The Indian economy has experienced a renaissance driven by fintech which has extended to several different sectors of the US economy. Fintech uses new technologies to allow businesses to flourish. Sectors of the Indian population are now able to draw loans and pay bills with new technology. (Image source)
What is Fintech?
Financial technology describes technology that is used to enhance and automate the delivery and use of financial services. This technology is used to allow the business to offer new products and services and better manage their financial operations. This could include payment mechanisms, credit lending facilities and the enhancement of transactions. Fintech has exploded with the use of smartphones and tablets.
Initially, fintech described the use of technology that was used to enhance back offer operations but has the use of handheld products perpetuated, fintech has exploded to include front end operations. Fintech is used for consumer-oriented services and now includes different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment management.
It goes as far as describing how to how to trade currency with the app. The ability to trade using handheld devices around the globe are one of the cornerstones of financial technology. While this segment has received most of the headlines, the largest revenue production is in the traditional global banking industry.
Indian FinTech companies have the potential to reshape the financial services landscape in three ways:
FinTech startups are likely to reduce costs and improve the quality of financial services. Not being burdened with legacy operations, IT systems, and expensive physical networks, the benefits of leaner operating models can be passed on to customers.
The FinTech industry will develop unique and innovative models for assessing risks. Leveraging big data, machine learning, and alternative data to underwrite credit and develop credit scores for customers with a limited credit history will improve the penetration of financial services in India.
FinTech will create a more diverse, secured, and stable financial services landscape. FinTech companies are less homogenous than incumbent banks and offer great learning templates to improve, both, capabilities and culture.
Accelerating Growth in India
Indian is expected to experience continued growth and the role of fintech should play a pivotal part in the expansion of revenues. According to NASSCOM fintech growth is accelerating and could hit US$ 2.4 billion by 2020. Since the Indian economy is still bifurcated, there is a large section of underbanked which can benefit substantially from fintech in the bank sector.
Nimble Indian Startups
The key to the success of fintech is finding areas of the Indian economy that are in need of technology to spur on growth. The opportunity to provide financial technology to the underbanked has been noted by the International Finance Corporation, where India’s current credit gap is around INR 16.6 lakh crore.
The majority of these are small-ticket loans sought by new to credit customers who are either unserved or underserved by traditional financial companies, allows fintech startups to bridge this credit gap by offering flexible loans. These low-cost digital payments use innovative delivery models and data science to assess the creditor’s creditworthiness to avoid payment defaults.
How has Fintech Perpetuated
Data analytics continues to be a strong driver of fintech within India. Fintech startups are working to bridge the gaps in many financial sectors. The information that is used helps with the marketing process. The data that is gathered describes what people want and where they want it. This process has been flourishing for more than a decade.
In 2009, The stamps and registration department created a tamper-proof process to generate secure stamp papers. E-stamping is a secured electronic way of stamping documents and provides a payment mechanism to the government. Moving forward, fintech should continue to be a pivotal part of the expansion of the Indian economy.