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Need for Consolidation Between NBFCs and Fintech Companies The micro-scale operations of the NBFCs can be easily expanded and performed at a global scale if they join hands with the technology partners in the form of Fintech firms

By Rajesh Gupta

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The fintech sector is growing at a very fast pace. In fact, fintech lending is not just another distribution channel but it is much more than that. This makes consolidation between traditional lenders like Non-Banking Financial Companies (NBFCs) and the modern-day fintech companies the need of the hour. Why? Well, NBFCs have an inherent advantage which fintech companies might not have, similarly, fintech companies have nimbleness and technology which acts as a great equalizer.

Benefits of NBFCs' and Fintech Companies' Collaboration

Typically, the growth of the NBFCs is accelerated with the fintech firms as the latter equips them not just to increase their efficiency but set a platform for their sustainability as well. In fact, the micro-scale operations of the NBFCs can be easily expanded and performed at a global scale if they join hands with the technology partners in the form of fintech firms.

Efficiency and sustainability are not just the only two factors that vote for the collaboration between these two financial set ups but there are several other dimensions to it as well. These include:

  • Wide expansion of the customer base

  • Innovative and highly customised products with better process management and faster execution

  • Detailed data analysis enabling better decision-making on part of the conventional financial players

It goes without saying that it would be hard for the NBFCs to think about expansion and serve the customers at a large scale without embracing technological advances that are introduced by the new-age technological firms. An example could be e-KYC facility (Know Your Customer) promoted by fintech firms that makes the process safe and hassle-free for the customers can prove to be a boon to the NBFCs.

Further, with the availability of innovative solutions in the form of modern-day technology, it becomes easier for the NBFCs to cater to various market segments in good detail. This is achieved by formulating the product designs to address the specific needs of the customers not just at the national level but at the global stage and introduce a streak of customisation. This can be easily done through collaboration with the fintech firms. For example, the insurance sector, a crucial area of NBFCs, can now come up with schemes that pay attention or cater to the varying needs of the buyers as per their demographic details, income and policy tenure they want to enrol in.

As a matter of fact, an association between the NBFCs and fintech companies can be seen as nothing but revitalising of old financial processes (that were time-consuming and hectic to pursue) with the latest technology that irons out the difficulties without stretching the process much. Thus, whether it is the completion of routine process such as KYC, form filling or the complicated ones such as data analytics and cyber security, fintech firms are a partner to trust and collaborate with.

As for the fintech firms, through the collaboration with the NBFCs, they can easily reach a wide customer base. This is essential and the primary step towards registering growth in the financial sector that is marked by huge customer base but was somewhat paralysed by the cumbersome processes of the yester era.

To conclude

It can be said that though the traditional players such as NBFCs will continue to be in the picture, the advent of technology-driven fintech firms will certainly add up to their utility, operability and sustainability. So, through a mutual collaboration, while the fintech firms can gain in terms of large customer base and expand themselves while equipping to serve the end customers better, the NBFCs can benefit from the technological advances brought in by the fintech companies. Thus, the collaboration between NBFCs and fintech companies can bear many fruitful results for the two and even their customers.

Rajesh Gupta

Founder, Cash Suvidha

Mr. Rajesh Gupta is the Founder of Cash Suvidha. 

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