By 6 am on a weekday, a flustered crowd braced the gates of ATMs and Banks all over the country in hopes to exchange their Rs 500 and Rs 1000 denominations before the cash notes were considered invalid. A bothersome affair, demonetization brought out some glaring flaws in the financial system.
Now, we aren’t going to debate over the intricacies of the decision or the political motif or even the public rage, so cleverly diverted and augmented by the media. The purpose of this piece is to ascertain whether the country could do with new sorts of financial service provisions.
Traditionally banking and finance in India has been a relatively sombre industry with not much room for innovation. An institution gets recognized by the government and starts dealing in large amounts of cash – pushing loans, taking in deposits, locking assets and the usual mundane details.
Banking, for all its ‘money-stemmed’ glory hasn’t witnessed a sway towards modern development trends – most significantly, technology.
That said, finance in India is witnessing a new trend through some crucial developments in Fintech. ‘Fintech’ is a clever portmanteau of Finance and Technology meant to describe any technological innovations in the Finance and Banking sector. It encompasses a wide variety of softwares meant to provide accessible financial services and ease banking processes which, at the least are quite arduous to navigate.
Fintech meant to supplicate transactions or deal with the enormous data that usually trails the sector enormous user base.
As for millennials the concept of Fintech is particularly appealing as it removes any kind of physical effort and coalesces all the services in one place. This change reflects the need and the requirement of modern financial systems which are essentially more connected to the technological changes in the society. Moreover, having a technologically sound financial system removes the need of slow financial processes which act as a bottleneck for the country’s boisterous financial needs.
Current trends in Fintech
Currently, several start-ups are bringing in new technologies and ideas into Fintech space. These start-ups are motivated by the lack of competition and the ever-present need of accessible financial services especially in the urban areas.
Other than that, the Indian government is tapping into the industry through various direct and ancillary measures and ventures. Some of the government ventures associated with Fintech are India Stack, Startup India, Jan Dhan Yojana and Aadhaar adoption. These ventures along with a vibrant government PR has helped drive user adoption. Also, since the government activities are deeply rooted in the finance and services sectors, emergence of these ventures and measures provide a solid foundation for nascent Fintech companies to touch base and boost financial inclusion across the country.
These measures have brought the financial sector under the spotlight, where the people are increasingly asking for new and easy services. Bank customers covet the various freebies they get through online financial services.
As for now, experts and industry biggies predict a 29% annual ROI on Fintech investments at a time where most investments suffer at the brunt of the world economy. Additionally, VC backed Fintech investments peaked at $1,580 million in 2015, highlighting the market’s interest in the new sector.
The Fintech eco-system in the country is rapidly evolving to service several unconventional financial services in the nation. Most of these segments are high-value including Insurance, Wealth management, Block-chain systems, Retail Banking and Alternative lending. Apart from the unconventional segments, the most promising Fintech opportunities in India are:
- Data Analytics
- Targeted Customer acquisition
- Expansion of products and services
- Cost reduction
These services combined with a directed push towards the untapped financial sector in the country, can bring about a radical change where several aspects of Finance could be more precise, adaptable and accessible for any segment of the market. Moreover, an open and distributed platform can help create a global community where Finance would not be a viewed as a difficult industry to manoeuvre.