The world is witnessing innovation and evolution in the financial sector at a pace never seen before – and it is being driven by fintech. India is one of the leading frontiers in this.
Among all domains, banking and financial services have always been at the cutting edge of adopting technology – even as regulations and risk considerations remain a key factor, the industry has always been at the forefront. In fact, these factors might actually have been critically contributory to ensuring that best in class security protocols come along with technology. This symbiotic relationship has been the harbinger of “fintech” – finance touches each of us and all businesses every day and with technology bringing in sophistication and ease, the evolution has been but natural.
However, this has come with various challenges including, but going beyond, risk and regulatory. Financial awareness along with technological adoption and maturity of users across the spectrum have been major factors in determining its growth. However, with pervasive smartphone penetration along with the growth of high-speed internet access, the speed at which fintech has penetrated the Indian market has been breathtaking.
In consequence of this, today we see a situation where, established financial institutions and startups alike are locked in a dead heat in a highly competitive market where innovation across the board is now de rigueur. To add to the incessant pace of innovation, developments around blockchain have now added a completely new dimension to the world of fintech. The future of the world of finance seems to be built around Neobanks – completely digital banks with zero physical footprint. Across the world, as in India, we are seeing an unprecedented and ultra-fast revolution in the making.
In a recent report, a leading consultancy identified ten trends that will shape the industry in the near future:
- The race across FinTechs, BigTech, and corporate giants to create India’s first truly comprehensive financial services SuperApp
- Buy Now PayLater is rewriting credit and enabling Indians to leapfrog credit-card and get access to digital credit at the point of purchase.
- InsurTech is driving innovation on products and digital distribution increase penetration of Insurance products.
- WealthTech has been a surprise package during Covid. It is transforming the investment landscape and bringing droves of first-time equity investors to the market.
- Driven by API banking development, embedded banking is enabling every company (financial or non-financial) to add FinTech as a feature and build on the ecosystem they control or influence.
- MSME is the new battleground for FinTech. Startups, BigTech, and conglomerates are vying to get a piece of this market. Covid19 has further accelerated the adoption of digital by MSME, making this market ripe for disruption.
- Digital lending, one of the most funded business models in FinTech, is moving to maturity with an increased focus on collections.
- Digital payment continues to draw in large funding and has maximum number of firms in the IPO queue. The battles have moved from issuance to acquiring. With reduced margins, the players continue to find newer ways using payment as a hook to generate revenue from cross-selling other financial products.
- Neobanks are rising by offering hyper-personalized banking experiences for un(der)served pockets of customer segments.
The risk of not adopting and thriving in the fintech revolution is bigger than the risk for Neo banks and financial technology companies encountering the constraint and risk of changing regulations , complainers and cyber security. The availability of large capital to be able to make nationwide impact and scale up to serve both India and Bharat is key. The fintech space is getting crowded and the ones that will survive will the ones which are customer centric and provide a sense of safety to their customers .
As we get used to ditching our wallets for the mobile phone and as real time payments along with concepts such as a peer to peer lending and instant digital credit become a daily reality, it’s time for us to realize that the next big revolution in the BFSI space is upon us through the power of fintech. 2022 will be the year of FINTECH.
The author is a practising chartered accountant and an independent director on many large public companies whose views and ideas have been instrumental in framing policy