Globally, the microfinance sector has grown rapidly in the last three decades. India, although lagging slightly behind in the sector, too has caught up, riding on the evolution of digital technologies and a substantial increase in mobile penetration in rural areas. Moreover, affordable internet access and cheaper smartphones have further boosted digital literacy and enabled traditional microfinance borrowers to evolve into more tech-savvy, social media-friendly, and experience-driven customers.
It all began with the introduction of the Pradhan Mantri Jan Dhan Yojana (PMJDY) scheme by the Indian Government in 2014 that set the course for the microfinance sector as we know it today. Government reports state that under the PMJDY scheme, over 417 million new bank accounts were opened till 27th January 2021. Later, the launch of the Digital India initiative further boosted the country’s journey towards the establishment of a digital economy.
As a result of the fintech revolution over the last decade, customer experience has undergone a sea change. While Fintech companies are taking center stage, traditional financial institutions are leaning heavily on their InfoTech departments in a bid to not lose out on new-age customers and to catch up with the fast-increasing competition.
For starters, smartphones and mobility have not only simplified things but also given the customer access to all banking services at the swipe of a finger. Surveys have shown that a majority of customers prefer to do their transactions online. Moreover, Artificial Intelligence and Automation have improved customer experience across industries. As a result of this, a majority of customers opt for mobile banking over the traditional way of physically visiting a branch. At the same time, customers’ preference for self-service options is also growing. So much so that the process of doing everything online has become more simple than visiting the branch. That is also why getting information, products, and services on their smartphones have fueled the customers’ need and expectations for omnichannel banking services.
Interestingly, this increasing penetration of mobile telephony and the internet have also given Fintech companies a better understanding of consumer behavior and how to use that data to reach specific target audiences. Several mobile apps serve as a source of information and store it in their data warehouse. Since big data not only influences markets and play a significant role in the ecosystem, it is also fast turning into a powerful tool to achieve financial inclusion across the country. That’s where mapping the customer journey is important and necessary.
Big Data helps in validating credit scores that are required in the approval process of loan applications. Besides saving time spent in the verification of the application, it also speeds up reference checks and validation by the banking executive. Moreover, it drives customer loan approval by hastening the processing of requests and disbursement of the loan amount.
The Big Data-driven model also plays a key role in psychometric evaluation of customers to credit loan repayment behavior based on the applicant’s beliefs, performance at work, attitude, and integrity.
Using Big Data, the microfinance industry will soon be in a position to be able to provide the exact product and service customers’ needs. To sum up, Big Data proves correct today’s popular adage: “work smarter, not harder”. In conjunction with the many aspects of AI, Big Data has already begun to influence decision-making not only in the microfinance sector but also in various other industries, be it healthcare, manufacturing, automobile, or even media and communications.
(Author: Pranay Bhargava is driving the data-driven initiatives at Sub-K. He has been a serial social entrepreneur for 15+ years. He has completed B.Tech from IIT Varanasi, MBA from AIM Philippines and earned CFA Charterholder from CFA Institute, USA.)