By Shruti Aggarwal, Co-Founder, Stashfin
The fintech industry emerged in the 21st century with the primary objective of providing the traditional financial sector with solutions for challenges such as the need to cater to an expanding market, increasing consumer expectations, regulatory compliance, and much more. To a large extent, it has delivered well. In recent years, global finance has undergone a complete overhaul, thanks to the many applications of fintech: mobile payments, cryptocurrency, online lending/borrowing platforms, and regtech, neobanking and much more.
Simultaneously, India has turned out to be one of the fastest growing fintech markets in the world. In Q1 2019, India bulled past China as the top fintech target market in Asia with investments of about $286 million across 29 deals, as opposed to China’s $192.1 million across 29 deals. Some of the driving factors behind the integration of several fintech themes into mainstream finance in India include the increasing customer demands for convenient, swift, and secure financial services, industry pressure, and government initiatives like the UPI and Digital India.
In my opinion though, there are five key trends in the fintech industry that I believe would revolutionize the Indian financial markets in the upcoming years.
Evolving Trends In The Fintech Industry:
1. One Platform Combining Multiple Financial Services
As the world around us steadily goes online, the average Indian consumer prefers financial services that strike a fine balance between the traditional and the digital. For example, a majority of us want to communicate with bank branches without having to be physically present. Especially in this post-covid era. Now, banks cannot do much to sate these new-age consumer demands on their own, but implementing fintech solutions can sure help achieve that, while also prioritizing data security. As they already have. According to data quoted by RBI, only about 1% of Internet users did banking online in 1998. This increased to 16.7% by March 2000.
The fintech industry has come up with the concept of digital platforms that offer a range of varied financial products and services, all in one place. Customers conveniently choose and avail of multiple services through the many websites and apps fintech brands have already offered.
2. Machine Learning/Artificial Intelligence and Big Data in Credit Risk Management
Another noteworthy fintech trend is the use of Machine Learning/ Artificial Intelligence and big data in the credit industry to evaluate creditworthiness. Machine learning can create a framework to examine both traditional and alternative credit data, identify key patterns in customer behavior under specific circumstances, and predict the borrower’s ability to pay back the loan. The tech sector often talks about the challenge of reaching the ‘next billion’ internet users. For the fintech sector, this is perhaps their equivalent – the reliance on big data and ML to unlock the next set of borrowers in the credit ecosystem.
Big data and ML together can therefore play a major part in improving our credit risk management systems and helping the credit industry achieve financial inclusion. It’s what we rely on heavily at StashFin.
3. Contactless Transactions
As the global economy slowly recovers after being shaken to its core by the COVID-19 outbreak, contactless transactions have emerged more effective than perhaps demonetization over 4 years ago. They’re now well positioned as the more advantageous alternative to physical transactions methods like cash and credit cards. Newer innovations such as mobile payments and digital wallets have already proven to be pretty popular worldwide since they provide convenient and speedy transactions.
Within the Indian fintech space, digital payments have remained the most widely utilized application of fintech since the launch of UPI in 2016. Right now, there are around 375 payment startups in the country, with mobile/digital wallets, gateways, and PoS (point-of-sale)/mobile PoS sub-segments accounting for over 50% of them. It is projected that India will contribute 2.2% to the world’s digital payments market by 2023.
4. Credit Starved Underbanked Customers
With the number of unbanked adults hovering somewhere around 190 million, currently India is only second to China among the developing countries in the number of residents who don’t have bank accounts or participate in the formal financial sector, according to a study conducted by the World Bank. However, this also makes India one of the most exciting opportunities within the fintech space anywhere in the world.
With the growing demand for consumer credit in India, the fintech space is gearing up to make the lending/borrowing process more efficient for the underbanked population. Fintech powered instant loan apps can leverage technology to make both the application and approval processes swift and convenient. For example, with StashFin, you can apply for a personal loan from the comfort of your home and get easy loan approval with low interest rates and flexible EMI options.
5. Public Cloud-Based Applications
I don’t need to talk up the cloud. Most brands today, both within and outside the fintech space, well understand its significance in keeping entire industries afloat. Cloud-based applications have long delivered some essential enablers on that front, such as reduced storage costs, simpler big data management, and the exertion of advanced analytics. Many financial organizations already use cloud-based SaaS (software-as-a-service) applications for non-core activities like financial accounting, KYC verification, and credit risk management.
According to IDC, spending on public cloud IT infrastructure increased 47.8% year over year in 2020 Q2, reaching $14.1 billion and surpassing the level of spending on non-cloud IT infrastructure for the first time. However, as the fintech industry evolves, the trend of using cloud-based solutions to perform core activities (e.g. customer payments and credit scoring) would emerge in 2020 and beyond.
In the current Indian economy, the fintech industry holds the potential to act as a bridge between the financial institutions and their consumers. Each of these fintech trends, along with many, many others, are on their way to evolving into absolute necessities for the Indian financial sector in the coming times. As technology, and the sector, collectively adapt to the new-age customer base and simultaneously gear up to meet market demands as quickly as possible, the future of the fintech industry in India sure looks bright. A future I’m excited to be a part of!