In India, Accounting Standards come under the Institute of Chartered Accountants of India (ICAI...
If we reside in urban areas there a good chances that we come around various loan options such as banks, Non-Banking Financing companies (NBFC), or Fintech start-ups. However, each of them provides loans but still has a unique place in the financial ecosystem. It can sometimes become a hard choice to determine what option to choose when we have a requirement for the money.
In this blog, we will be explaining the main difference between these finance options and how to opt for the one medium that fits your requirement.
To understand the difference, it important to understand their meanings first:
Financial technology (Fintech) is used to explain new tech that seeks to automate and improve the use of financial services and delivery. Within this definition, Fintech companies usually operate to facilitate company owners, consumers, and corporations to better handle their functions of financials, processes, and lives by utilizing dedicated software and the process of algorithms. This can be carried out by Smartphone users and computer applications. The term Fintech is a grouping of “financial technology“.
Fintech also comprises the expansion and use of crypto-currencies including bit coins. That one section of fintech may see the most headlines; a huge amount of money still lies in the traditional global banking industry and its multi trillion dollars as market capitalization.
Non banking financial companies (NBFC), also known by the name of non bank financial institutions (NBFIs) are a financial establishment that proposes various banking services but does not have a banking permit. Majorly, this establishment is not authorized to take traditional demand deposits or any readily available funds, such as those in saving or checking accounts—from the public. This restriction keeps them outside the extent of predictable oversight from union and state financial regulators.
|Time to receive Money||Generally, 4-6 days||Generally, 1-3 days|
|Dependability of Customer Service||Medium||High|
|The flexibility of Rules||Low||Medium|
|Involvement of Paperwork||Medium||Low|
|Verification of documents||Typically manual||Typically automated|
|Signing of Agreement||Typically manual||Typically automated|
|KYC||Typically based on the signing of photo copies, self attestation, or eKYC for digitally superior NBFCs||Generally, eKYC or scan image upload based or virtual methods are adopted here.|
|Other paperwork||Typically high||Typically low|
In the terms of Interest rates, it is clear that both NBFC and Fintech are not efficient when compared to traditional banks. It is evident that fintech companies are beneficial when it comes to terms of convenience of the user and the speed of services. NBFCs are more advantageous in terms of financial products.
The following are the recommendation to choose between Fintech and NBFC:
Read our article:How FinTech Companies Help Startups to Grow?