The financial services industry in India is undergoing a digital transformation. This has resulted in the emergence of the Fintech, a synergistic alliance between financial services and technology. This has improved the customer service levels of financial transactions and enabled online, paperless processing.
Initially, FinTech found application in banking channels but has now branched out far and wide into diverse roles across financial services namely lending, asset management, insurance etc.
By harnessing machine learning, FinTech companies are able to decipher customer expectations and accurately cater to their demands. This facilitates demand forecasting and customized solutions through technology platforms. The fintech players have greatly benefited SME lending, where SMEs are now able to compete with big established players with technological tools.
In the early 90s, before the opening up of the Indian economy, India was predominantly a cash concentrated economy. The first shift occurred with the introduction of EFTs or Electronic fund transfer mechanism. Subsequently, the mobile phone and internet-based transactions began to gain momentum. Nowadays, it is difficult to imagine financial services without technology. In other words, it’s only fintech.
There are multiple stakeholders that have contributed to the growth of the fintech industry. They are:
- Financial institutions:
Financial institutions like NBFCs and banks spearheaded the fintech movement in India by embracing new age technologies and applying them in daily transactions.
These organizations have actively supported every small fintech initiative be it the e-wallet or the paperless loan processing. This has helped save huge redundant costs for the NBFCs. NBFCs have also been able to win the trust of the customer, provide superior quality of services, within minimum turnaround time.
Another way the NBFC space is promoting the FinTech industry is by the adoption of the latest technological innovations. By shifting the entire process of data storage online, NBFCs are able to replace the traditional methodologies of making payments, lending funds, and updating KYC documentation. There will no longer be a need for human intervention to process regular financial transactions. Further, NBFCs have enabled 100% online process for a loan application, approval and a digital signature of the loan agreement. NBFCs also extend custom made unsecured business loans India by leveraging on business analytics and cloud computing.
- Start-Up Companies and SMEs:
Start-ups and SMEs have an inbuilt entrepreneurial spirit and risk-taking qualities. Hence they are open and eager to embrace new age technologies. Further, fintech provides a level playing field for such units that can reach a potential customer in spite of the distance, with the connectivity of technology. With the recent, historic, bold demonetization move by the Government of India, which encouraged citizens to go cashless, the digital movement has got a further boost.
- The government of India:
The Indian Government is at the forefront of technology. It has launched several initiatives to give the fintech space a wider acceptance and coverage in society.
An example is UPI, Unified Payment Interface, which is a system set up by the Government of India. UPI channels multiple accounts into a single mobile interface. This has enabled unification of the citizens towards the ‘cashless India’ movement. Further, the National Payments Corporation of India is expected to launch UPI 2.0 soon. This revised app would have additional features of enhanced transfer limits and promotion of merchant transactions, with a highly user-friendly interface.
It is indeed commendable that the Government of India has constantly been encouraging the FinTech revolution.
Impact of FinTech on Lending
FinTech has touched upon every aspect of loan processing. NBFC lending platforms are integrating online technology solutions to simplify lending procedures for SME lending.
Automation has helped in reducing operating costs. Thus FinTech companies are able to offer competitive interest rates. Further, the use of technology to collect business intelligence has reduced the background verification and due diligence process to a few days. This has made the speeded up the evaluation of the credit standing and repayment capacity of the loan applicant. FinTech companies are able to extend quick loans.
The Future of fintech
Blockchain, robot-advisory services, and bank-in-a-box are overhauling the traditional financial system completely. Technology would enable financial inclusion and penetration of financial services into rural India. As per NASSCOM’s report, by 2020, the FinTech industry is expected to grow by 1.7 times and be valued at approximately USD 8 Billion. Fintech is the future of monetary transactions across India and globally.