In the earlier days, loan collections were invariably undertaken by agents by visits to the borrowers’ places. However the process of digitisation has brought about a sea of change in this function for the convenience of both borrowers & lenders. In the present pandemic scenario, digitisation has reduced the impact of collections. What indeed impacts collections is the problem of cash flows owing to lockdowns which have considerably influenced the level of debt. Certain Small Finance Banks have put In in place mechanisms which have dealt with disruptions to routine business activities. During festivals or known holidays, it prepones payments of EMI with the consent of the customer.
As much as 80%-90% collections are done in advance. The bank passes on the interest for the period of advance collections to the customer & what makes the process simpler is the adoption of digitisation. Cashless payment systems such as the UPI mode of collection were used. However the percentage of customers who used this platform was relatively low due to lack of awareness or apprehensions about digital methods in the rural & semi rural areas. Certain SFBs provide credit solely to the MSME sector. While festivals & strikes do not invariably impact the business of their customers, lockdowns have unfortunately affected their sales & cash flows. In such circumstances, the SFB have stepped in to understand the problems faced by small businessmen & worked out pragmatic solutions to ease their financial woes. Regular stream of collection gets affected during times of festivals, marriages, school openings or conditions like lockdowns, deaths ,job losses, illnesses etc.
While some of these occasions can be well known in advance, others are difficult to predict or quantify. Here technology constitutes a real boon. Intelligent collection systems can analyse patterns in transactions individually & collectively with different attributes such as time, geography, gender, profession, instances such as lockdown etc.AI/ML technologies have grown by leaps & bounds and reached a steady level of maturity. There is availability of more programmer friendly tools that software houses are widely leveraging. Prediction of occurences, early warning systems & self learning capacity have grown overtime. Planning of advance EMI for customers with their consent using these sophistications have helped customers to plan better & lead to far better customer relations. Such software enables customers to capture their responses into the software during a telephonic call or during direct visits or any other channels. This provides more insights into the creditworthiness of the customer & opens up options for better analysis. Some NBFCs using this software had better collection outcomes compared to the previous year.
NBFCs operating in non essential items employ more personalised ways which assists customers to procure their mindshare for clearing their obligations in time. During a lockdown period, it was possible for a lender to estimate the stress on its portfolio using a combination of macroeconomic data on sectors, financial data from multiple resources & on ground impact by collecting feedback directly from customers using telephone surveys.The insights gained from this exercise were leveraged into portfolio management preparations & provisional planning. The MSME restructuring scheme available to customers during the pandemic were utilised. Mobile based platforms with the help of fintech players were used for real time collection & receipt generation for seamless collection & convenience of the stakeholders.Analysing customer profiles based on their attributes, transactions & social media activities are important capabilities on which entities like CIBIL are dependent for deciding credit scores.
This gives a lot of valuable insight into customers. Companies make customised offers based on customers’ financial performance. There is considerable opportunity in our country for adoption of digital methods throughout its length & breadth . Cashless collection constitutes a miniscule portion of the total collection in the country & as such the penetration is pretty low. Payment gateways are becoming popular as these can be customised using customer information & offer convenient options such as UPI,NEFT,RTGS,IMPS etc for the customer to choose from. These facilitate proactively initiatiating customers’ payments at preferred times & dates based on past behaviour. These features will aid the penetration rate exponentially.
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Prof. K V Ramkrishna