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Noobie's Guide To Fintech Parlance Mostly In Credit Domain


NBFC = A Non-Banking Finance Company (also known as NBFI - Non-Banking Finance Institution) is a company that offers select set of banking services (like credit facilities, loans, under-writing, chit-funds, share trading etc.) without any banking license. They are not subject to banking regulations but are still classified as Regulated Entities (REs) and are registered with RBI in India. Their regulations are not as stringent and regulated as banks and thus have scope to innovate and specialize in catering to the needs of under-served segment - be it people or MSMEs - in providing access to the credit they need and deserve.

BNPL = Buy Now Pay Later. Some NBFCcompanies operating in this sector include Amazon Pay Later, PayTM Postpaid, Flipkart Paylater, Lazy Pay, Zest Money, Simpl etc.

STPL = Short Term Personal Loans aka Unsecured Term Loans. Some NBFC Companies operating in this space include PayTM, LendingKart, Pine Labs, MoneyTap, MobiKwik, PaySense, etc.

MSME Loans = Micro, Small & Medium Enterprises Loans. Some NBFC companies that are providing these services collateral-free are LendingKart, Kinara Capital, Indifi, Flexiloans, etc. 

Online Aggregators (OA) = These companies that list the lending companies on their sites offering their customers one stop shop for comparison of services from its pool of lenders. Take the case of OAs in STPL space, we'll have companies like BankBazaar, PaisaBazaar,

P2P Lending Companies = Companies that build platforms that enable P2P lending by getting NBFC P2P certification from RBI. Example FairCent, LiquiLoans, CreditVidya, Lendbox, RangDe, etc.  

Co-Lending = NBFCs are bridging the credit gap in India as much as elsewhere in the world. And the concept of co-lending was recently adopted by RBI, encouraging banks and NBFCs to come together to compliment each other and serve larger market segment. Until this a lot of NBFCs were also coming together in offering credit services. The dynamics of this space is changing that could be challenging the NBFCs at times; for instance, very recently the RBI has mandated the Banks to hold at least 10% share in the loans that NBFCs disburse via their channel; what started off as nudge became a mandate. This mandate on the bank, can potentially force the NBFC to have stronger relationship with the bank instead of merely transactional one. In summary, co-lending can be with other NBFC and/or bank.

NeoBanks = New means new. But what is new about these neo banks? Banking has moved from traditional/conventional brick and mortar (aka physical) branch locations to going digital leveraging internet and technology thus enabling online banking with Web and mobile apps. NeoBanks are banks without any physical branches and operating wholly online leveraging tech through and through. Some of the Newbanks in India include PayTM, Freo, RazorPay, InstantPayFamPayNiyo, Finin, etc.

PA = Payment Aggregators like Google Pay, Amazon Pay, PayTM etc. who aid consumers in managing all their utility billings from their super app.

AA = Account Aggregator in India is one of a kind framework whereby a network of RBI regulated entities with NBFC-AA license work together in bridging potential borrowers and their potential lenders digitally. AA empowers an individual with control over their personal financial data in a single place instead of it being scattered in silos. Think of AA as an inter-operable data-blind Consent Manager replacing the traditional, cumbersome process of issuing "blank cheque" and agreeing to a lot of granular permissions that may vary from lender to lender. There are quite a few AA entities that an individual can choose from. Some of them being Anumati by Perfios, Protean (formerly NDSL e-Gov), etc. For more do read the press release by the government, that should be worth your time. Simply put, with AA, an individual can easily and securely share his financial data digitally at granular level to various financial institutions to avail their credit services with faster turn around time.

PD = Probability of Default aka Default Probability is the likelihood that a borrower will fail to pay back a certain debt. For businesses, probability of default is reflected in the company's credit ratings; and for individuals, a credit score is one of the things that is used to gauge the default risk. Lenders will typically charge higher interest rates when default probability is greater. PD can depend not only on the borrower's characteristics, but also on the general economic environment.

This is work in progress. I do intend to update it with time.. so, stay tuned!