Conversational Analytics / 27.05.2013

How Indian NBFCs are using Mobility to Lower Operational Costs and Increase Revenues

Synopsis:

NBFCs in India are struggling to maintain high margins, fighting high borrowing and lending rates. However, across the globe, 1 technique is consistently effective in increasing overall profitability: boosting operational efficiencies. Operational efficiency, or achieving more productive operations through lower investment, can be achieved in two ways: reducing costs and increasing revenue. This article explains how to pursue both of these objectives through technology solutions.

The problem:

NBFCs in India are subject to the same problems of NBFCs across the developing world. Major hurdles include high interest rates, lack of physical infrastructure, and limited purchasing power of the target market. These inhibiting factors limit the margins that NBFCs are able to achieve per customer. Instead, Indian NBFCs must focus on achieving large volumes of customers. And when it comes to recruiting large numbers of customers, there is no method to beat the direct selling approach. But with this comes the challenge of a huge field sales team, the costs associated with managing a distributed work force, and the manageability and fraud/ misappropriation.

Let’s take for example take the Microfinance segment in India. Deutsche Gesellschaft für Technische Zusammenarbeit (GTZ) GmbH published a report that entitled “A Risk Management Framework for Microfinance Institutions,” which claims that operational Risks like Human Resources risk, Information & Technology risk, fraud (Integrity) risk etc. may cost MFI companies more than 10% of their gross outstanding portfolio. These are primarily a result of the inefficiencies of the market and the complications of managing a mobile field force.

The solution:

Despite these challenges, business across the globe have found that they can achieve high profits in lending to developing world markets by leveraging the mobile phone. With a penetration of 934 million devices 53% of which is in rural India, mobile phones are a boon for NBFCs. Here’s how the businesses can enhance profitability by leveraging mobility:

1. Decreasing Operating Costs:

a) Decrease travelling costs: Route planning, Geo-fencing and lead management features of mobility solutions can help make sales visit more meaningful. Meeting 8 prospects instead of 4 in a day means the travelling costs per lead have virtually comedown by almost 50%.

b) Reduce cost of fraud/ misappropriation: Collections can be realised real-time, receipts printed instantaneously etc. This means that almost every penny collected is as good as in the bank immediately.

c) Reduce default rates: On time payment reminders and increased trust due to immediate receipts will encourage customers to make payments on time.

d) Reduce cost of customer communication: Contact center automation and smart IVR and speech recognition tools can help bring the cost of customer communication down by 50%. Early case studies show that gross cost per call have come to as low as Rs. 6 from Rs. 14  per call for each customer.

2. Increasing Revenue

a) Increase efficiency of the sales team: Using mobile phones to quickly fill out forms, and send them to the head office, makes each customer meeting quicker and more productive – giving field agents more time in the day. More time, means meeting more customers, which can only mean one thing: more sales.

b) Sustain customer engagement through to the closure of the deal: 70% of all prospect drop-outs in a sales process is due to disengagement due to delay says renowned sales advice portal. However, mobility enables instantaneous customer onboarding through PoS devices, credit worthiness test on-site, discount advice based on preset rules, etc. This immediate onboarding sustains the customer’s engagement long enough to close the sale.

d) Geographic planning for optimal use of time and resources resulting in increased business: Ability to manage field resources through location based services can ensure the best productivity resulting in increased business.

e) Increased accountability and business management resulting in more business: Instantaneous information on lead management enable managers at the head office to make informed and real-time decisions based on the most up-to-date information. This is translates into better conversions and hence increase in revenue.

Next Steps:

Many NBFCs in India have achieved these gains through Uniphore’s mobility solution, mForce. Recently, one of India’s largest vehicle finance companies used mForce to increase their revenues and lower their costs, resulting in a 300% impact on profitability.

About Uniphore: Uniphore Software Systems is the leader in Multi lingual speech-based software solutions. Uniphore’s solutions allow any machine to understand and respond to natural human speech, thus enabling humans to use the most natural of communication modes, speech, to engage and instruct machines. Uniphore operates from its corporate headquarters at IIT Madras Research Park, Chennai, India and has sales offices in Middle East (Dubai, UAE) as well as in Manila, Philippines.