Artificial Intelligence: How conversational AI Tools are disrupting loan collection space for fintech sector, expert explains

The fast-paced technological innovations have revolutionised every industry, and the financial technology (fintech) sector is no exception. In the rapidly evolving landscape of innovation, while FinTech companies, including Lending Service Providers (LSPs), still struggle to fetch loans and improve their book the old way, they're seeing a glimmer of hope in powerful AI solutions. Dr Rashi Gupta, Chief Growth Officer of Rezo.ai, explains how conversational AI tools are transforming outputs in loan collection efforts with innovation, compliance and unparalleled efficiency.

 

Dr Gupta informs that the backdrop for the game-changing innovation in the loan collection space is set against the RBI's recent guidelines addressing lending arrangements between digital lenders and Non-Banking Financial Companies (NBFCs). She informs that before these, digital lenders commonly extended guarantees ranging from 20 per cent to 100 per cent to their lending partners, including banks and NBFCs, as protection against losses resulting from loan defaults. However, the RBI has now imposed a cap, mandating that these guarantees must not exceed 5 per cent of the total loan portfolio amount.

 

"The tightening regulations by the RBI have placed a significant 95 per cent of potential losses in the hands of lenders in case of defaults. Consequently, NBFCs and FinTechs in the digital lending sector have been forced to undertake substantial operational overhauls, adapting their business models to cope with rising costs. To navigate this challenging terrain, NBFCs and LSPs need to implement proactive strategies to acquire loans and improve their financial standing, enabling them to continue their partnerships," she avers.

 

The Chief Growth Officer of Rezo.ai opines that in the face of regulatory challenges, FinTech companies and LSPs are finding refuge in conversational AI solutions since they not only bring automation into play but also enhance the ability to reach large audiences — a feat that would not be possible without traditional contact centres burning a hole in the pocket. Tailored for FinTech and LSPs, cutting-edge Conversational AI-powered products are lending them a helping hand in optimising their financial portfolios by recovering loans with exceptional efficiency. Powered by advanced AI algorithms, she says these AI tools possess the remarkable ability to not just analyse vast datasets, uncover hidden patterns and spot trends that often elude human agents, but also to attain a staggering 90 per cent connect rate implying that of the number of borrowers contacted a remarkable 90 per cent actively engaged in conversations.

 

Dr Gupta says “NPAs are a huge problem in the lending industry be it with traditional banks, financial services companies or third party LSPs. In a way, what we have observed is that reducing NPAs needs a personalised approach to borrowers from the very first due payment. Human agents, engaged for the loan recovery process, often miss the critical aspects of a borrower’s profile, which if otherwise leveraged can prove to be very tactical in persuading them to pay timely.”

 

The AI agents take into consideration factors such as timings, preferred languages and other relevant factors based on the customer’s historical data and deploy calls which automatically leads to a remarkable 90 per cent connect rate.

 

“The greater the recovery, the lesser the NPAs, which highlights the preventive impact of AI solutions on averting loans from turning into NPA. This not only positively impacts LSPs' revenues but also trims down their operational costs,” Dr Gupta further added.

 

A traditional contact centre has only a 30-35 per cent connect rate. Conversational AI tools, on the contrary, can manage millions of automated calls every day, which is comparable to the capacity of a contact centre with tens of thousands of human agents. Owing to the capacity-building abilities of AI-powered tools, she says that a lot of NBFCs, banks and FinTechs, now including LSPs, have been able to optimise their financial portfolios and lower NPAs substantially through AI-driven insights and automation.

 

FinTech, due to its inherent flexibility in tendering loans to people in diverse demographics, has to deal with rural markets as well, which, contrary to popular belief in some quarters, are extremely diverse in terms of varying regional languages, dialects, accents and communication styles. Dr Gupta says it is important to capture the nuances involved in an AI-powered interaction with rural consumers, for example, a word can mean different things or there can be multiple words to convey the same meaning. Today’s AI solutions have the ability to converse and register responses in multiple Indian languages and dialects, which gives an enormously meaningful advantage while reminding a borrower of his/her payment delinquency.

 

There is often a spectrum of reasons behind borrowers missing payments, spanning from a temporary shortage of funds to simple forgetfulness and even intentional default. "Conversational AI agents meticulously analyse each borrower's profile and delve into the reasons behind payment delays. It then classifies borrowers based on similar characteristics, behaviour or needs to proactively address future payment risks. It intelligently segments customers based on their delinquency level, enabling the efficient allocation of resources and prioritisation of efforts. For example, customers who are only a few days behind on their payments require a different approach than those several months behind. This AI-driven, automated and tailored approach equips LSPs and NBFCs with the most effective collection strategies, allowing them to target their efforts on debts most likely to be repaid," she sums up saying.