How the modernization of payments is re-fueling growth for NBFCs

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Following the March 2020 Covid-19-induced pandemic lockdown, NBFCs and lending firms took a massive blow and suffered multiple setbacks amid stressed borrowers and pandemic insolvents

Despite this slowdown, NBFCs have now recovered up to 55% from pre-pandemic numbers and are evolving using new technology and innovative services

Digital payment companies work directly with NBFCs, which makes the process more efficient and strengthens the overall framework

The credit ecosystem has seen remarkable changes, including operational changes, availability of liquidity, new borrowing and lending policies and regulations. The modernization of payment technology has been instrumental in driving this growth and development, from video KYC to contactless repayment options to automated technology-driven banking that is paving the way for easier access to credit, which is critical to economic recovery.

Following the March 2020 Covid-19 induced pandemic lockdown, NBFCs and lending firms suffered a massive blow and suffered multiple setbacks amid stressed borrowers and pandemic insolvents. Internet-based lenders had lost momentum, with both collections and loan disbursements falling 90%. According to the latest Data from the National Automated Clearing House (NACH) platform, about 40.1% of auto debit transactions by volume failed in October due to the country’s lower income levels.

Despite this slowdown, NBFCs have now recovered up to 55% from pre-pandemic numbers and are continuing to evolve using new technology and innovative services. With updated systems and a modern payment system, they are rapidly converting their models to ensure high quality performance while preparing for the next wave of transformation.

The RBI guidelines on imposing credit limits by multiple banks have expanded the latitude for NBFC lenders and further anchored them as systemically important.

Modernizing to Adapt and Thrive

The importance of strategic partnerships in renewing the payment traffic landscape in the new normal

With digital capabilities and increasing automation, the entire banking landscape will see a positive redesign. Strategic partnerships are essential for any business to generate long-term profits. Digital payment platforms work with financial institutions to rebuild the payment infrastructure and innovate for a seamless online banking experience. In contrast, banking institutions are working closely with digital payment companies to improve their technological infrastructure and meet the ever-changing needs of consumers and millennial businesses.

Strengthening the Indian credit infrastructure

Digital payment companies work directly with NBFCs, which makes the process more efficient and strengthens the overall framework. With increasing interconnectedness and interdependence, fintechs in the lending, asset management, deposits and lending system sectors are gaining traction by integrating their innovative solutions and cutting edge technologies to make borrowing easier and streamline lending infrastructure while expanding the horizons for NBFCs as as well as banks and other financial institutions.

Given the current global mindset and the pace of changing expectations, NBFCs need to seek strategic partnerships by working with new fintechs to achieve agility in this environment.

Loan Automation – Facilitating seamless borrowing and collection

There is still tremendous leeway for companies to adopt innovative digital payment solutions on a large scale. For example, lenders and NBFCs have a significant number of agent-based cash-dependent recoveries. However, that physical currency system can quickly be replaced with electronic mandates, UPI and QR-based collections, with the company opting for instant payout and collection solutions to automate credit management.

Instant loan disbursement solutions and an integrated loan disbursement approach via API banking are currently being used by digital payment companies. This solution is used by businesses to facilitate instant loan withdrawals from a lender’s bank account via IMPS or UPI, verify the borrower’s bank account using the API, and allow borrowers to authorize lenders to withdraw their accounts through an automated loan repayment system In the form of subscriptions to be debited via standing instructions (SI) on cards or e-mandates on bank accounts. Continue to the recent publication by NPCI, UPI Autopay can be used to authorize an automatic charge on a one-time approval with a UPI-enabled app.

The Future of NBFCs – Towards a Digital Payments Ecosystem

Digital payments are seamless, inexpensive, and give NBFCs access to a much wider customer base. The increased mobile and internet penetration has enabled NBFCs to connect with their customers online and fill the gap so they can complete the entire credit cycle (application, e-KYC and electronic signature of the withdrawal) through their mobile devices.

Despite the regulatory steps being introduced in the financial technology field, such as: Regulatory sandbox of the RBIwhich recently included cross-border payments as the second cohort after retail payments as the first, new challenges continue to emerge given the dynamism of the sector.

As a pioneer in transforming the introduction of innovative market offerings, NBFCs have completely redesigned the way lending is perceived and executed. These digital lenders will be instrumental in helping the economy recover from the slowdown caused by the pandemic. which are equipped with advanced features to provide a seamless remote Loan with digital document Verification that enables full contactless experiences in a non-face-to-face format.

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