The Alternative Financial Services Association of North Macedonia
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Availability, efficiency and speed as major advantages of the non-banking financial sector

The non-banking financial sector, as one of the major sectors of the Fintech industry, has seen rapid growth and development in recent decades, boosting the market and promoting the financial services industry worldwide.

The essence of non-bank financial institutions (NBFIs), also known as financial companies, is to meet the short-term financial needs of citizens for fast, efficient and simple financial services, by applying advanced and innovative technology to all the channels that consumers prefer, with emphasis on digital channels.

But what essentially differentiates traditional financial institutions and non-bank financial institutions? Are they competitors?

It can be said that traditional financial institutions and non-bank financial institutions are not essentially competitors, as there are several major differences between them, both in terms of target groups, in terms of technology, clients preferences, etc., but in general,  it can be concluded that these differences actually make both sectors complementary entities in the financial market that contribute towards increased financial activity and the progress of the entire industry.

One of the major differences is technology. Financial companies use state-of-the-art technology solutions in their services that provides them to complete all procedures within seconds, from a computer or mobile phone, to all application procedures, check the applicant solvency and obtain a response within minutes, if the application is approved. The advantage of non-bank service providers is that their technology solutions are up-to-date, making them highly efficient, while with the increased availability of the internet and changing customers’ habits for access to digital channel services, financial companies can provide customers with the fully new, digitized process, rather than hours spent in branches or filling out piles of documents.

Also, their company culture and attitudes are similar to those of start-up companies, whose focus is on delivering efficient service and great customer experience, opposite to the global corporations, which often revolve around difficult bureaucratic procedures.

Clients of financial services are usually those clients who need small, micro loans to help meet unexpected financial needs, to cover unforeseen household expenses, and so on. These products are mainly intended for short-term use, usually up to 12 months, thus not forcing the consumer to enter into long-term secured financial relationships.

Full personalization, immediacy, simplicity and affordability. Non-bank financial institutions offer individual access, flexibility, discretion, simplicity in application, which includes avoiding desk procedures and unnecessary documentation, as well as excluding notarial costs. They are applied online, via any internet device, in a short procedure the applicant’s solvency is checked, and then the loan is re-approved online, which is not the case with traditional financial institutions where there are extensive procedures, gathering required documents, securing guarantors, visiting the branches on several occasions and so on.

Financial companies also open branches and hire local staff in rural areas and smaller towns where traditional financial institutions have shown no interest in working and serving consumers.

In terms of products, traditional financial institutions issue larger amounts over a longer period of time and until recently, it was almost impossible to obtain a loan from a traditional financial institution in the amount of 6,000, 10,000, 15,000,000 denars, amounts which are often urgently needed for some intervention for some unforeseen costs. On the other hand, non-bank financial institutions help clients address acute financial needs, where time plays a decisive role. The main idea of ​​non-bank financial institutions is based on short-term liabilities, which determine the advantages of non-bank loans in situations where money is needed quickly and the repayment period is not long. As the loan amount is much lower than in traditional financial institutions, the bureaucratic requirements are therefore significantly lower.

Also, it is very important to mention that another main thing that differentiates the non-banking financial institutions from the traditional financial institutions is the source of financing. Unlike the traditional financial institutions, the non-banking financial institutions do not collect deposits, ie savings deposits, which are the primary source of cheap financing and then lending, but they fund their activities either from own funds or, to a large extent, from loans.

That is why the activities performed by financial companies are a real complement to the credit activity of traditional financial institutions. Their work can also be called positive competition that contributes to changing the conservative approach to lending and citizens.

In Northn Macedonia, representatives of the non-banking financial sector are financial companies that represent an industry that has been growing at an accelerating pace in recent years, confirming that the population needed precisely these types of services.

In order to create responsible practice, long-term collaboration and positive evaluation by consumers and market regulators, as well as presenting to the general public the various opportunities that financial companies using Fintech can provide, in May this year, Association of Financial Companies was comprised, which currently comprise 7 financial companies operating in the territory of the Republic of North Macedonia, as follows: Tigo Finance, Digital Finance, Mogo, Credisimo, M Cash, SN Finance and Iute Credit.

It will promote safe, socially responsible and sustainable lending practices and at the same time give financial companies the opportunity to work together to introduce service quality standards, as well as to design a mid-term industry development strategy with supervisors and legislators. At the same time, the Association will also work to promote opportunities offered by non-bank financial technology solutions that will benefit individuals and society. The mutual cooperation of the financial companies will provide greater trust to both the users and the competent institutions, thus achieving greater transparency of the financial industry.