2016 was quite rebellious with Brexit, the US Election, and India’s demonetisation happening. So, while the US was busy analysing its election results and tweets, Europe and UK figuring out the next financial capital, India thought of igniting the digital fire that could give new heights to banking and its services.
And, in fact, the year 2017 for India turned out to be a game changer for the Fintech sector, with growth in investments, customized offerings equipped with the latest technologies and, most importantly, trust they gained from consumers. While e-commerce and hyperlocal markets were flourishing in 2016 and before that, the Fintech industry got a significant push from friendly government policies, demonetization, and the ‘Digital India’ movement.
So, how has the Fintech sector evolved in 2017 and what are the key takeaways?
When the Government Lends a Helping Hand
Jan Dhan Yojana [JDY] came into existence in 2014 to provide banking to the unbanked population and gained its acceptance when demonetization happened in Nov 2016, pushing individuals to opt for a digital mode. The next booster was a special mention of Fintech in the Annual budget speech by the honourable Mr Arun Jaitley. Later, with the initiatives and mandate to link the biometric-based Aadhar card to banking/JDY account, another entrepreneurial extent helped the Fintech sector. As S Ganesh Kumar, Executive Director of the Reserve Bank of India (RBI), says
“We have proved to the rest of the world that in Fintech we are the leader. The government and the regulators in India are focused on making fintech secure, safer and more affordable for the common people.”
Later regulators initiated a series of payment initiatives such as Unstructured Supplementary Service Data [USSD] based mobile banking, Aadhaar Enabled Payment System [AEPS] with Banking Correspondents for fund transfers, and United Payments Interface [UPI]. There was also a launch of the low-cost inter-operable, mobile-based solution BHIM app to enable digital payments. These again helped the payment vertical to expand their solutions and offerings.
The takeaway is that the digitisation that was dominated by e-commerce, with government and regulator support, is helping the Fintech sector to grow and build consumer trust for these digital soldiers.
The Banks and Fintech Collaborate
As per a report from EY, by the year 2020, the average Indian age will be 29. To serve this internet savvy individual, banks need solutions that are real-time, fast, mobile compatible and available 24/7.
While previously the registers in banks were replaced with computers, formal computer lessons were rolled out to banking officials with expectations that in future paperwork would go away, banking processes would be automatic, and customers could get real-time updates and services. However, the old processes were getting automated, but new things crept up – the KYC form, Mobile App Activation KIT form, Internet Activation form, Debit Card Application etc. And although the existing paperwork was digitised, the new paperwork loaded the banking officials with even more folders.
While a few private banks invested in technology, many rural and cooperative banks weren’t yet tech-ready due to the costs involved. However, the blooming Fintech industry was able to lend a helping hand to banks by providing a means of engaging customers with the latest technology.
A Mumbai based Fintech firm, Chillr, facilitates bank transfers, payment of bills and linking of all bank accounts via their product and has partnered with many leading banks like Andhra Bank, HDFC Bank, Bank of India, and Saraswat bank.
Another Fintech firm Teknospire from Bangalore that aims to enable last mile banking is helping banks across the globe to digitise agent banking and boost financial inclusion.
From this we can take away that banks were keen on upgrading themselves, but the time, money and effort needed to do so was a challenge. On the other hand, Fintech firms were technology advanced but did not have the customer trust, and when they collaborated, it was a win-win for all – banks, Fintech firms, and customers.
Emergence of New Verticals across the Fintech Industry
While banking used to be either retail or investment, Fintech reinvented financial services and categorised itself into verticals that serve as a base to one area. As per CBInsights Market Map, there are Fintech firms under each category, including real estate investing and insurance.
Segregation in categories has helped banks and customers to choose what is apt for them. For example, a cooperative bank may not be willing to invest in blockchain or capital markets and trading in initial phases, and the leading investment banks may not be keen on wallet & money transfer services.
With different categories, each firm offers customer-focused solutions, quick adoption to newer technologies and, most importantly, it comes at a reasonable price.
One can see that segregation has helped in taking mini steps towards digitisation. While the digital wave looks attractive, its acceptance will be slow and needs to be targeted one step at a time.
Handshake with New Technologies to Offer Customized Solutions
Thanks to innovation and mind-boggling ideas, Fintech firms can come up with just the right kind of solution. While a Fintech firm from Mumbai Phicommerce is offering a cashless payment mode for a refill of LPGs, another firm Kiva allows one to offer loans to entrepreneurs across the globe. The nation’s leading banks, SBI and ICICI, tested their blockchain solutions to be the frontiers of the latest technology. The customer service was given a complete overhaul when IRA, the talking robot, was seen welcoming in HDFC bank.
With Artificial Intelligence in demand, Fintech firms like ACTIVE.AI are helping banks and other financial institutions to engage with customers on mobile, chat, or voice-enabled IOT devices.
Banking has been redefined. Blockchain, Hashgraph, AI, AR, VR, Cloud or the new technology that is still serving the POC is determined to make customers’ lives happier and simple.
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