Though not a household term yet, FinTech is the next big thing to keep an eye on. It has the potential to change the very definition of banking — how we manage our money, make payments, investments, insurance, loans and much more.
Here, in today’s post, you can find out- Why FinTech is the Next Big Thing to Watch Out For.
Let’s start with the basics.
What Exactly Is FinTech?
FinTech is a combination of two familiar words — Finance and Technology. It’s the abbreviation of Financial Technology and is an umbrella term that denotes all companies that use digital technology to provide financial services.
Global investment in FinTech has exploded in the last few years. FinTech is now a multi-billion dollar industry, with massive potentials for growth. The best part — unlike other industries that are dominated by multi-national corporations, FinTech is powered by small start-ups that use innovation and technology to dominate.
Also Read: The FinTech Space In India
The Evolving Landscape Of FinTech In India
From being a cash-oriented economy, today India is steadily moving towards digital payments. The first major introduction of Fintech in the country can be traced to the 90s that introduced EFT payments, ATM cards, and credit cards. There is a Vyapar Card specially created for MSMEs to Apply for Business Loan.
Eventually, with the increase in internet connectivity and the introduction of smartphones, today a vast majority of Indians use their mobiles for banking services.
Factors Supporting The Rapid Growth Of FinTech In India
Fast Adoption Of Technology
A recent study points out that India has overtaken the US in Smartphone usage and is now the second-biggest Smartphone market globally, with over 220 million active Smartphone users. With a rapid adoption of digital technology, Indians are poised to embrace the growth of Fintech services.
Internet Penetration
India today has robust internet connectivity with 4G data speeds available in all corners of the country. Both internet availability and affordable smartphones play a crucial role in increasing the growth of Fintech services.
Also Read: How FinTech Is Changing Lives In The Global South
Government Policies
Demonetization was a huge boon to the FinTech sector — with digital payments sky-rocketing in a few months. Apart from this move, the government has also introduced other positive measures to transition the Indian financial ecosystem to a digital one.
Increasing Financial Inclusion
The Global Findex Report published by the World Bank in 2017, reports that there is a rapid increase in financial inclusion in the country.
The number of account holders in the country rose from a meager 35% in 2011 to over 80% in 2017. With the RBI’s target to further increase these numbers up to 90% by 2021, helps FinTech lenders target customers who were previously outside the formal financial system.
Increase In A Younger Working Population
The younger generation, especially the millennial and Gen-Z are part of the working populace today. These generations have grown up with technology and hence are highly receptive of new disruptions that let them handle their money easily. They have greater enthusiasm and trust in the FinTech sector compared to older generations.
Increasing Investments
Angel investors, private equity houses, high-net-worth individuals and venture capitalists consider FinTech as one of the lucrative industries for investments. According to a recent report, FinTech investments in India crossed over $2 billion in 2018 and is further expected to grow.
Also Read: A Brief Discussion On The Top 5 Business Ideas For Women In India
Special Needs Of SMEs
For decades, small and medium enterprises had a difficult time acquiring funds for their business growth. Fintech eliminates the bottlenecks of traditional financial systems, thereby providing SMEs with higher access to funds and other banking related services.
All these factors combined have helped to fuel the massive growth of FinTech services in India.
The Popular Types Of FinTech Service Providers
Digital Lending Platforms
For years, traditional banks were the only options for borrowers. This made it highly challenging for borrowers with poor credit scores or no collateral to access funds. Digital lending platforms like Indifi connect borrowers with other non-banking lenders. Online lending covers all borrowing from personal loans to business loans and more.
Robo Advisors
These are online investment services that use algorithms to provide consumers with the best investment advice. From handling the actual investments to re-balancing and asset allocation — these services take care of the A-Z of investing.
Mobile Payment Providers
These are digital wallets that help consumers pay for their purchases without using a credit card or a bank account. All you have to do is load the mobile wallet and use it for all online and even real-world purchases.
Online Banking And Personal Savings
Long gone are the days, when banks were the only way to save your money. Today there are an array of FinTech start-ups that provide micro-savings providing consumers with alternative ways to grow their personal savings, without relying on banks.
Online Insurance Providers
These services handle all aspects of insurance — from providing consumers with a variety of quotations to helping them renew and start a policy. All of this happens online, with technology powering the services.
The relentless progress of AI advancements
The recent impact of AI on the financial services sector suggests that it is poised to remain a significant disruptor in the upcoming months. FinTech companies are eager to incorporate AI-powered financial advisors, providing users with highly personalized and predictive insights.
Anticipate widespread AI integrations in FinTech applications, particularly in crucial areas like assessing creditworthiness, evaluating risks, and enhancing robo-advisory services. As AI strengthens fraud detection and enhances customer service on multiple fronts, its role in the FinTech landscape is poised for further expansion in the foreseeable future.
Harnessing the Potential of Quantum Computing
As cybercrimes evolve in sophistication, the deployment of quantum algorithms becomes instrumental in identifying anomalies and swiftly detecting fraud within extensive financial datasets.
FinTechs worldwide are poised to progressively utilize the capabilities of quantum computing, fortifying financial transactions against hacking attempts and enhancing the effectiveness of risk management models.
There are many frauds and scams going on in the field of finance and business loans. Here are some tips & tricks to avoid business loan scams.
The Future Of FinTech In India
Globally, the FinTech industry is expected to reach $45 billion by 2020 and the Indian FinTech market is predicted to cross $2.4 billion by 2020.
With the myriad benefits offered by FinTech to both consumers and businesses, there’s no doubt that FinTech will explode in popularity, in the coming years.
The landscape of Indian financial services has undergone a transformative shift with the infusion of FinTech technologies and innovative concepts. India, boasting an adoption rate of 87%, surpasses the global average of 64% in the FinTech adoption race.
Projections indicate that by 2030, the robust Indian FinTech market is poised to generate a remarkable $200 billion in revenue and accumulate $1 trillion in AUM, according to a study conducted by EY.
Over the past decade, the global financial services sector has experienced substantial changes due to the influence of FinTech. In India, this growth is propelled by proactive government and regulatory initiatives, a flourishing funding environment, a robust VC ecosystem, vast demographic opportunities, high FinTech adoption rates, and access to talent and technology for entrepreneurs shaping the new India.
Despite some challenges, such as privacy and data security concerns in collaborative settings and uneven digital financial services adoption, the FinTech industry presents substantial opportunities.
Notably, financial inclusion remains a top government priority, given the under-penetration of traditional financial service players in rural areas, the ageing population, unorganized sectors, and the gig economy—highlighting a significant silver lining amid the challenges.
Frequently Asked Questions (FAQs)
What is Fintech, and how does it differ from traditional banking?
Fintech, short for financial technology, refers to innovative technologies that enhance and automate financial services. It differs from traditional banking by leveraging technology to provide more efficient, accessible, and often decentralized financial solutions.
What factors contribute to the growth of Fintech in India?
Factors include a large population with increasing digital adoption, government support for digital initiatives, a growing startup ecosystem, and a need for financial inclusion in underserved areas.
How is the Indian government supporting the Fintech sector?
The Indian government has introduced initiatives such as Digital India, UPI (Unified Payments Interface), and regulatory sandboxes to foster innovation and support the growth of Fintech.
What areas within Fintech are expected to see significant growth in India?
Sectors like digital payments, peer-to-peer lending, InsurTech, robo-advisory, and blockchain applications are expected to witness substantial growth in the Indian Fintech landscape.
How is Fintech contributing to financial inclusion in India?
Fintech plays a crucial role in reaching unbanked and underbanked populations by providing digital financial services, mobile banking, and innovative credit solutions, thereby promoting financial inclusion.
What challenges does the Fintech industry face in India?
Challenges include data security concerns, regulatory uncertainties, competition with traditional banking, and the need for widespread digital literacy among the population.
How is Fintech impacting traditional banking institutions in India?
Fintech is pushing traditional banks to innovate and adapt to changing consumer preferences. Collaboration between Fintech and traditional banks is also becoming more common.
Are there specific regulations governing Fintech companies in India?
Yes, the Reserve Bank of India (RBI) and other regulatory bodies have established guidelines and regulations to ensure the stability and security of the financial system while fostering Fintech innovation.
What role does artificial intelligence play in the future of Fintech in India?
Artificial intelligence is expected to play a significant role in automating processes, enhancing customer experiences, and improving risk management within the Fintech sector.
How can entrepreneurs and investors participate in the Fintech boom in India?
These FAQs provide an overview of key aspects related to the future of Fintech in India, but individuals are encouraged to stay updated on the rapidly evolving industry landscape.
Apply For Business Loan Through Private Financers In Delhi
Fintech is much more than just a reference to financial technology. It is often referred to as the innovative technology that is used to improve the traditional financial methods and develop effective solutions for financial services which are at par with the latest technological trends.
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