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A decade ago, popular publications were tripping over themselves in an attempt to declare the ‘death of DSAs’ (Direct Selling Agents). Economic uncertainty meant that banks were cutting costs where possible, and DSAs were the first on the chopping block.
Branch expansion and a renewed focus on training employees in lead generation meant that they simply didn’t need these third party distributors any longer - despite the fact that they once formed the very backbone of the lending ecosystem.
Fast forward ten years, and the situation looks rather different. Building in-house distribution capabilities is harder (and more expensive) than it seems, and no matter how digital lenders go, there will always be some borrowers who prefer speaking to a human to address their doubts around the application process and hand hold them as they look for the best source of capital.
Today, distribution partners in various forms and formats account for an average of 30% of a lender’s retail book. This kind of command over the revenues of the financial services industry means that distribution isn’t dead and must be paid its due attention to improve not just the lenders’ acquisition funnel but also the borrower experience.
So, who is a DSA really?
A DSA is essentially a third-party referral agent for a lender. They bring in leads by scouting for individuals who are looking for a loan. DSAs are largely of two types.
The first - online platforms that partner with financial institutions and act as distributors. The second, and the focus of this blog - individuals who sign up as DSAs with multiple lenders, and earn a commission on every loan disbursed. Every bank could have a vast network of DSAs, who in turn will have their own sub-networks of agents.
Why should lenders improve their DSA operations (and how)?
DSAs are now spoilt for choice.
They work with multiple lenders, so building loyalty is tough. What can lenders do to foster a strong relationship with their DSAs? How can their lives be made easier while on the job?
Think tech-driven solutions that reduce chances of error and simplify borrower management. Bid goodbye to excel sheets and give DSAs access to a platform (through a handy tablet perhaps), that gives them a detailed view of every customer's profile, helps manage their field visits, calculates borrower eligibility, and improves DSA productivity - while also giving lender’s a bird’s eye view of their activity.
Data security must be the central pillar
Giving third parties access to sensitive borrower data is always a risk - especially considering that there are no real regulations governing the functioning of DSAs.
These agents are fully aware of their lenders’ policies and can easily spot loopholes to exploit (it’s no wonder then that the RBI in 2019 banned DSAs from conducting physical KYC verifications) - so it doesn’t hurt to be vigilant.
Digitization brings accountability
Fraud and risk management software alongside airtight data protection protocols can go a long way in protecting your borrowers in case their data falls into the wrong DSA’s hands.
A number of DSA networks still depend on manual records and excel sheets for data collection. Needless to say, this is prone to all kinds of errors. Lenders could miscalculate the loans disbursed and thus give out inaccurate commissions, and DSA’s themselves could misplace data and derail loan application processes.
A shared dashboard between lenders and DSAs will ensure transparency of data and help generate valuable analytical insights which will allow lenders to tweak strategy and GTM quickly and effectively. The key point here is that no personally identifiable information should leave the premises of the lender while a DSA gets to securely and seamlessly access insights and track progress of loan applications as well as their own partners’ activities on the ground.
No matter how quickly or to what extent lenders digitize their operations, DSAs are likely to remain a valuable lead generation tool for financial services players such as banks and NBFCs.
And despite them being third parties, they are, in essence, representing the lenders they partner with - so making their jobs easier is in everyone’s interest. At FinBox, we’re working on a variety of solutions that do just that - including unified journeys, no code credit links, cross platform operations and lender partner management dashboards. To learn more, get in touch here.