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Contributed on May 19, 2020

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Emerging technologies transforming the financial sector.

Blog: NASSCOM Official Blog

“Fin-tech is not just a term that describes technological integration with Finance. It is the fuel that is going to decide the race and the winners in the market in the coming times. To drive towards success financial companies need to implement some changes”

We can feel the change in how India is adopting the digital platform to transform the businesses that operate today. There has been a disruptive shift in conventional cash flow and all other financial services as Fintech entered the Business Environment.

People are now coming forward to accept the change and adopt the latest technology to simplify their financial transactions using various apps such as BHIM, UPI, etc.

As predicted by the experts, the Fintech market is likely to expand to $31 Billion by 2020.  Collaboration between banks and upcoming fintech startups will be a driver for the fintech market. Artificial intelligence, blockchain, data analytics, and cybersecurity will be considered as very effective tools for fintech.

Talking about the key drivers for India’s Fintech Growth:-

• UPI
• GST
• Make in India
• License for payments banks
• Digital India program

All the above-mentioned drivers will work based on the principle of integration and collaboration between agencies and other institutions where an exchange of ideas, network building, and conversation off opportunities take place.

The relevant stakeholders that will define the success of this industry are as follows:

• Start-ups
• Universities and Research Institution
• Government & Regulators
• Financial Institution
• Incubators
• End Users

Some of the major fintech applications where blockchain is being deployed are:

1. Cross-border payments: Payments have seen a significant revolution in the last few years. Currently, payments between two countries are done with the help of swift code, which has to go through multiple corresponding banks involved in the process of settlement of payments, which increases the settlement time and the cost incurred at every level of transmission. The banks and payment service providers will build up the next-generation customer solutions & payment initiatives such as UPI are expected to define the future of payments.
2. Rise of niche Fintech players: Collaboration between Fintech innovators and corporates, where corporate companies would prefer investment in Fintech, rather than purchasing solutions. Upcoming entrepreneurs in fintech space are finding solutions to remove the financial gap in areas like agriculture and supply chain. Startups are also coming up with flexible loan options for salaried professionals and freelancers. This will encourage the fintech stakeholders to invest further to bring in more innovation and evolve the sector.

• MSME financing to rise: Why small enterprise fail? They generally fail due to their inability to reach their full potential due to a lack of access to credit facilities at the right time. However, this is about to change at a rapid pace with the rollout of GST and a brigade of lending tech startups entering into the alternative SME lending sector utilizing alternative credit scoring methodologies.

1. Innovation in cloud: Cloud adapts to the changing demands and provides a solution to serve the changing needs of customers/ businesses. Cloud resources also depend upon the scale of requirements and allow easier integrations with advanced technologies. Implementation of cloud computing will reduce costs up to a great extent because no additional investments will be needed for managing resources as the costs associated with dedicated hardware and software are eliminated.
2. Robo-advisory to gain ground: There’s a rising change being experienced by the Investment Advisory administrations with the development of computerized wealth advisors, also called Robo-advisors. They can provide advice about wealth management by utilizing algorithms, helping customers make financial judgments on their behalf. This helps in creating scalable business models that are sustainable even at low-profit margins. As per analysts, Robo-advisories can be revolutionary in personal finance management.

1. Blockchain for Security: Security is crucial since financial transactions are subjected to threats and attacks. New technologies help companies predict and detect problems. For example, blockchain’s use in digital identity management provides additional security for both institutions and consumers.

An EY report says technology like Blockchain will be all the rage, attributing to its exemplary features like transparency, immutability, traceability, and suitability.

Long and short of it

While 2018 was a massive contributor to the Indian Fintech space, creating a solid foundation for innovative technologies to emerge, Fintech will remain an industry that will be on the leading edge of innovation. As India is evolving to be a digitized country, we can only expect more advances to cause a breakthrough in the Indian Fintech space.

Blockchain pushed fintech into the media spotlight, and blockchain technology will drive mobile banking adoption outside of the high growth areas in which it currently maintains the most market share.

As rightly quoted by Arvind Sankaran, “We’re witnessing the creative destruction of financial services, rearranging itself around the consumer. Who does this in the most relevant, exciting way using data and digital, wins!”

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