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How is new technology helping NBFCs evolve

How is new technology helping NBFCs evolve?

How is new technology helping NBFCs evolve

Technology is changing our lives in more ways than we can imagine. Some impacts are obvious, like using the digital medium to communicate or buy anything from the comfort of our homes. Some are not so obvious, like the targeted online promotions you get when you browse social media.

Technology has had an impact on the financial sector too. Non-Banking Finance Corporations (NBFCs) particularly are adopting technology to develop innovative products that can cater to all segments of society and keep the operational costs in check.

This post focuses on two emerging technologies, Artificial Intelligence (AI) and Robotic Process Automation (RPA) and their impact on the banking industry.

Use of Artificial Intelligence And Robotic Process Automation By NBFCs

Artificial Intelligence is a branch of computer science that enables machines to imitate human intelligence to solve intricate problems. As it mimics human intellect, it is called artificial intelligence. The use of robotic process automation software to automate manual business processes in the financial industry is known as Robotic Process Automation.

The use of RPA and AI in the financial industry is bringing about sweeping reforms in the sector; some of them are discussed below:

  1. Customer Service

    NBFCs offer personalised and instant customer support to their customers with the help of Chatbots and live chat. Chatbots and live chat software use artificial intelligence programs that operate on preset rules. Advanced Chatbots can be integrated with deep learning capabilities to learn from customer interactions and improve the customer experience in real-time.

    NBFCs are flooded with customer queries and service requests daily. RPA can handle mundane and low priority tasks; this allows the customer service team to focus on high priority tasks that require human interaction.

  2. Compliance

    NBFCs and banks must comply with statutory regulations, as laid down by the Reserve Bank of India and the Indian Government. Despite employing the best minds, total compliance with rules when dealing with a wide range of products like equity, bonds, insurance, debt, etc., can be challenging. Employing artificial intelligence helps improve reliability in risk assessment with systematic frameworks and eliminates manual errors.

    Implementing RPA can assist NBFCs in better compliance with rules and regulations. RPA works round the clock and can scan through a substantial number of transactions in a smaller span to identify any discrepancies or compliance issues.

  3. Risk Assessment

    Another use of AI in the financial sector is in the risk assessment domain. Bad loans are a challenge faced by all banks and NBFCs. AI financial analysis helps banks filter loan applications better. Real-time analysis after loan disbursement can also benefit financial institutions; they can take action based on the early signs collated from various data points. If a borrower defaults on utility payments, then it can be an early sign of loan default.

    Shriram Finance uses Artificial Intelligence to offer personal loans to its customers based on an alternate data-based lending program.

  4. Efficiency in Data Handling

    The use of Artificial Intelligence in investment banking has multifold benefits. Simple AI tools help reduce the information overload threat faced by investment bankers. A simple implementation of an AI system could remove the threat of information overload for an investment banker. Unlike the technology used before, analytic tools used today don’t rely on a large data pool. Data used from interactions with customers is used for analysis. Artificial intelligence provides credible inputs after removing anomalies and duplication. AI helps investment bankers make more analytical decisions without being overwhelmed by all the data.

  5. Know Your Customer Process

    Client onboarding for banks and NBFCs requires following strict Know Your Customer (KYC) guidelines. Automatic KYC verification with the use of AI ensures quicker onboarding without relying on only the staff. It also removes the scope of any human biases and errors.

    NBFCs and banks spend a lot of time and incur enormous costs in validating the accuracy of the information supplied by customers. Robotic Process Automation helps NBFCs to collect and validate customer information automatically. RPA helps financial institutions complete the process faster with fewer errors and at a lower cost.

Benefits of Using RPA And AI In The Finance Sector

The benefits of using RPA and AI can be understood by looking at the following two sets of data:

  • A study by Accenture states that AI will add $1.2 trillion in value to the financial industry by 2035.
  • As per Juniper Research, traditional financial institutions can cut 22 per cent of their costs by 2030 by using artificial intelligence.

The use of RPA and AI in the finance domain has the following benefits for NBFCs and their customers.

  1. A Superior Customer Experience

    The most visible use of AI in the financial industry is in the area of customer service. Most of you would have experienced this first-hand. Many companies have Chatbots on their site; as soon as you visit the website, the Chatbot pops up and, based on preset questions which you answer, it can provide you with a solution or direct you towards the right path.

    Chatbots offer instant and personalised support to the customer, which saves time for both the organisation and the customer. Users get quick and helpful solutions for their problems and the organisation gains by attracting a higher number of potential customers.

    The use of RPA in the account opening process helps the banks and NBFCs reduce the processing time for account opening and loan disbursement. Quicker processing gives a tremendous boost to overall customer satisfaction.

  2. Personalised Solutions

    Artificial intelligence-based solutions offer customers tailor-made solutions based on their requirements. For example, you can get a financial plan or loan based on your requirement and credit score.

    Using AI tools, banks leverage customer data to get insights, offer lower/higher loan interests and cross-sell products based on the user profile.

  3. Improved efficiency

    Technology can help financial institutions improve their efficiency to a great extent. The processes become much faster; NBFCs gain from their employees and processes being more productive. Customers also stand to gain when the efficiency of service providers improves with a lower turnaround time.

  4. Cost Saving

    Implementation of RPA and AI in the finance industry can help organisations save costs by reducing the human resources requirements, enhanced efficiency, lower errors and reduced defaults and, thereby, increase their profits. Reduced costs benefit the consumers too, as their service charges reduce over time.

  5. Automated Debt Recovery

    AI tools also help lenders in automating their debt collection. Access to a complete summary of the client's borrowing history allows the lender to send out automated reminders that save time and cost and reduce bad debts to some extent. Customers also gain from receiving messages about due payments. With timely reminders, they are not likely to miss their EMIs and are saved from paying late charges that may occur due to late payments.


The use of AI tools by Shriram Finance is an example of how employing RPA and AI in the financial industry is changing the user experience forever. SCUF has extended credit to many borrowers with no prior credit score based on the alternative credit rating. This enabled customers with no credit history to borrow and also gave them a chance to build a solid credit profile with timely payments. Enhanced use of modern technology benefits both the organisation and the customer.

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