Digital Transformation

in NBFCs
Addressing the last mile with digital

A Newgen Guide
Technology-led Shifts in Lending
Technology has gripped every sector in the modern world, and the Advanced
post-pandemic developments have only speeded this transition. The financial technology
services sector has been in the vanguard in adopting innovative technology-led platforms and
delivery of products and services that are bringing several powerful benefits to solutions are being
the customers. Advanced technology platforms and solutions such as Low adopted by a large
Code Application Platform (LCAP), Robotic Process Automation (RPA), Artificial number of Non-
Intelligence (AI), and Cloud Computing are being adopted by a large number of banking Financial
Non-banking Financial Companies (NBFC) players to extend credit efficiently. Companies (NBFC)
players to extend
Let us look at the current technology trends in NBFCs. credit efficiently.
Low Code Application Development: Creating a Future-proof Enterprise

Significant shifts in the NBFC regulatory framework such as capital requirements, governance standards,
prudential regulations, changing customer expectations, and increased competition are challenging NBFC
business models. With a low code digital transformation platform, NBFCs can easily connect disparate data
sources such as credit bureaus, core banking solutions (CBS), enterprise resource planning (ERPs), and other
third-party applications. Low code can streamline integration mechanisms to bridge information silos,
efficiently bringing applications to market faster with its platform ecosystem and improving productivity.

How NBFCs Can Benefit from Low Code Application Development

 Faster application development and deployment

 Seamless integration with existing enterprise applications

through plug-and-play adaptors

 Flexibility to update applications as per new lending schemes

or regulatory requirements By 2024, more than 65% of
 Effective risk management and governance
application development will
be done on low code
 Secure platform for remote work, allowing bankers and
platforms, and 75% of large
mortgage advisors to work on a loan anytime, anywhere
enterprises will be using at
with data privacy and information security least four low code
 All functions and methods available in the system are available development tools
as webservices to be consumed by external application
Gartner
Hyperautomation: Infusing Intelligence
Across Lending Processes
As defined by Gartner, hyperautomation is a business-driven, disciplined
approach that involves the orchestrated use of multiple technologies,
tools, or platforms, including artificial intelligence (AI), machine learning
(ML), low code, business process management (BPM), and robotic process
automation (RPA).

Lending is a prime area where hyperautomation can deliver significant

benefits and accelerate growth, with many of the top NBFCs already
making serious investments.

Hyperautomation Use Cases in Lending by Leveraging BPM, AI, ML, and RPA
Intelligent Process Artificial Intelligence (AI) Robotic Process
Automation (BPM) and Machine Learning (ML) Automation (RPA)

 Streamlining high-volume,  Predicting loan defaults  Auto-classification

repetitive tasks such as and improving compliance of customer loan
customer service to  Building alternate scoring documents
optimize business models based on customer  Auto-extraction of
performance behavior, demography, and relevant loan data
 Intelligent, personalized spending patterns from voluminous
responses to customers  Improving service quality records in seconds
while retaining a human with AI bots, digital
Hyperautomation is one
 Easy handling of
connection payment advisers, and repetitive tasks such of the top trends on the
 Exception handling for biometric fraud detection as data re-keying or Gartner Top Strategic
non-straight-through cases mechanisms
data entry in KYC, Technology Trends for
 Audit servicing,  Detecting individuals and loan and credit
compliance, and fraud face matching during video 2022.
application
detection KYC
Banking-as-a Service: Making the Most of While FIs and banks
are integrating
Extended Ecosystem
fintech or other
Bank-as-a-Service (BaaS) is a model that allows non-banks to embed and financial service
offer core banking solutions and services to customers via third-party vendor products into
distributors. With a BaaS, NBFCs can embed various products like lending,
the banking journey,
non-financial
deposits, and payment products with their own offerings. It also provides an
companies are
opportunity for NBFCs to develop new propositions to meet unfulfilled
embedding banking
money management requirements. For example, a customer purchasing a
products into their
mobile phone on Amazon can convert their purchase into an EMI at checkout
own services.
without leaving the platform.

Deloitte Digital
Seize the Opportunity with an Embedded Financial Ecosystem

As more companies and ecosystems embed financial services in their

offerings, NBFCs should take the opportunity to decide on the role they will
play in this model.

 Embedded Credit: NBFCs can embed their credit products into non-
financial digital platforms, thereby allowing consumers to apply for,
acquire and repay loans within the platform

 Embedded Insurance: NBFCs can offer transactional APIs to integrate

insurance solutions with websites, mobile apps, and partner ecosystems

 Embedded Payments: NBFCs can integrate payment infrastructure to

provide a seamless payment flow with the platform
Hyper-personalization: Delivering Top-notch A Salesforce
survey conducted
Customer Experience in October 2021
indicated that
Hyper-personalization is known to be the next new trend for customer
66% of customers
engagement. In today's experience economy, customers expect financial
expect
institutions to understand them and offer personalized services that are relevant
organizations to
to their needs.
understand their
Hyper-personalization can be defined as using real-time data to generate insights unique needs and
by using behavioural science and data science to deliver services, products and expectations.
pricing that are context-specific and relevant to customers' latent needs.

How NBFCs Can Deliver Hyper-personalization:

As more companies and ecosystems embed financial services in their offerings,

NBFCs should take the opportunity to decide on the role they will play in this model.

 Offer tailor-made products to clients driven by behavioral science and artificial

intelligence (AI)

 Provide product recommendations basis insights generated by analyzing data

such as transaction history, shopping habits, demographics, etc.

 Generate comprehensive customer profiles via AI-based models that empower

the service providers to offer products tailored to the customer's changing needs

 Offer top-up loans, conduct cross-selling and up-selling after analyzing customer
behavior
Blockchain: Unleasing Value By 2025, the
business value
added by
The financial sector is quickly realizing the immense potential that
blockchain will
blockchain technology offers—from generating new revenue streams,
grow to slightly
improving user experience, to reducing risk in business processes, and
more than $176
more. Blockchain technology empowers NBFCs by streamlining loan
billion, then surge
processes through real-time verification of documents, enabling credit
to exceed $3.1
prediction and automated disbursement of funds through smart contracts. trillion by 2030

Gartner
What Blockchain Can Do for You:

 Manage cybersecurity and enable authorized access while sharing

financial data and sensitive information with stakeholders

 Encrypt data cryptographically to offer protection from hacks and

fraudulent activity

 Verify customer data at multiple touchpoints

 Maintain data integrity by recording immutable transactions

 Provide a digital, shared ledger for increased transparency

 Facilitate automated agreements through smart contracts

 Provide real-time transaction settlement

Digital Payments – Delivering an Omnichannel Experience

Digital transactions play a pivotal role in strengthening the digital economy of a country.

According to a study by the Internet and Mobile Association of India (IMAI), around 16 percent of
the rural users access the internet for digital transactions, as compared to nearly 45 percent of
the urban users.

Consumers' survey responses also indicate an increasing interest in digital payments, including new concepts
like "buy now, pay later" offered by leading players such as LazyPay, Simpl, ePayLater, and Amazon Pay Later.

Digital Payment Trends Shaping India's Financial Ecosystem:

 COVID-19 has proved a better accelerator for the adoption of digital

payments

 Increasing access and use of the internet through smart mobile phones
in rural and urban India

 Rising number of NBFCs adopting digital modes of payments for debt

collections process with the adoption of NFC, Bharat QR-based payment
solutions, Google Pay, UPI etc.

 Stronger customer preference to purchase through EMIs using digital

payment methods and receiving receipts in real-time

 Seamless integration of open API and microservices-based loan

origination and collections systems with multiple digital payment modes
to enable a unified customer journey
Open API Combined with Microservices Architecture:
Capitalizing on Platform Ecosystem
Open APIs and microservices-based architecture have become crucial as without interoperability NBFCs will
not be able to access valuable innovations, which can directly benefit them and their customers. By allowing
the sharing of their transaction data with third parties, a customer will gain a holistic view of their finances,
thereby simplifying their management and control.

An architecture based on open APIs and microservices can make NBFC operations agile and connected by
breaking down monolithic processes into a smaller, integrated set of services.

The Benefits of Open APIs and Microservices: The Benefits of Open APIs and

 Provide a resilient, reliable, and robust banking system  Facilitate independently scalable
services
 Enable seamless integration and interoperability
between multiple channels  Ensure zero threat or disruption to
the entire system
 Deliver complex functionalities through smaller,
simpler applications
Cloud Infrastructure: Ensuring a Secure, McKinsey research
Scalable Future shows that by 2030,
cloud technology will
Cloud technology allows lenders to operate at a comparatively low cost for
account for EBITDA
high volume, providing cost-effective scalability. Furthermore, financial
lending enterprises welcome prospects seeking to free themselves from the (earnings before
hassles of infrastructure maintenance, upgrades, backups, and disaster interest, tax,
recovery. This allows them to better focus on their business innovation goals depreciation, and
and deliver a great customer experience through cloud-based solutions. amortization) in
excess of $1 trillion
Cloud computing in lending management can make it easier for loan
across the world's top
providers to connect with their customers and cater to business needs in a
streamlined fashion.
500 companies

With Cloud Computing NBFCs Can:

 Leverage open banking and banking-as-a-service to open up new

revenue streams

 Operate in a dynamic and remote environment without impacting the

speed and quality of services

 Automate, integrate, and orchestrate all the moving parts of the system
while keeping sustaining stakeholders' touchpoints in real-time

 Scale processing capability based on evolving market conditions

 Enable users to access, edit, and share documents anytime, anywhere

 Expand cloud-based microservice architecture and allow services to scale

independently without enlarging the coding base of the overall offering
Other Significant Tech Trends
A Move Towards Branchless Banking
Digitizing banking services in accordance with recent customer trends
is being capitalized by the rising dawn of branchless banking.
Branchless banking is the provision of financial services outside
traditional bank branches. The development of branchless banking
offers a number of benefits to NBFCs, such as reducing the cost to
invest in brick-and-mortar branches, developing customer loyalty and
commitment, and improving services. It also enables NBFCs to meet
growing regulatory and market expectations on how they can
adequately serve the needs of an ever-expanding digital community.

The Case for Branchless Banking

As per a recent study done by Credit Bureau CRIF Highmark, 40% of individuals seeking personal loan and
61% of individuals seeking two-wheeler loans are between the ages of 20 to 35 Years.

 Generation Y constitute a majority of the lending portfolio for NBFCs

 Young adults below 25 years of age availing short-term low-value credit are driving personal loans that have
grown 2.3 times by value and eight times by volume in terms of disbursals from FY 2017 to 2021

 These millennials rarely visit the branch and are mostly connected to digital modes of communication for
loan initiation, management, payments, and communications

 These borrowers are tech-savvy and prefer receiving personalized credit offers and communications
through digital channels
The Opportunities Presented by Co-lending
Hon. FM Nirmala Sitharaman unveiled the fourth edition of the
Public Sector Bank (PSB) Reforms Agenda' EASE 4.0' Enhanced
Access and Service Excellence for 2021-22 - tech-enabled,
simplified, and collaborative banking.

The Reforms Highlighted on Co-Lending between

Banks and NBFCs

 The partners may include banks, NBFCs, and HFCs

 Co-lending helps the partners trust each other's strengths to

create a mutual win scenario and unlock value for their
customers

 NBFCs rely on their considerable ground presence in tier 2

and tier 3 cities and have a deep understanding of niche
customer segments while banks bring in the required capital

 Co-lending helps banks extend their reach rapidly into new

sections and meet the priority sector lending targets while
lowering the cost of capital
How Newgen Can Help?
Newgen offers an extensive portfolio of lending products and applications to cater to all NBFC industry-specific
needs. These products and solutions are available with both cloud and in-premise deployment models.

Newgen's cloud-based loan lifecycle management solution (LLMS), built on low code digital transformation
platform, enables NBFCs to stay future-ready.

Newgen's Loan Lifecycle Management Solution

Branch Web Portal Mobility Third Party
Agent

Corporate
Loans
SME Agricultural
Loans Loans

Retail Other
Loans Servicing All
Lending Products Loans
on a Single Platform

Configurable Low Code

Process Automation Framework

Core Rating Other

Banking System CRM Bureaus Systems
Newgen's Cloud-based LLMS
Solution for NBFCs Includes

Lead Management Solution

Loan Origination Solution

Retail Loan Origination

Commercial Loan Origination
Agri Loans
SME and MSME Lending
Supply Chain Finance

Loan Management Solution

Collections Solution

Enterprise Content Management Solution

Lending Analytics
10 Reasons to Choose Newgen's LLMS

1 4 5 8 9
Streamlined On-time and Configurable, Omnichannel Lower total cost
lending process in-budget rule-based experience to of ownership
with low code and implementation framework help serve
cloud-based customers better
capabilities

2 3 6 7 10
Faster product Seamless Real-time Dedicated center Proven track record
rollouts with an integrations that comprehensive of excellence of nearly three
off-the-shelf help leverage reports and audit team for the decades, with over
solution existing trails banking sector 1,400 deployments
accelerator investments across 69 countries
 info@newgensoft.com
www.newgensoft.com

About Newgen FOR SALES QUERY

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