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4 Innovative Ways How Fintechs are Transforming Traditional Lending Life Cycle

Lending Lifecycle Management

The proverbial story of the chicken and egg is the ideal when it comes to depicting the reality of the Indian lending landscape. Borrowers require a lending score to borrow money but do not have anything as such since they have never applied for a loan before. Traditionally, borrowers also had to comply with the lending institution’s stringent demands, wait patiently for loan approvals, and submit various documents, extending the lending life cycle.

In this scenario, financial technology (Fintech) companies and non-banking financial companies (NBFCs) have emerged as the unsung heroes. Driven by government initiatives and high internet penetration, digital financing has gained significant momentum in recent years, and for good reasons. As evidence of this,

Fintech companies disbursed loans worth 92, 267 crore rupees in FY 22-23, against 76,396 crore rupees in FY 21-22.

The evolving consumer behaviour and growing demand for branchless financing are redefining the Indian lending ecosystem. The change is further fueled by the integration of cutting-edge technologies, including artificial intelligence (AI) and data analytics.

This article helps our readers understand how the arrival of Fintech is gradually transforming the lending life cycle in India.

What Do We Mean by Fintech Lending? 

Fintech lending primarily refers to the use of cutting-edge technology such as AI, machine learning, and data analytics to identify, evaluate, and disburse loans. These technologies empower lenders to make informed decisions and trim the lending life cycle, resulting in a faster and data-driven lending process.

Fintech financing has made capital more accessible for underserved groups such as small businesses and peer-to-peer borrowers, creating a competitive lending market.

How Fintechs Drive Transformation in the Lending Life Cycle?

Now, let’s explore how Fintechs are improving the traditional lending life cycle. 

1. Introduction of Alternative Lending Models

Fintech companies have swiftly made inroads into the lending ecosystem by catering to the needs of the large, untapped population seeking accessible and convenient financial solutions.

Alternative lending models introduced by Fintech companies are poised to replace incumbent and inflexible traditional lending models as the latter have been unable to narrow the gap between credit demand and supply.

And what do we mean by alternative lending?

Alternative lending primarily refers to loans disbursed via non-traditional channels such as digital platforms instead of traditional lending institutions such as banks. For example, peer-to-peer lending is one of the best examples of an alternative lending model where individuals can provide loans to businesses and individuals through tech-driven digital platforms. 

2. Fintech Companies are Transforming Data Utilisation

Traditional lenders haven’t been able to look beyond some of the most basic data points, including demographics, credit bureau data, and credit scores, to assess the creditworthiness of their borrowers. It is safe to say that determining the creditworthiness of underbanked individuals and businesses was a lengthy process, extending the lending life cycle, and resulting in dissatisfied customers. This is one of the major reasons why credit access was often time-consuming and inconvenient for underbanked borrowers.

Unlike traditional lenders, new-age Fintech companies evaluate a borrower’s conventional and non-conventional data points to create accurate and robust borrower personas. Today, Fintech companies also assess social media behaviour, financial transactions behaviour, payment behaviour, and app-based data to make a holistic assessment of a borrower’s creditworthiness. 

3. Building an Instant Loan Culture

It is worth noting that around 67% of Indians rely on personal loans to meet their fund requirements.

Fintech companies are the pioneers of instant loans, setting them apart from banks that take weeks and even months to approve loans. How are Fintech companies managing to reduce the traditional lending life cycle? Their success on this front can be attributed to a range of factors, including minimum eligibility requirements and digital document and identity verification.

As a result, borrowers from the remotest parts of the country have access to instant credit thanks to the streamlined and data-driven approach adopted by Fintech companies. 

4. Machine Learning to Create Borrower Groups 

While Fintech companies are leaving no stone unturned to provide seamless customer service, they are leveraging ML algorithms to improve the accuracy of credit assessment. They primarily lean on reinforcement models to learn from past mistakes and segregate bad borrowers from good ones based on their behavioural patterns.

Fintech companies are also extensively using ML to differentiate their product offerings from their competitors, resulting in better, flexible, and consumer-centric product offerings.

Additionally, their optimized products and services play a significant role in streamlining the lending life cycle, resulting in higher customer satisfaction.

Parting Notes

There is no doubt that modern and sophisticated Fintechs have emerged as promising alternatives to traditional lending institutions. That said, Fintechs are the new entrants in the ecosystem and will take some more time to expand their market share.

Fintechs should prioritise innovation and fill the gap between credit demand and supply. Additionally, they need to stay on their toes and study borrower behaviour, leverage cutting-edge technologies including AI and machine learning, and harness the power of data analytics to overcome the challenges of the traditional lending life cycle.

As a lending life cycle management tool, Finezza offers a wide range of innovative solutions to improve and organise your lending cycle management and credit evaluation services. Our web-based platform is designed to aid lenders in making informed decisions and facilitate seamless credit assessment.

Contact Us today to know more.

How Will RBI’s New Offline Payment Framework Impact Fintech Growth?

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Many have encountered a frustrating situation where they could not make a UPI payment due to poor internet connectivity. It is the sole reason that leads to the disruption of digital financial services, resulting in issues like failed transactions, UPI apps stuck at the loading screen and waiting endlessly for the merchant details to show up.

 

Therefore, usage of UPI and fintech payment solutions significantly depend on dependable internet connectivity. However, a study revealed two out of three Indians face issues when making digital payments due to poor network connectivity, and 9 of 10 users have reported network connectivity issues; despite over 98% of India having 4G coverage. 

 

As a remedial measure, the Reserve Bank of India (RBI) has devised a framework to solve this pesky problem: a framework allowing offline payments. 

 

In this blog, we will discuss how it can make transactions more seamless and influence fintech growth in India.

 

Boosting Fintech: An Overview Of The Offline Payments Framework

 

An offline digital payment is a transaction that does not need internet connectivity. Despite sounding absurd, the RBI’s recent framework for enabling small-value offline digital payments has made it possible. 

 

The new framework allows offline payments made face-to-face, up to Rs 200 per transaction, with an overall limit of Rs 2000.

 

RBI has designed the new framework based on the feedback from pilot runs carried out nationwide from September 2020 to June 2021 to develop a solution for internet-dependent payments. 

 

9 Notable Features of RBI’s Offline Payments Framework 

Here are some key features in the framework listed below: 

  1. Special wallet

The user loads money in a special wallet, subject to a limit of Rs 2000 per instrument, and they can use the app offline to make payments.

  1. No Need for AFA

Though user consent is required, these offline transactions do not require an additional factor of authentication (AFA) like a pin or one-time password.

 

  1. Payment instrument enablers

Authorised Payment System Operators and Participants (Banks and Non-banks) will enable payment instruments for offline transactions based on the customer’s explicit consent. 

 

  1. QR Code Generation

The user scans a QR code, after which the amount gets debited from the wallet even if the merchant has no network. A QR code gets generated after the payment, which acts as proof of payment. Once either the merchant or the customer goes online, the transaction gets settled.

 

  1. SMS/Email alerts

As the transactions are offline, alerts through an SMS or an e-mail are received after a time lag or when the internet connection is back. These alerts may not be available for each transaction.

 

  1. Reloading the balance

The Rs 2000 limit is applicable until the customer replenishes the balance. The user can reload the balance only through the online mode.

 

  1. Multiple channels

The framework enables small-value offline digital payments using any instrument or channel, like cards, wallets and mobile devices.

 

  1. Consistent protection

Users have similar protection against customer liability if there are any fraudulent or unauthorised transactions and grievance redressal, as in the case of regular electronic banking transactions.

 

  1. Liabilities

The acquirer must absorb liabilities arising from any security or technical issues at the merchant’s end.

 

Impact Of Offline Payments Framework On Fintech 

 

As innovations occur across the fintech sector, they have a trickle-down effect on the entire economy. Mobile banking, in recent times, has been one such innovation. Here’s how the RBI framework can impact the fintech sector:

1. Promote Financial Inclusion

The adoption of digital payments has been low in rural and lower-tier cities due to connectivity issues. Digital payments can wean buyers and sellers off cash transactions and steer them towards formal banking channels. This eventually paves the way for adopting other fintech services like savings, investments, loans and more. 

 

2. Introduce New Users To Fintech

The offline option encourages first-time users to make digital payments using mobile devices, cards, or wallets. Popular technologies like Bluetooth, sound waves, NFC, or IVRS will be instrumental in developing innovative solutions for such payments. 

 

3. Facilitates Last Mile Penetration

This payments framework incentivises last-mile penetration of digital payments and ensures the benefits of fintech innovations reach remote corners of the country.

 

4. Mix Of Safety And Convenience

The framework strikes a balance between safety and convenience. The transaction cap of Rs. 200 and a total cap of Rs. 2,000 (per instrument) are in place to ensure user security. Non-requirement of the additional factor of authentication adds to user convenience. 

 

5. Help Small Businesses Expand Their Base

Transactions habitually settled in cash, especially in small businesses, will now be settled offline using the customer’s UPI-enabled app., card, e-wallet or mobile device. This increase in person-to-merchant (P2M) and peer-to-peer (P2P) transactions via payment apps will give rise to a new wider segment for businesses. 

 

4 Vital Fintech Challenges To Offline Payment Adoption


Though offline payment comes with many advantages, it does pose some challenges. Such as:

  1. Top-up requires an internet connection

The user can top-up the wallet only when they are online with an AFA code; if one is going to be in a low connectivity region for a prolonged period, then they would not be able to replenish funds if they run out of money in their wallet.

 

  1. Future of Existing Debit Cards

Another challenge is the usability of existing debit cards for offline payments; can these cards be used, or do new cards have to be issued?

 

  1. Mobile Devices as a Solution

Mobile devices could emerge as one of the possible solutions. Banks and payment services can come together to devise a solution for processing payments through point-of-sale (PoS) terminals, mobile devices etc., either with or in the absence of a network and communicating transaction alerts to the user upon the user receiving connectivity.

 

  1. Slow Adoption

Implementation of the framework is left to the banks’ and payment system operators’ desire and is not a mandatory obligation placed on them. Banks have been slow in adopting and deploying technology solutions and infrastructure and may not be incentivised to implement offline payments for their users.  

Key Takeaways

The Reserve Bank of India’s framework enabling offline payments will have benefits across a large spectrum. Users in remote parts are not left behind and can benefit from the fintech revolution. Small businesses and banks also stand to gain with an expanded user base.

 

Finezza offers a range of services for integrating payment options with different frameworks. Additionally, Finezza is software and platform agnostic and offers secure APIs and data pipelines to make integration easy. We emphasise your dynamic security needs as well. 

 

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A Comprehensive Guide to RBI’s Digital Lending Guidelines for Fintech Companies

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India’s digital lending market has grown exponentially in the last decade, from a modest $9 billion to nearly $270 billion in 2022. But the sector was largely unregulated.

The digital lending guidelines, which took effect on December 1, 2022, are considered a proactive and progressive step by the Reserve Bank of India (RBI) as the country’s credit system custodian. 

The new rules are intended to protect customers’ interests, improve transparency in the digital lending system, and facilitate the healthy and orderly growth of the sector. The RBI aims to effectively endorse digital lending activities in India and assumes responsibility for this innovative credit mechanism, boosting consumer confidence in the industry.

In this blog post, we will discuss some key terminologies and analyse key points of the supplementary FAQs. 

The Glossary of 8 Must-know Digital Lending Terms 

This section will help readers comprehend some of the key terms and concepts that are being dealt with in this circular.

1. Annual Percentage Rate (APR)

 APR is the interest rate of a loan charged to the borrower annually.

2. Cooling off period/ Look-up period

It is the time that should be provided to the borrower to exit an existing digital loan if he does not wish to continue with it. The RE’s Director Board determines the duration.

3. Digital Lending 

An automated process that essentially uses seamless digital technology for granting and recovering loans. It manages the lending life cycle using web or mobile platforms.

4. Digital Lending Apps (DLAs)/ Digital Lending Platforms 

Mobile or web-based applications that facilitate the digital lending process. The applications (apps) are operated either by the REs or by service providers entrusted by REs known as the LSPs.

5. First Loss Default Guarantee (FLDG)

FLDG is an agreement between a lender and a third party in which the third party undertakes to compensate the lender for defaults in the lender’s loan portfolio for up to a predetermined percentage.

6. Key Facts Statement (KFS)

 A key facts statement is a printed communication to be given to the borrower that contains all the details about the digital loan being availed, including its amortisation schedule. The circular provides the format of KFS as an annexure.

7. Lending Service Provider (LSP)

LSP is an outsourced service partner of the regulated entity that performs one or more of the RE’s digital lending functions under the prevailing guidelines.

8. Regulated Entities (REs)

The term “RE” refers to both banks and non-banking organisations that      the RBI has authorised to carry out the activity of digital lending.

An Addendum to the Digital Lending Guidelines

The RBI has compiled a list of the most frequently asked questions about the new guidelines as a FAQ on its website. 

These frequently asked queries help fill in some gaps in the new circular and bring further clarity to the new digital lending norms. 

Some key specifics are summarised below: 

1. According to the circular’s definition of digital lending, a lending activity falls into the digital lending category if it ‘largely’ uses digital technology in the lending process, even if there is some physical interface with the borrower.

2. Service providers engaged by REs who provide credit intermediation services that do not meet the definition of ‘digital lending’ are not designated as LSPs.

3. Only those LSPs with a direct interface with the customer need to appoint nodal Grievance Redressal Officers. However, the onus of complaint resolution lies with the REs for all actions of their partner LSPs.

4. EMI programmes on credit cards falling under the purview of the “Master Directions– Credit Card and Debit Card, Issuance and Conduct Direction, 2022” will not be covered under the digital lending guidelines.
However, loan programmes offered on debit cards, including those with EMI facilities and all other credit facilities extended on credit cards not covered by the aforementioned Master Direction, will be governed by the new rules.

5. In the case of floating rate loans, any changes in the APR must be intimated to the borrower through SMS or emails whenever there is a revision.

6. Transferring money related to loan disbursal and repayment must happen directly between the RE (lender) and the customer. LSPs, including payment aggregators (PAs), must not be involved in handling funds.

7. If the situation calls for it, REs can use a physical interface to collect cash on delinquent loans. Loan repayments recovered in cash are exempt from the requirement of direct loan repayment via digital modes. The loan account of the borrower must be updated to reflect the recovery.

8. The guidelines apply to all lending transactions that meet the definition of digital lending and occur on all digital platforms, including mobile banking apps and banks’ websites.

9. The amount in default will serve as the maximum amount on which penal interest/ charges are imposed.

10. Cheque bounce or mandate failure fees charged by instance will not be annualised.

11. If the customer withdraws from the loan arrangement during the cooling-off period, the REs can retain a reasonable one-time processing fee. This should be communicated to the customer in advance via the KFS.

12. At the time of sanction, the borrower should be informed of the details of the empanelled recovery agents. If a loan becomes delinquent and the RE assigns a recovery agent, the borrower must be notified of the agent’s details via SMS or email. This must be completed before the agent contacts the borrower to begin the recovery process.

Wrapping Up

The Indian digital lending industry saw tremendous progress in the last two years, and Fintech players are preparing for a bright future.

RBI has also stepped up its role as the regulator by introducing important regulatory changes in the sector. Some may consider the RBI’s scrutiny of lending apps too intrusive. The complaints originate mainly from the need to change the existing business model to comply with the new standards. 

However, RBI’s new Digital Lending Guidelines are the right step toward developing a transparent, productive economic credit system.

Finezza, a leading lifecycle management, and credit evaluation Services platform, efficiently manages your lending portfolio. In our suite of products, the flexible and agile Loan Management System is a one-stop solution for the entire loan lifecycle.

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How Can Banks Unlock Sustainable Growth by Partnering With Fintechs?

Lending Lifecycle Management

Traditional banks have been around since the 14th century and have had a good run until now. However, the onset of new-age financial technology (fintech) firms has taken the financial world by storm.

So, how have banks responded to the arrival of fintech companies? Do they see them as unwanted intruders? Are they willing to collaborate with fintech companies to pave the way for a better banking experience for consumers?

This article provides answers to these questions and takes you through some of the key reasons why banks should partner with fintech companies.

Beginning of the Fintech Era – What to Expect?

Fintech companies have acquired substantial market shares that previously belonged to banks explicitly. That being said, many fintech firms are actively scouting for collaboration opportunities with established banks.

Fintech companies are predominantly startups that do not have a lot of resources when compared to banks. However, they have a grip on new technologies and innovations. This is exactly why around 65% of credit unions and banks have agreed to enter at least one fintech partnership in the past three years.

One may wonder what value lies in the collaboration of fintech firms and banks. The answer is pretty straightforward – this collaboration has the potential to address the challenges of both parties. While fintech companies have expertise in new technologies and innovations to improve the overall banking experience for the masses, banks have the masses on their side.

Therefore, traditional banks and fintech companies have the right mix to lay the foundations of the financial sector suitable for the next generation.

Why Should Banks Tie Up With Fintech Companies?

Today, businesses across all industries are either on the path to embracing digital transformation or already serving their customers digitally. Banks that have conventionally remained slow to adopt new technologies have identified the need to spruce things up by partnering with fintech companies. The blend of new technologies provided by startups and the banks’ rich and diverse financial expertise would open the floodgates to a new, secure, and modern banking era.

Here are a few reasons why banks should join forces with fintech companies:

  • Leveraging Tech Innovations

There is a considerable technology gap between fintech companies and banks. Partnering with fintech companies would mean that banks can deploy technology systems that are not bound by legacy. Partnering with fintech companies addresses age-old challenges within the traditional banking system ecosystem.

With new digital solutions and development, fintech companies have the potential to transform the current state of banking. All in all, fintech companies can help traditional banks fill the huge technology gap and, most importantly, revamp the bank’s existing tech architecture.

  • Curating New Products and Services

Fintech firms have the knowledge and expertise to develop customer-centric products and services. Their offerings can play an important role in improving the status quo of traditional banks.

Many fintech companies have rolled out niche solutions such as buy-now-pay-later (BNPL) for mainstream customers. Such solutions appeal to the younger and more tech-savvy population. Looking at how inactive traditional banks have remained in the past to roll out tech-driven solutions, it is safe to say that the entry of fintech companies would do more good than harm.

  • Saving Time and Resources

Time is money. Ironically, banks spend countless hours debating whether they should buy or build technology in-house. Today, these debates prove to be very counterproductive as many fintechs can provide the required technology and solutions to banks at affordable rates. Thus, when banks partner with fintech companies, they need not worry about discovering new ideas and innovations. Fintech firms lift that burden off their shoulders.

Thus, implementing new technology or building a tech stack is cost-effective and much faster when banks partner with fintech firms. Leasing technology rather than developing it in-house offers banks more flexibility to reject a course of action if it is unsuitable or does not align with its requirements.

  • Facilitating Cloud Banking

Cloud technology or cloud computing largely means that you can access and save your data on the internet instead of a hard drive. This enables you to access your data irrespective of your location, device, or time as long as you have a working internet connection.

Just like any other sector, banks save large volumes of customer data and banking details on their hard drives. However, things have taken a turn for the good with the arrival of cloud technology. Many banks have tied up with fintech firms that provide cloud-based services and solutions to store data. It is a win-win situation for both the banks and customers. Banks do not have to worry about erasing or losing customer data, and customers can access data from any place at any given time.

Final Thoughts

So, the main question is whether fintech companies complement the growth of traditional banks. The answer is yes. The offerings or product portfolios of most fintech companies can transform the services of traditional banks and take them to a whole new level.

With an increasing focus on digital transformation across the banking sector, banks cannot ignore what fintech firms bring to the table. Partnering with fintech companies has multiple benefits, and many banks have recognized the same.

At present, many banks have joined hands with fintech firms, and those who haven’t are exploring this possibility. If banks want to remain relevant, stay ahead of the curve, and acquire new customers, they should collaborate with fintech companies.

By partnering with a fintech company like Finezza, you can avail a wide range of brilliant solutions and leverage the new age technology. Finezza offers services like streamlined loan management, document identification, and KYC processing. Contact us today to know more!

What Is the Difference Between Finserv and FinTech?

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If you’re learning about a new industry, you need to familiarise yourself with the jargon of that industry. The jargon is not meant to confuse you but to help you communicate concepts as clearly and quickly as possible.

Common terminologies have also transformed with the marriage of finance with ever-evolving technology. Two often used terms in the industry that any finance enthusiast or professional needs to know are “Finserv” and “FinTech.” These terms are sometimes used interchangeably, but important distinctions exist between them.

How is FinTech different from Finserv?

While these sound similar, specific points identify the need for two separate terms. To explore the difference, let’s first understand the two terms individually.

What is Finserv?

Finserv is an abbreviation for “financial services”. Essentially, any company that offers financial services is known as a Finserv company. This may include banks, non-banking financial corporations (NBFCs), insurance companies, brokerages, etc.

Finserv is an ancient term used to refer to financial service providers for decades. For example, a prominent financial company in India is Bajaj Finserv.

Finserv is commonly used in the industry to describe any company that provides financial services. Banks that have been around for over 50 years in India are also described as Finserv companies.

What is FinTech? 

FinTech is an abbreviation for “financial technology”. This refers to companies that leverage technology to provide financial services. FinTech is a relatively new term that has been around for several decades. FinTech is usually used to refer to tech start-ups operating in the financial space. 

Finserv companies use technology in some form or the other. For example, every company uses computers these days, so are Finserv companies also FinTech companies? 

The simple answer is “no”. FinTech companies are different from Finserv companies because FinTech companies use technology to disrupt the existing financial space. Using the latest technology means FinTech start-ups can provide a financial service more efficiently or cost-effectively than before. For instance, in Asia alone, more than 2.38 billion people used a FinTech service in 2021.

There are several examples of FinTech start-ups in India, like PayTM, Cred, and MobiKwik, to name a few. In 2021, the overall market size of the Indian FinTech industry was $31 billion, estimated to reach $150 billion by 2025.

The Primary Differences 

There are several differences between a FinTech and Finserv company. Some of the most notable ones are below.

Disruptive – Finserv companies have been operating for a long time. They have similar business models that are time-proven. For example, every bank operates in a standardised way, and there are only a few aspects to differentiate one bank from another.

However, FinTech start-ups are defined as new and disruptive. These companies are much more experimental and aim to do business differently by leveraging the latest technology.

For example, the payments space has seen a lot of activity by new FinTech start-ups. These start-ups allow you to make payments digitally simply by using your smartphone without carrying cash or using a debit card or credit card. This is just one of how FinTech start-ups are revolutionising finance.

Scalable – The goal of a FinTech company is to provide services to underserved communities and areas.

Since these companies use the internet and smartphones, they can reach customers that traditional Finserv cannot. With the ubiquity of smartphones in today’s era, FinTech companies can provide their services to a large swath of the population.

Further, since the cost of acquiring a new customer is relatively low, FinTech start-ups can scale their operations very quickly. They may even record high growth numbers in a relatively short period.

Digital – The operations of a FinTech company are digital. Customers can interact with these companies entirely online, and there is no need for a physical presence.

For example, traditional Finserv companies may require you to visit their branch or head offices to do business with them. However, a FinTech start-up has capabilities that allow you to do all your business with them through an app or a website. There is no need to stand in line at an office when dealing with a FinTech company.

Further, FinTech start-ups are leading the way to financial inclusion thanks to digital access.

Lower Cost – Due to the reduced cost of digital infrastructure, FinTech start-ups can offer their services at highly competitive rates compared to Finserv companies. Several FinTech companies even offer a large portion of their services for free. For example, a person does not need to pay anything to use PayTM.

The Future of Finance

It is clear that FinTech is the future of finance. However, this does not mean that Finserv companies will go out of business. Instead, almost every Finserv company is actively working towards adopting technology to offer better and more cost-effective services to their customers.

For example, banks like ICICI have launched their mobile app through which customers can deal with almost any banking operation. Customers can use this app to transfer money, request a debit or credit card, check their transactions, apply for loans, and so on.

FinTech start-ups face tough competition from Finserv companies while encroaching on their space. As the popularity of FinTech services grows, more and more Finserv companies are digitally transforming themselves to stay relevant in the future.

Open banking and automation allow companies to reach more customers than ever before. As of today, there are over 1.7 billion individuals in the world without access to banking services. But with the advent of new technology, the picture is changing for good.

Several global technology powerhouses are also entering the financial space to exploit the financial technology revolution. Even Apple and Microsoft are testing the waters. The day may be close when almost every financial service will be available to everyone at the click of a button on their smartphones.

Wrap Up 

Sooner than later, every financial company will become a FinTech company. The road ahead is bright for companies open to leveraging new technology to provide better services. The line between Finserv and FinTech may dissolve soon enough as even traditional companies adopt FinTech capabilities.

If you’re banking online, you should be careful of fraud. Read our primer on avoiding fraud to keep yourself safe while operating in the digital space.

Also, contact Finezza if you’re looking for comprehensive credit assessment solutions. We hope you’ve found our article helpful and informative.

Trends Influencing the Future of Indian Fintech in 2022 and Beyond

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Fintech is at a fascinating stage as it has reshaped how we view finances. What’s impressive is that fintech companies’ innovation has compelled the government to change its reforms. This is a disruption in action. The finance industry is no longer restricted to financial solutions; it has rather evolved with technology-backed solutions that make financial services convenient and your life easy.

Internet is a significant part of our lives now, and the drastic adoption led to the rise of fintech companies. These companies have brought financial solutions to our doorsteps. Banking solutions, investment, payments, insurance, you name it, and it can now be done in a few steps. All the credit goes to financial technology, aka fintech.

Watch Out For These Top 5 Fintech Trends

Looking back a few years from now, we have come a long way and redefined multiple financial processes. Let’s now peek into what the future of the finance industry would look like and trends that would set the traction.

1. AI and ML

Pandemic has given digitisation the right push, and we now live in a world of cashless payments and banking. The banking sector advanced multifold with the help of Artificial Intelligence (AI) and Machine Learning (ML). The data processing ability of banks has streamlined efficiency, cutting through manual labour and extended steps.

Banks can now process a vast set of data to draw quick and concise outputs that facilitate the process of decision making—improved ability to recognise and decipher real-time patterns led to the advancement, which has not only cut process time but also costs.

AI and ML have reduced the workload and stress level of the workforce, thereby increasing productivity by 59%. Besides improving the process of banking, they have also made online banking safe and secure. Technology is set to empower the workforce, equipping them with efficiency.

The kind of data AI processes reduces loan default and many other complicated notions of banking. This includes fraud detection processes, customer service, credit, and loan decisions. However, a major portion of AI and ML remains unexplored, and Fintech firms are ramped up to disrupt the traditional practices.

2. Neo Banks

We relate to physical establishments, coming across the mere term – bank. But we have moved past this traditional assumption; a physical presence for banks is now ancient. Neo banks have challenged the monopoly of banking sector players and successfully established a stature. Neo banks have one vision, to make banking more accessible and convenient.

They are building a banking ecosystem that does not rely on physical branches, where banking is open for everyone. Neo bank’s cheap and convenient products are the best alternative to the present market dominant brands.

Neo banks leverage technology and their aspects such as artificial intelligence, biometrics, cyber security, and online banking to create bespoke solutions. Customers can access data relating to their accounts or just any banking products at their fingertips. They are the major hubs for mobile banking and cashless transactions.

Neo banks are not yet certified as independent establishments under RBI but have found a way to coexist with traditional or legacy banks. Some of the prominent names we have already come across are YONO by SBI, Kotak 118, RazorpayX, Jupiter, and NiYO.

3. Blockchain

The terms blockchain and cryptocurrencies rely on each other’s presence. But, blockchain need not necessarily be limited to crypto. Banks are now aware of this technology’s potential and plan for mass adoption in its workflow dynamics.

Blockchain technology is highly secure, and one of the trusted technologies. Therefore, integrating it into the banking ecosystem would ensure safe transactions.

Since the banking system is unfortunate to experience major frauds and attacks now and then, blockchain would help create a secure environment free from fraud, thereby complying with regulatory requirements. In addition, blockchain can host quick, convenient, and precise transfers, payments, and investments.

4. Wealth Management

Investments and wealth management were concepts only the privileged sections of the society were familiar with. Now, almost everyone is educated about the probable potentials of compounding and investment.

Previously, the risk profiles of wealth management would scare investors. Though risk is still a part and parcel of the wealth management industry, we have also come to visualise low-cost methods and frequent returns.

India’s fintech market is one of the fastest-growing markets in the world, and wealth management is a part of it. The major drivers of the wealth management industry are startups. Startups have challenged the well-established traditional business models to only shatter their confidence. Moreover, the technology competence these startups have is inevitably their greatest strength.

People are now aware of these startups and also the upsides of investing in such companies. Trading is now being adopted by people of all ages and has got them hooked to investment.

AI is still the primary determinant of this industry’s future. It has already grown up to be able to process gigantic amounts of data, analyse it, and reliably forecast trends based on it. There are special algorithms designed to make the experience and process of investment highly rewarding and risk redundant.

5. Insurance

Insurance and coverage are a major part of financial discussions, especially since the pandemic has hit us hard. While the relevance and significance of insurance remain the same, fintech companies still have a role to play. They are partnering with potential and high-profile insurance brands to help them create an easy and automated process of approval and funds disbursal.

The flagship products of this industry are term and life insurance. It was, however, not limited to life insurance and grew up to include mobile, car, health, wearable, covid insurance, and more.

The technology advancement would help brands to better engage with their clients. Brands can clearly establish their communication lines and convey any updates duly. Technology would also lend a hand to the customer service executives, thereby improving customer retention.

The fintech industry is evolving at a fast pace, and anticipating major disruptions is only obvious. The future has a lot of disruption in-store. It is only a matter of time before trends become fads and new disruptions hit the market. As per the present scenario, some of the major drivers are Robo advisors, blockchain, a better lending landscape, globalised payments, secure banking, wireless transfer,  digital and cloud banking, chatbots, automation, financial inclusion, and more.

The present fintech landscape is all about the survival of the best. This demands you to stay in sync with the hot trends of the industry. We recommend you stay abreast of Finezza spaces to stay on top of the Fintech trend that would take the market by storm.