Finance at your fingertips: Two inclusive fintech models in India

Panel at the Inclusive Finance Summit showcases the value of customer-informed product design

What role can technology play in inclusive finance? Microfinance has long relied on the same strategies for reaching the underserved: a standardized product, a physical delivery model, and group structures. However, as the digital ecosystem evolves in emerging markets, the opportunities to disrupt the lending status quo and build customer-centric products have also expanded.

Across many of the markets where we work, more providers are lending to the unserved and underserved with more diverse lending models. New models can give prospective borrowers instant decisions and disbursements, decreasing reliance on physical branches and business correspondents. And digital operating models generate increased efficiencies, often resulting in cost savings over time. These savings can be passed on to customers in the form of reduced interest rates and fees, and increased incentives and loyalty schemes to drive retention and bring in new clients.

India’s robust enabling environment makes it the perfect test case for new models of lending. Nearly half of India’s 650 million mobile phone users own a smartphone, and competition has driven affordability, with high-speed data plans for as little as 149 rupees (US$2.30) per month. So it’s fitting that during the Inclusive Finance Summit in New Delhi in December, Accion’s Prateek Shrivastava joined a panel of industry leaders, including Arun Nayyar from Neogrowth, to discuss the evolving landscape of digital lending in India.

Accion portfolio company Neogrowth was established in 2013 to serve retailers who were denied finance based on traditional underwriting methods. During the panel, Arun discussed how the company combines a “tech and touch model” with a customer-centric business philosophy, ensuring that products are focused on customers’ financial needs, preferences, and goals. Neogrowth introduced a daily repayment function to account for customers’ cash flow cycles. The company also promotes customer loyalty through a brand ambassador program, which serves the dual purpose of elevating client voices and expanding Neogrowth’s brand awareness. As a result of these initiatives and consumer-centric approach to product design, Neogrowth has maintained high renewal rates and low default rates.

Focusing on the implications of inclusive fintech beyond lending, Prateek discussed Bizom, a sales automation company based in Bangalore, which is using technology and data to support supply chain actors, including distributors and retailers, to sell goods more efficiently. The company provides a comprehensive suite of services to support data-driven insights at every stage of the supply chain. Bizom aims to disrupt India’s high-touch and inefficient retailer system through real-time analytics. The company was recently ranked the third-fastest growing tech company in India by Deloitte and has over 6 million retailer outlets on its platform.

While Neogrowth and Bizom cater to different types of customers, they have several shared principles in the design and operation of their business models. First, both companies invest in developing a comprehensive picture of their customers’ needs, preferences, and goals, and they leverage these insights to solve for specific pain points. Rather than employing a ‘one-size-fits-all approach,’ they use data-driven insights to design customized products that cater to customers’ individual needs, creating a sense of trust and loyalty between the company and the customer.

As a financial service provider, simply interacting with a customer does not guarantee that they won’t move to another provider. Loyalty is created by creating products that customers value.
Prateek Shrivastava

Second, both companies use the data from customers on their platforms to continuously refine product offerings to meet customers’ needs. Neogrowth has taken this one step further and has been successful in leveraging customer data to offer targeted add-ons, such as insurance and savings products

As the lending landscape in India continues to expand and become more competitive, one measure of success will be in how well financial service providers understand and adapt products to meet the changing needs of a diverse and dynamic client base. Technology can undoubtedly drive operational efficiencies, but financial service providers should be careful not to overlook benefits that technology can bring in driving enhanced customer understanding as well.

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