Digital transformation in NBFCs – Boosting efficiency for MSMEs

By Tashwinder Singh, CEO and Managing Director, Niyogin Fintech Limited
The Indian financial ecosystem has undergone a remarkable evolution over the past decade,
marked by substantial growth and widespread digital transformation. What was once reliant on traditional brick-and-mortar institutions has now transitioned into a dynamic landscape where financial services are seamlessly accessible through robust and integrated digital channels.

Tashwinder Singh

The key driver of this transformation is India’s Digital Public Infrastructure (DPI), which has emerged as a beacon of innovation and efficiency on the global stage. As digital NBFCs continue to harness the power of AI/ML-driven lending models, they are poised to redefine the paradigms of MSME credit, unlocking new avenues of growth and opportunity for businesses across the spectrum.

Improving customer acquisition
Fintech companies handle vast amounts of data, which AI algorithms can examine to
comprehend customer patterns, preferences, and behavior. They can effectively target specific customer segments with their marketing strategies by gaining insights. Fintech businesses can target their marketing campaigns with specific customer preferences and behaviors in mind. By utilizing machine learning algorithms, AI can examine consumer data and generate tailored offers and recommendations, leading to new customer acquisitions.

The power of AI in Operations and Management
AI-powered facial recognition technology verifies the identity of individuals by comparing their facial features against official documents or previously captured images. This helps in
preventing identity theft and fraud during the onboarding process. AI enables biometric
authentication methods such as fingerprint scanning, iris recognition, and voice recognition. These technologies provide an additional layer of security during customer authentication and transaction verification. Furthermore, KYC regulations mandate that financial institutions authenticate the identities of their customers. AI-driven solutions assist fintech firms in meeting these requirements by precisely confirming customer identities and keeping thorough records of the verification process.

Analyzing credit risks and underwriting for MSMEs
AI can help with creditworthiness and risk assessment of potential customers for fintech
companies that provide lending or credit services. Hence, these algorithms can make more accurate credit decisions allowing NBFCs to acquire customers while minimising the risk of
defaults.NBFCs can predict the future financial performance and repayment patterns of MSMEs through AI-powered predictive modeling. Artificial intelligence algorithms can estimate the probability of default or late payments by evaluating past data and spotting predictive patterns.

This helps NBFCs reduce risk and maximize lending decisions. In the future, compared to
conventional credit scoring techniques, AI-based credit scoring models will be more accurate in assessing the creditworthiness of MSMEs as they provide authentic credit scores and loan pricing by using machine learning techniques to analyze many data points and identify pertinent risk factors unique to MSMEs.

AI revolutionises NBFC underwriting procedures by automating labor-intensive manual
processes such as data collection, verification, and analysis. This automation accelerates
processing, reduces the likelihood of human error, and enhances operational efficiency,
enabling NBFCs to underwrite loans for MSMEs with high speed and affordability.

Enhancing customer service
According to PwC, 83% of Indian Financial organizations have identified enhancing customer experience as the top driver for AI-enabled use cases. Chatbots and virtual assistants powered by AI can address customer inquiries and support requests around the clock, in real time. They offer quick answers to frequently asked questions, aid with product inquiries and assist customers in navigating troubleshooting procedures, thus enhancing the responsiveness and availability of customer service for MSMEs. By offering customer support in vernacular languages, businesses can improve engagement and retention rates among users who may otherwise struggle to communicate effectively.

This fosters loyalty and strengthens relationships with customers. AI tools can analyze customer feedback through surveys, reviews, and social media, to extract valuable insights and identify areas for improvement. By understanding customer sentiment and preferences, MSMEs can make data-driven decisions to enhance products, services, and customer support processes, ultimately improving overall customer satisfaction and loyalty.

Overall, the future looks optimistic as digital transformation has simplified access to finance, personalised services, and improved support for MSMEs empowering them to spearhead economic growth and promote financial inclusion in India.

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