By Nehal Gupta, Founder and MD, AMU
The contemporary world is extremely dependent on the development and application of technology. There are numerous technological innovations, but few have transformed the financial services industry as profoundly as Artificial Intelligence (AI) has done. Where the improvement in Non-Banking Financial Companies (NBFCs) in this instance is marginal at best. As opposed to standard banks, NBFCs are characterised by great speed and mobility and are able to tap into previously unmet markets.
More than ever, given the rise in sophistication and widespread availability of such technology, these firms can overhaul their current business models, enhance their operational approaches, and carry out more advanced and efficient solutions than ever before.
The development of AI in the financial services sector
New innovative solutions are emerging, and AI, as one of them is reshaping the future of financial services across the world. NBFCs, being one of the most rapidly expanding sectors in finance, can leverage AI for growth and innovation because they are fast growing sectors. But while banks have been saddled with traditional systems and stringent regulations, NBFCs usually enjoy more freedom and speed to adopt modern technologies, placing them in the lead of the digital revolution in finance.
AI in Non-Banking Financial Companies can be used for one of the first applications – the evaluation of credit risk. Until now, lenders relied mainly on credit scoring models and legacy data on a client. However, such models often do not grasp the complexity of a person’s business’s financial profile, a common problem in countries with large informal economies. AI, on the other hand, can analyse large amounts of data, from historical transaction information to phone use and even social behaviour.
AI algorithms are able to analyse this data at astonishing speed, recognising trends and yielding more precise forecasts about the borrower’s capability to pay back loans. This enables NBFCs to offer credit to a wider and more diverse client base, which ultimately drives financial inclusion. With AI, it is possible to extend the reach of credit for those who are otherwise excluded from traditional banking, such as small enterprises, entrepreneurs, and those living in remote or rural regions.
Enhancing customer experience through AI
Another important area where AI has a significant impact on customer service is the NBFCs. With customers demanding speedier, more personalised services, NBFCs are using AI-powered devices like chatbots, virtual assistants and even chatbots in order to fulfill these requirements. These AI tools are able to handle many transactions and customer inquiries in real time, providing immediate assistance without human intervention.
This is a shift that has several benefits. It allows NBFCs to cut operating costs by automating repetitive tasks. In addition, it allows employees to concentrate on more intricate customer requirements and the growth of the business. Additionally, AI-driven personalisation makes sure that customers get personalised financial solutions and advice, which boosts the satisfaction of customers and increases loyalty.
The function of AI extends beyond just providing transactional support. With the help of sophisticated machine-learning models, NBFCs are able to offer personalised financial products that are tailored to the financial behaviour of individual preferences, lifestyles, and conditions.
AI in fraud detection and prevention
Problems with fraud have for a long time affected the financial industry and NBFCs, too, are not exempt. The development of AI, however, offers the possibility of a solution. With predictive analysis and pattern recognition, AI algorithms are able to monitor transactions in real time by identifying any unusual activity or deviation from the standards. These systems are able to detect potential fraudulent transactions and alert institutions before any harm is caused.
Additionally, AI systems are continuously developing and learning. In the process of processing data, they improve their ability to spot fraud patterns and adapt to the latest threats. This innovative method of detecting fraud does not just reduce the chance of financial loss but increases trust among customers who expect to have security and a safe environment.
AI and the rise of data-driven decision making
For the NBFCs, data is the power. The ability to tap into huge quantities of market and customer information to make educated decisions is a major advantage in the current competitive environment. AI can help financial institutions combine and analyse information from a variety of sources and provide actionable data immediately.
By using advanced analytics and machine-learning models, NBFCs are able to identify new opportunities to grow. AI helps identify under-explored markets, anticipate the needs of customers, and optimise pricing strategies. This kind of data was not available before, but now, thanks to AI, data-driven decisions that improve profitability and allow for the growth of businesses are possible.
In the years ahead, AI will further enhance the capabilities of NBFCs, particularly in areas like customer engagement, risk management and financial inclusion. Businesses that can quickly adapt to the changing times will be leading the way in creating the future of finance.
In the end, artificial Intelligence has become an effective driver of change within the financial services sector as well as specifically for Non-Banking Financial Companies, the possibilities it opens are transformative. With the advent of AI, NBFCs can expect to spur innovation, simplify operations, and provide top-quality customer service. If they invest in technology, human capital and regulatory compliance, the NBFCs will continue to be at the forefront of the digitalisation of finance.