Building fintech startups beyond UPI: Where the next wave of innovation will come from

Over the last few years, the fintech experience in India has centered around one thing: UPI. It has changed the face of transactions in India by making digital payments easy, instant, and more available to millions. As UPI becomes a part of our daily lives, the next wave of innovation in fintech will not just be about creating methods for making payments; rather, it will be focused on tackling larger financial issues specifically related to underbanked populations and first-time users.

With India’s fintech infrastructure backed by government support, it has evolved into a sturdy and consistent ecosystem that enables easy digital transactions, security for users, and scalable innovations in its fintech community. This public digital network infrastructure allows new and existing startups to deliver financial services that are inclusive and will reach underserved segments of society within India.

Assisted Financial Services: The Power of Trust

Digital adoption is increasing rapidly; however, a large segment of users will continue to need human assistance to successfully navigate financial services. Firms that combine technology and provide human-assisted solutions may create large amounts of value. By combining the physical and digital aspects of their offerings, companies can create a “phygital” solution that allows customers to use the service with confidence while also building trust and familiarity with the service providers.

This approach applies to every aspect of assisted fintech, whether onboarding, completing transactions, or learning about various products and services. No one will be left behind during the transition to digital finance due to the use of assisted services and technologies.

Solving the ATM Gap with Last-Mile Innovation

In India, many rural economies rely heavily on cash, but many rural areas have limited access to ATMs. Local merchants can help overcome these barriers through the use of fintech technology that allows local stores to act as microbanking locations for customers to access their cash through withdrawing, depositing, or transferring money.

Using Aadhaar-based applications and biometrics will allow customers to perform their banking transactions electronically and easily from their homes without the need for a physical card or having to go into a branch. In addition, these models also create digital familiarity for first-time users, ultimately helping to build confidence in traditional financial systems. Through bringing banking closer to where people live and integrating it with their daily life activities, fintech not only helps bridge the access issue but also accelerates financial inclusion at the community level.

Embedded and Invisible Finance

Embedded finance is changing the way people access financial services by integrating them into the platforms where they spend most of their time instead of offering them as standalone applications. Examples include offering credit at the point of sale via a retailer or providing insurance to users who purchase a service with their connected devices.

As financial services become more embedded into our daily lives, they will also become more transparent, meaning that users will not actively seek out these services; instead, they will simply happen without having to think too much about them. One major benefit of this new way for users to access financial services is that it will create an opportunity for startups to collaborate with businesses in different industries to develop complete financial ecosystems that seamlessly integrate into each user's daily life.

One thing that is certain about the future of embedded finance is that it will continue to grow in popularity as more companies enter the space. This will lead to greater competition among providers and create opportunities for those who want to create innovative ways to deliver banking and investment services to their customers.

Micro-Credit Reinvented through Data and Design

Traditional lending methods have had difficulty servicing borrowers without any history of credit, but fintech companies are using a data-driven approach to rethink the mortgage process. By analysing transaction behaviour both online and offline for their borrowers, reports can produce targeted lending products that meet the needs of each specific customer.

Repayment models are also changing to allow for more flexible terms that are tied to income flow rather than fixed monthly payments. For populations in rural areas or small businesses, which depend a lot on informal means for borrowing from institutional lenders, this could have a huge impact.

To better engage with these communities, microcredit providers could make the application process easier by streamlining the onboarding experience, localising the language used within their digital interface for the purpose of improving usability, and providing assistance throughout the entire microcredit experience. Over time, this type of lending will create a digital credit record for first-time lenders and allow them to gradually gain access to larger and more structured financial services.

The Road Ahead: Innovation with Impact

India's fintech landscape is moving from a place being measured by growth to one that measures innovation based on impact. The greatest opportunity for the fintech sector is addressing the needs of newly digitally enabled, excluded, or financially vulnerable customers. The startups that will be successful in this area will provide simple and secure solutions by utilising technology, establishing trust with users, and achieving a strong understanding of their users. Fintech's next wave will be driven by addressing real-life issues like expanding access to credit, increasing protection against fraud, and, more significantly, strengthening financial systems down to the lowest local levels.

Some very exciting Indian start-ups are producing ideas that could reinvent financial services in this next evolution of fintech. The future of fintech isn't purely digital; it's also about intelligence, inclusiveness, and having a personal touch.

Shams Tabrej, Co-founder & CEO of Ezeepay