The year 2018 witnessed established BFSI companies adopting emerging tech extensively. Let’s see what the new year holds for the sector.
The fintech sector started on a promising journey with advancement in technology and rising customer acceptance of digital transactions. However, the sector got its real calling in November 2016 when the demonetisation drive suddenly pushed a country-wide acceptance of digital transactions. Since then, the industry has set on a path of exponential growth in India, a trend that continued in 2018 and is expected to maintain momentum in years to come. With almost 400 firms operating in this place, the Indian fintech space is estimated to grow at a CAGR of 22 percent for the next five years and the market is expected to reach $ 2.4 billion by 2020 as per a recent report by Nasscom.
Today, fintech platforms are already creating significant disruptions in the business model of conventional and highly regulated entities in the banking and financial sector in India. The year 2018 also witnessed established banking, financial services and insurance (BFSI) companies in India experimenting and adopting emerging technologies like e-KYC, digital document upload, artificial intelligence (AI) and blockchain extensively. A Frost and Sullivan 2018 report, projects the total number of mobile phones in India to reach 1028 million in 2021 and internet penetration to reach a penetration of 27 percent in 2021 and hence, mobile technology-based financial services may see a further surge as a primary channel to deliver financial services.
The government and regulators are convinced fintech’s potential as the most effective route to meet their objectives for financial inclusion for all in the country with otherwise abysmally low access to finance numbers. That is the reason that even after Supreme Court’s decision on Aadhaar, which halted the e-KYC process, the government has constantly been mulling over new alternatives to enable digital KYC through other means such as live video authentication. This reaffirms the government’s commitment and conviction in pushing and promoting digitalisation.
To summarise, the following factors may reshape the fintech sector further in 2019:
As more and more banks compete for a set of customers that is increasingly comfortable with digitalisation, we may see the emergence and growth of digital-only financial services providers in 2019. On the demand side, millennials are not willing to stand in long queues at the bank or put up with their complicated and obsolete processes and have demonstrated a clear preference for swiftness, convenience and transparency in banking services. Demand-level factors for digital financial services are in place and the supply side factors can be expected to catch up soon with the changing trends.
Data-driven alternative lending platforms will be increasingly used to sketch out customer profile and behaviour based on advanced analytics on similar customer profile data and hence, enable the extension of credit to customers with no past credit history. Further, lenders are expected to move beyond the basic demographics and credit score-based lending models to include alternative information sources such as mobile usage, social media reports, utility payment behaviour and online transactions to evaluate the likely creditworthiness of borrowers.
The usage of AI in automating tasks like data analysis is likely to enable the sector as it can help in saving time, resources and detecting fraudulent activities by monitoring the patterns of customer behaviour. AI is also being leveraged in creating chatbots and robo-advisors that can help the fintech platforms in decreasing their costs of hiring manual assistants and overheads of their financial services. All these innovations will enable the fintech platforms to stay ahead of the competitors in terms of their ability to have deep insights into their customers’ behaviour.
Although third-party digital platforms are offering numerous alternatives for online payments like UPI, WhatsApp payments, Apple Pay, Samsung Pay, Google Pay, AePS, etc to the users these days, the potential of mobile wallets is yet to be tapped fully by fintech companies. In order to give a new meaning to the cashless and cardless payments economy and stay relevant to customers, fintech companies offering mobile wallets will evolve as an effective option for day-to-day and customer-centric consumption.
The aforementioned trends certainly indicate that 2019 will witness more innovations pouring out from the dynamic fintech startup industry. It will also be interesting to witness the outcome of the smart integration of human intervention and automation in terms of redefining the customer experience in financial services.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)