“The biggest part of our digital transformation is changing the way we think.” — Simeon Preston
Change rarely comes with uniformity. Throughout history, we have seen that intermittent phases of disruptive innovation have led to a transformation in the inequality map. The same pattern of changes applies to our financial journey. Fintech, or financial technology, is the latest captain steering the vessel of India’s financial industry to new frontiers. It refers to individuals or businesses that use technology to drive their financial services.
Fintechs use several innovative features that have helped them to surpass the age-old arsenal of banks as the chosen financial partner for citizens. Fintech focuses on utilising new ideas and skills, as well as technology and software, to revolutionise the ABC of financial business. While ‘modern solutions’ is the go-to acclaim for fintech, it has another equally important long-term goal – to make financial services more accessible, available, and affordable to the masses. This will lead the country to the gates of financial democracy.
We have often seen that the uneven and biased distribution of key resources like capital, labour, and technology can hinder and restrict economic growth. Fintechs have improved the overall economic stability of our society by bringing several financial ventures to the mainstream population. Beyond these macroeconomic benefits, higher financial inclusivity leads to major personal and social benefits. According to data from the World Bank Global Findex, up to 170 crore worldwide citizens were unbanked in 2017. Out of this, almost half belonged to seven countries: Nigeria, Mexico, Indonesia, China, Pakistan, Bangladesh, and India.
Interestingly, about 110 crores people, accounting for around two-thirds of these unbanked individuals owned a mobile phone. Fintech has capitalised on this, bringing financial management to the fingertips of crores by building apps and platforms that offer a wide range of services and products. Finding branches, long lines, user restrictions, extensive paperwork, basically all the hassles involved in a bank, were taken out of the equation. In this way, the fintech industry has made banking facilities easier and more accessible, reducing costs on both the customer’s end as well as the institution’s end.
Fintech’s success in democratising the Indian financial market was due to its ability to tap into a sizable, digitally literate population. Beyond that, it was also responsible for reaching out to those who could not get their choice of financial services that easily. As a new entrant to the financial sector, fintech saw the benefits of aggregating numerous components of traditional banking systems and offering a vast assortment of financial solutions on a single platform. Fintech firms offer higher convenience, simple user experience, increased transparency & wider range of choice to customers.
All this has been further boosted with faster processing, easier access, and prompt service. In addition, modern technologies like AI/ML, feedback mechanism, chatbots, etc., have received a thumbs up from customers too. Besides providing 24/7 access to customer service officials, fintechs also utilise non-traditional channels like social media. This helps to boost their visibility, increase brand awareness, generate higher customer leads. Further, many fintech brands connect with their customers on social media platforms like Twitter and Facebook, to answer queries, respond to grievances, etc. Today, procuring a loan or applying for insurance does not depend on where your bank is. Rather, it depends on your mobile phone and internet connectivity! While banks are just getting out of their rigid modules, fintechs are a mile ahead, into customers’ comfort zones.
The complicated and exclusive arena of market trading and investments have opened up to the general public due to the inclusive efforts of today’s fintech players. Previously these investment options and money markets were largely inaccessible to a major chunk of people. Large corporations and wealthy investors were the key players in stocks and mutual funds. Fintech companies increased the accessibility of these investment ventures to just about anyone, thus boosting overall financial democracy. People now know how to use stocks and securities to improve their financial portfolios, thus levelling the field for middle-class individuals and small businesses.
Furthermore, the exponential rise of fintech platforms has also led to the rapid inclusion of alternative investments in our journey to gain wealth. More and more consumers are flocking to investing, helped by digital innovations. Even beyond the traditional investment opportunities, fintech platforms have put several alternative tools on the map. Best for those who are looking for higher diversification and returns, the fintech ecosystem is helping these new financial instruments. Overall, newer technologies, software, and analytics are driving the growth and inclusivity of both traditional and alternative investments, thanks to fintech.
Fintech applications have further democratized financial services by giving more consumers knowledge and awareness regarding where and how to transact, save, invest, and borrow. As consumers began exploring their finances sitting at home on their devices, they also took up the responsibility of managing them. This in turn, necessitated minimal financial literacy. Innovative financial technologies increase customers’ intimacy with their finances through higher flexibility and control. As the COVID-19 pandemic forced us to manage everything independently, the wider population were forced to increase their financial understanding.
Fintechs go beyond their basic financial offerings as today many of such companies publish their own newsletters, blogs, surveys, reports, etc. By sharing these with their customers, these platforms increase their self-reliance. In this way, customers also develop a certain trust and bond with these platforms as it highlights their focus on empowering the customer. Many fintech companies also offer personalized services and products to their customers as compared to traditional banking institutions. The availability and accessibility of such self-help services and tailor-made products is one of the main reasons behind the increasing financial literacy in recent times in India.
Above all the pros, one of the primary USPs of a fintech is its wide range of products and services. After the technology boom and exponential growth of fintechs, people’s worries about getting their choice of loans, insurance, savings schemes, etc. was at an end. Fintechs take customer feedback to make their products and services more personalised, thus boosting trust and goodwill. For example, customers with a low credit score face extreme difficulties in the face of financial emergencies as most banks are unwilling to provide them with loans.
Fintech apps and platforms provide an expansive range of lending products that anyone can take, irrespective of their credit rating. Even with investment and saving schemes like fixed deposits, these companies offer a higher interest rate than most banks. Another fintech venture that is rising in popularity includes a number of small-token insurance products. These include several healthcare-oriented products related to specific ailments and diseases along with insurance products that provide financial coverage for your electronic devices, accessories, household products, and so on. These financial offerings are affordable, provide extensive coverage, and can be purchased easily with little paperwork and in a completely online format.
1. All developing countries should take the initiative to digitise user IDs and create a more secure ecosystem for all financial services. For example, the Aadhar ID system started by the Government of India has made it easier for citizens to open bank accounts and access financial services.
2. The public sector needs to partner with startups for investing in telecom and digital infrastructure for the rural parts of India. This will propel emerging economies forward with the combined use of mobile, e-commerce, and digital platforms.
3. Newly launched fintech ecosystems can act as a great stepping-stone for wealth redistribution, growing alternative financial services, and ease the pressure onf traditional banking systems. Fintech startups make the most of data collection, thus creating a more user-focused profile.
Today, fintechs consist of tech- and finance-driven startups as well as established financial firms that provide a wide range of products and services. They function as an aggregator, thus acting as a one-stop solution for all financial needs. Be it loans, insurance, investments, or saving tools, the fintech industry has revolutionised the digital world by bringing personal finance down to a closed knit model.
Fintech companies empower the customer to take their money management into their own hands, thus promoting financial literacy. All in all, it is a rapidly growing industry, making leaps and bounds to make the financial world more inclusive, accessible, and democratic.