FINTECH, the landscape
The given article will cover FINTECH and will provide the readers with a brief overview of how FinTech’s evolved, the meaning of Fintech, the scope of fintech, and lastly Fintech in India.
Fintech, as we know, are a very recent emergence of the use of technology in the field of finance. However, the idea of Fintech is nothing new. It is said to have started 150 years ago and is largely divided into 3 major periods by most literature. The earliest found is 1886–1967; during this period, the financial system as we know it now was being established, and a globally integrated market was being formed, linkages such as transatlantic cables and other services such as credit cards, diner’s club cards, etc. came into existence by the end of this period.
The second period (1967–2008) included massive advances such as ATMs, Internet banking, and slight digitalization with various e-commerce models.
Fintech, as we know it now, are mostly because of the distrust towards traditional banking systems that skyrocketed during the economic crisis of 2008 and the expected development of the technology. The rapid growth of technology brought about a surge in innovations in baking and related services provided by organizations throughout the world. Various startups came about which increased the ease of banking with financial services available in their hands, such as Apple Pay and Google Wallet. There was a boom in cryptocurrencies, and almost all services, from trading stocks to checking account balances, can now be done through APIs.
Fintech is the application of technology in both supply chain and front-end dealings of all the finance and financial services to make it more accessible, approachable, and consumer friendly. This has opened new avenues for neo-banking to progress in the country. Neo banking is often called the “Holy grail” of Fintech, a data-oiled version of traditional banking practices that unbundles all the banking practices and puts forward a new basket of consumer-friendly services.
The scope of Fintech is large and wide; it provides every kind of service, from “Peer to Peer” lending to insurance. The key selling point of these is the customer experience, automated services, transparency, API-based operations, and other insights such as account balance, bank statement, etc. In India, the key selling point becomes being an aid to SMEs in financial management.
The nonbanking model has many advantages. It has a low-cost structure with almost no monthly fees or withdrawal costs. They provide real-time services for almost all banking needs, such as opening a new account, making immediate payments, making bank statements, etc. They also provide various intuitive budgeting and investing plans under the umbrella of financial wellness. The provision of day-to-day or regular access to finances can help in tracking and planning according to our financial needs. It generates accountability over your expenses and a sense of responsibility towards personal financial goals. Fintech companies have an extremely competitive value proposition in the new technology of Robo-advising when an individual’s investment portfolio is selected by algorithms that offer clients an investment structure that corresponds to their investment preferences and risk profile.
In India, the government has played a massive role in making people more inclined towards technology in banking. The Jan Dhan Yojana had a huge impact on people’s attitudes. They removed the middleman, digitalized all the transactions, and increased financial inclusion by large. After the demonetization, there was a surge in the use of applications such as Google Pay and Paytm, which was earlier considered taboo; again, the changing trends in how people perceive transactions related to finance and technology were challenged.
Indian Fintech has a market value of ₹1,920.16 billion as of 2019 and is estimated to reach ₹ 6,204.41 by 2025,expanding at a CAGR of 22.7%. This, added to the government aid in the form of tax relief and surcharge relief, enhances the growth of the number of startups. Apart from this, a regulatory instrument such as the introduction of the UPI and initial support of RBI to the blockchains was also a laudable step forward.
One major hindrance to the FinTechs in India was the lack of authentic consumer information. Since India has less technological infrastructure, this is reflected in the kind of services the FinTechs are willing to offer. The Indian payment sector has seen the highest growth in this sector due to the large-scale adoption of mobile payments. The growth of the Robo advisors in the retail investing space. Even many traditional broking firms have launched Robo advisors such as Aditya Birla, BigDecision, ScripBox, 5nance, etc. The Bank in a box model of banking that supports traditional banking as well as aids in moving towards neo banking has made regular banking services much more accessible. This model becomes a selling point for small banks as they can provide services from a remote location. P2P banking and B2P banking have also seen a significant increase as Fintech redefines lending standards to includemore SMEs and retailers. All of this has led to large financial inclusion. In 2016, almost 145 million households in India had no access to banking services, and this has now changed.
Apart from the business perspective, financial services can become a major development driver, and the right kind of services can help to escape poverty by investing in the correct places by both private and government parties. Cash can sometimes be unreliable, unsafe, and hard to manage. The shift towards neo-banking techniques will surely result in positive change for India.
