Banks and financial institutions can no longer depend on old ways to recover NPAs and deal with delinquencies. They need to up their game by adopting technologies like machine learning and chatbots, and find ways to efficiently manage and optimise their data.
While the world around has continued to grow digital, banks and financial institutions have not been able to match the pace, owing to their legacy systems and other factors. This has brought down their reach, especially since the users are beating a path to digital payment platforms’ door.
Government initiatives like Digital India campaign, the demonetisation drive, GST, Digital IndiaStack etc., have made certain structural overhauls in the way the Indian economy used to work before. As of today, a number of businesses and individuals have registered their digital footprint, creating a huge opportunity for banks and financial institutions.
While banks have a learning curve ahead of them, fintech solutions come armed with ready-to-deploy solutions that also leverage the sweeping wave of digitisation. With the correct use of technology, fintech firms are able to create rich profiles of users, best understanding the unique requirements and challenges faced by the user. Furthermore, the financial technology platforms also directly reach out to these users via digital and social media, in order to significantly expand the customer base for banks and financial institutions.
While this just happens to be the tip of the iceberg, the digitally empowered fintech enterprises also contribute by solving the delinquency challenge faced by banks and financial institutions. In the case of bad debts, when users go under the radar – changed their address or phone numbers, they can be traced via digital mediums. This is simply the beginning of how fintech services will help legacy systems and banks control the growing problem of non-performing assets (NPAs) and delinquencies. Let us look further at more such use cases.
Getting users hooked while spreading digital financial literacy
An informed user is more likely to be a good customer, and fintech players are actively coming up with gamified digital platforms for spreading financial literacy. In the guise of quirky and interesting quizzes, surveys, infographics, rewards and recognition system, fintech players are delivering important knowledge on financial management, including safe banking practices, tax planning, saving and investing, delinquency management and credit awareness.
Making conversations non-intrusive and effective with chatbots
For long, banks and financial institutions have been chasing their clients by repeated calls or sending field agents their way. This approach has actually been counterproductive, adding only to the mental harassment of the borrowers. Hence, it doesn’t come as a surprise when debtors try their best to avoid such confrontations and reporting such calls as spam. Deployment of chatbots, powered by deep learning and artificial intelligence algorithms, offers a radical transformation to such a regressive and intrusive approach.
Borrowers tend to want to maintain details of loan or repayment confidential and, hence, wouldn’t openly respond to repeated calls. Perhaps this stems from the negative perception of lending that is still upheld by the society. However, by deploying chatbots, banks and financial institutions can easily automate a number of processes and improve customer qualification.
Since 2017, various banks have been adopting chatbots, including YES Bank, ICICI and HDFC. The trend will gain more prominence in 2018, owing to its multiple practical applications. A bot can send updates and reminders and further connect with credit takers, in case they are facing any challenge. Since the entire transaction happens online, via text messages or chats on messenger, users are more likely to respond in time. Besides, they will also appreciate the non-intrusive and conducive means adopted by banks and financial institutions in reaching out to them.
Machine learning automation and web negotiation portal
A number of fintech solution providers are utilising the scope of machine learning in generating trustworthy user profiles. Since the technology is able to self-learn by computing more data, it provides any red flags or uncertain patterns, right at the very beginning. In addition to forecasting any defaults well in advance here is how the technology allows banks and financial institutions to combat delinquency.
In certain cases, defaulters may have a genuine interest in paying back. However, due to a change in their financial status – perhaps a loss of job, personal tragedy etc., paying becomes a challenge. With the help of machine learning automation, fintech solution providers reconnect with such borrowers, providing them with a web platform for negotiation. Users may access this portal to drop their challenges and attempt a reduced EMI or complete closure. Thus, the platform offers financial institutions with fully automated NPA recoveries that leverage machine learning, in order to recover outstanding payments from long overdue customers.
Data enhancement engine for data cleansing and efficient operations
Another significant way in which fintech service providers contribute towards controlling delinquencies for financial institutions is by digitally enhancing their data. The intelligent and self-learning engine is capable of detecting and correcting inaccurate records, and provides a clean database to work on. For a financial institution, inaccurate data can grow quickly; thus, cleansing it is important to increase business efficiency. Through tool such as these, financial institutions are able to target the right customer, thus saving them time and money, whilst disrupting the traditional modus operandi.
This is just the beginning of fintech services solving real-world problems for banks and financial institutions. The combination of fintech and legacy systems adopted by several banks and financial institutions would result in an efficient and flexible system, smooth customer service, whilst controlling the staggering problem of delinquencies.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)
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