FinTech is changing the way our money works for us
The debate always rages whether technology is a business in itself or a medium/ facilitator of an existing business. Whether a startup is a tech startup or a non-tech startup is a mere extension of this debate especially when we have several investors who proclaim to invest only in tech focused startups. In either of the cases, technology makes life a lot easier for each of us by bringing all of our requirements at our doorstep be it eRetail or Banking facilities.
The startup world comes with its own success stories every year be it the eRetail, handyman, travel bookings, real estate and lately Fin Tech.
From simplifying payments, investments, transactions, several Fin Tech startups are entering the space to make life easier for us especially for non commerce folks who are perceived to be less careful about cash management.
The money cycle for a regular individual would be: earnings -> expenditures -> investments and savings (including tax related) ->tax payments
The earning ofcourse totally depend on your nature of employment (including being self employed). However several startup their do help you get hired at a better place with a better package and there are startups which help you avail of a credit line to grow your business.
Expenditure (Payments and Transactions)
Internationally PayPal lead the way and closer to home we have the InstaMojo, PayTm and Freecharge and several others in the eWallet space. Inspite of the fact that a person needs to first use a payment mode to top up their eWallets and then use the wallet to make a transaction vis a vis directly making a payment to the merchant, wallets offers certain level of security and convenience in terms of transactions once the top up is completed. A user can only maintain limited funds in their eWallet (less than Rs 10000) in order not to trigger the KYC compliance requirements. But what is the main attraction – convenience or the hefty discounts and cash backs.
To cite a recent example, a friend went shopping at a popular physical retail store for a pair of jeans. And this particular wallet offered a 10% discount of eGift Card which could be redeemed at the store. So in additional to the ongoing sale he availed the additional 10% discount just because he routed the payment through a wallet. Are eWallets going the eCommerce way in the name of creating a new habit and customer acquisiton? Having said that, they have definitely made payments and transactions easier and helping me save every rupee which used to become a toffee at my local kirana store.
Several Indian PSU banks as well as private banks have gradually shifted their focus to mobile banking which can also be seen as part of their recent ad campaigns ranging from the SBI Buddy to IndusInd Banks FingerPrint banking. The focus is no more about services or higher interest rates; it’s about convenience and ease of utility. People understand that a differential 100 basis point interest rate on minimal balance in my savings bank account hardly matters.
Let's not forget the much awaited Unified Payment Interface which has already been tipped as the game changer and we also await the launch of Payment Banks. Shockingly, IMPS which has simplified payments largely and works simply against a mobile number and is available 24/7/365 has failed to kick off inspite of being really convenient. There are speculations that UPI could spell doom for the wallet industry but that is only for time to tell.
Expense tracking apps have also been a rage in recent times such as splitwise which lets you split the bills on the spot and can be used for monthly household expenses to a trip expenditure and apps like Money View lets you track your individual expenditures. Several apps let you consolidate all your incomes, expenditures, savings and investment across avenues in a single screen and give you a bird’s eye view of your financial standing something similar to what a Tally means to a regular business venture.
We are expecting a roll out of startups in the investment solutions space as well and even in account maintenance. Zerodha has changed the investment scenario with slashing the brokerage rates drastically and several others like the Indian Trading League, etc have followed suit. It will definitely make the larger players stand up and take notice.
The government is also going all out with schemes like the Pradhan Mantri Jan Dhan Yojana, Suraksha Bima Yojna Mudra Yojna, etc to ensure financial inclusion across various strata’s of Indian society. Its actual implementation, success, failure and numbers can be left for another discussion but the initiative is definitely praiseworthy.
Several startups also assist in the personal finance space serving dual purposes of savings (wealth) management as well as tax savings. Several high profile exits from well known investment banking and consulting companies have led to an influx in this space. Companies like policy bazaar, apna paisa, bank bazaar have been around for sometime catering to domains ranging from insurance policy selection to lending to personal finance management.
Recently released data by the government revealed startling facts with respect to return filing wherein only 4% Indians files the ITR. Clear Tax is working in this space to make return filing simpler for individuals and probably help increase compliance. Easier laws and awareness could see a spike in this segment as well.
Line of Credit
Credit worthiness is an important criteria for any individual looking to take a loan for any purpose be it housing, motor or personal. We all are aware of the CIBIL score basis which banks decide to extend a loan to an individual. Some startups have sprung up in this space which claims to help you improve your CIBIL score and with the help of their relationships help you avail a loan as well. On the other hand, startups like Capital Float, Faircent, Shiksha finance, Lending kart help you avail of working capital finance, educational loans, etc on simpler terms subject to meeting their respective requirements which are generally easier to adhere to as compared to organized banking channels.
One of the key takeaways I had from a recent FinTech event was on how to optimally use Rs 100 per day for a new business – ‘Buy a domain and startup’.