What are the unsolved problems in the Indian financial services sector?
The finance industry has seen its fair share of ups and downs in every generation, with the repercussions reaching far and wide across the globe. Despite the inevitability of highs and lows, the financial services sector presents massive opportunities for willing entrepreneurs to build thriving businesses.
Sanjay Swamy, Managing Partner at Prime Venture Partners, said,
"Today, consumers want a specific set of financial services and the Indian banks are currently struggling to provide them. Here lies a market that is almost demanding attention where consumers are almost ready to pay for the right services."
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Major unsolved problems in the Indian financial sector
One of the biggest problems with the Indian financial sector has to be penetration. Even when the Indian government tried its best to take banking services to the country’s grassroots, there are still people who do not have a bank account yet. As the entire world is already moving towards digital banking, the penetration of this technology in India is under five percent, Sanjay adds.
The country is still in its early stages when it comes to basic financial services for all and, right now, the banks are facing their own set of problems to actually worry about creating penetration.
Second is security. From 2017 to 2018, the rate of cyber finance crime reported rose almost by 480 percent and the steps that were taken by the conventional financial institutions are not fool-proof enough to prevent them from reoccurring. Blockchain technology stands as the best solution. The Indian industry needs entrepreneurs who can successfully integrate the concept in existing financial services.
Wealth management is another great challenge. Indian consumers are still oblivious to structured schemes of investment and remain dependent on savings techniques. Banks are still their bulk money managers and buying gold is still their way to invest.
The issue is not just with the mindset. Brokerage firms have failed to reach out to their potential customers.
This area is ripe as the millennial workforce is more informed. But even with structured investment schemes, they are looking for easy ways to put their money into stocks, mutual funds, and more.
Next comes credit. Unlike most countries, India is still credit-starved. As a growing economy, the country cannot afford that trend. Most big credits handed out by the top banks have gone bad and the effects have naturally trickled down to the general consumers. People are now turning towards non-banking entities for credit and the supply at the moment is nowhere near the demand, Sanjay points out.
Then there are issues regarding business travel that corporates still struggle to finance, payday loans of employees, technology integration in the finance sector, and regulatory compliance. The trend is already here where fintech startups are challenging conventional financial houses.
The modern crop of consumers is more open-minded with their money and they are willing to look beyond banks for their wealth management and transactions.
The right opportunities are everywhere
In short, the Indian financial services market has a trove of problems that need solving. All an entrepreneur has to do is pick one and solve it for the consumers. The population will drive growth and any brand can soon find a customer base that is at least 50 million-60 million strong and expand further when the foothold has become decent enough, Sanjay believes.
And the best part of the finance sector, especially, is that no particular segment can be termed as identified and won. Multiple digital payment applications have thrived alongside each other in the Indian market and their figures are continuing to rise.
Plus, the demand for proper financial services is currently so high that no company can claim full dominance of a particular sector. An entrepreneur can easily come up with a better product, give a few features extra, and still find success in that same market.
Identify the problem you want to solve
So if you are looking to penetrate the financial sector, the first step is to identify the problem you want to solve, and set up your shop wherever you want. Be it micro-loans, easy lending, international payments, or personal wealth management, India needs a new batch of entrepreneurs who are willing to heal the country’s ailing financial services market.
As evident, there is no dearth of opportunities. All one needs is willingness.
(Edited by Evelyn Ratnakumar)