We have completed 40 days of lockdown due to COVID-2019 pandemic and now entering the 3rd phase. While there will be more relaxations in future but we now need to live with the new normal — SOCIAL DISTANCING, CONTACTLESS & DIGITAL OPERATIONS.
Lending institutions have been worse hit operationally specially the smaller ones who cater to lower income segments and SMEs as their operations requires regular physical interaction with clients for underwriting and collections.
So, while currently demand for loan Is on a rise but it is becoming difficult for institutions to underwrite them and manage collections.
In order to ensure business continuity, its now inevitable for Small NBFCs and MFIs to digitally transform their operations.
Following six measures will ensure smooth functioning:
1) E-KYC & E-SIGN: RBI has allowed NBFCs to perform e-kyc via offline Aadhar XML and recently even given node to Video KYC. E-sign are also legally valid as per provisions of Information Technology Act and can be used for digitally signing of loan documents.
2) TECH DRIVEN LMS: it is expected that there will be an abundant flow of leads but lending will be restricted currently. it is important to prioritise good leads. A tech driven Lead management system is need of the hour.
3) ALTERNATIVE DATA: Sole reliance on credit bureau data is not currently recommended as they themselves have decreased access to accurate data due to non-reporting by members and loan moratorium provisions. A mobile app-based application process provides a lender consent-based access to some very useful information about potential clients like transaction data, spending pattern, types of apps installed in mobile, contact information among others. Algorithms based on this information will improve both underwriting and collections significantly.
4) AUTOMATED CUSTOMER INTERACTION: Automated interactions with clients via IVR, WhatsApp, Mails and SMS can really help in improving overall efficiency of organisation. A customer who wants to know his loan enquiry status can just WhatsApp and get answer within seconds. A customer who wants to pay manually can get a payment link just be selecting an option from IVR. Company can send bulk SMS and mails to remind customers about upcoming EMIs.
5) NACH E-MANDATES: E-mandate registration via net banking and debit card can replace PDCs collected from clients for emi collections. They are completely paperless and activate instantly and there is no fear of signature difference. Sec 138 of Negotiable Instruments Act which deals with cheque bounces is equally applicable to dishonour of electronic fund transfer instruments.
6) PAYMENT LINKS: Cash collections can be replaced by payment links which can be sent to customers. One link can support various modes like Net banking, Debit card and UPI.
Phocket was born with the mission to drive financial inclusion through digital first approach. In these challenging times we are willing to provide tech assistance to Small NBFCs and MFIs, which really are the backbones of Indian financial system.