significantly enhancing customer satisfaction.
– Operational Efficiency: Digital factory models, which adopt agile ways of working, help accelerate the traditional delivery approach, resulting in faster go-to-market, improved productivity, and reduced development costs.
– Real-time Monitoring and Analytics: A digital operating model empowers NBFCs with real-time monitoring of key performance indicators and data-driven decision-making capabilities. By accessing and analyzing structured and unstructured customer data, NBFCs can offer personalized banking products, enhance credit decisioning, and improve overall customer experience.
Overall, the adoption of a digital operating model is crucial for NBFCs seeking to navigate today’s digital economy and position themselves for sustainable growth and resilience. Our thought leadership paper, ‘Pioneers of Change: Building Resilient NBFCs,’ delves deeper into new business models, emerging technology trends, and the regulatory landscape, providing valuable insights for the future of NBFCs.
(This is a Brand Connect Initiative)
