A decade ago, who could have imagined taking a ride in a cab and not paying the driver? Have you heard of depositing a cheque by snapping a picture of it using your smartphone? Could you envision paying your utility bills without standing in long queues for hours?
Fintech has made all this and more possible – and this is just the beginning. Fintech is transforming the lives of people around the globe.
The Current Scenario
Google and BCG (Boston Consulting Group) predict an exponential increase in the use of Fintech in India and a rise in digital payments from $50 billion in 2016 to $500 billion in 2020. By 2023, cashless transactions are expected to exceed cash transactions.
PricewaterhouseCoopers reports that investment in Fintech has risen from $5.6 billion in 2014 to $12.2 billion 2015 – a rise of more than $7 billion in just one year.
These claims are far from baseless. Here is a sneak peek into the way Fintech is changing the way people transact.
Banks have traditionally had a stronghold over the finance industry. As Fintech takes hold, traditional setups and structures are experiencing change. More and more services offered by financial institutions are being automated – reducing the need for a physical visit. These include:
- Transfer of funds – Electronic money transfer is being encouraged through both net banking and payment gateways.
- Loans – The risk assessment, approval and disbursement processes have been simplified – making finance easily accessible to all and reducing the cost of loans.
- Passbook updates – Account statements are now sent via email.
- Investment – Most investments such as FDs, mutual funds and even equity trading is now made online.
This list is by no means exhaustive. It may not be wrong to say that physical bank visits are limited to only the discussion of investment options; and even in this area, robotic advisors are aiding humans.
Payments and Receivables
Another area where Fintech is changing lives is the way you pay your suppliers or accept payment from customers. Payment gateway apps, Internet banking, and mobile banking are offering businesses wider choices to transact. Services that were earlier restricted to metro users are now available to small vendors in remote areas.
Fintech is not only aiding remote vendors to do business but is also encouraging new entrepreneurs who were earlier unable to set up their business because of financial constraints.
Stock trading and investment was the realm of the initiated few, while the common man contented himself with fixed and recurring deposits. Fintech has brought trading and investment right into the homes of the common man, placing financial decisions firmly in his own hands. Robotic advisors supply the high-level expertise required for investment decisions and also manage the logistics of the investment.
Big Data for Small Loans
One reason for the low credit to GDP score in India is that borrowing has hitherto been the forte of select borrowers with high credit rating. Big data can now access credit scores, transaction history, bank accounts and much more, facilitating the identification of small but viable loans. This bodes well for entrepreneurs and small startups since apart from the reduced costs of loans, they now have better access to the resources required for their business.
As Fintech advances, the need for expertise decreases. Moreover, the reduction in illiteracy levels and the changing social scenario are driving investments for the future needs of children. Building nest eggs have become the rule rather than the exception – even for the underprivileged and marginal sections of society. Further, the ease of transferring money has enabled crowdfunding for specific needs – such as treatment for terminal illness – ushering in a new social culture.
Startups and MSMEs
Not only has Fintech made funding easier for startups, MSMEs and small businesses, it has also eased the burden of collection on receivables, as well as facilitated secure payments without frequent bank visits. Digital transactions now cost only a small fraction of the cost of physical payment, and they are faster too. This is promising for the ease of doing business. Moreover, it has reduced the cost of finance as well as that of doing business.
Better Product Design
Not only are providers happy to accept low revenue-generating customers, but they are also able to offer innovative products that fit the budget and wallet of every customer. Banks, NBFCs and other finance companies are offering customised products to their clients based on specific requirements.
Fintech is creating opportunities where none existed. For instance, in the remote parts of the country where banks cannot reach, Fintech facilitates access to finance from the comfort of the home. Entrepreneurs are challenging economic inequality. Illiteracy is no longer a barrier since apps can educate users. Inclusiveness is the new mantra.
Perhaps the only reason why Cryptocurrencies have not become the new medium of exchange is the fact that they are yet to receive legal acceptance. While the hesitance to legalise the likes of Bitcoin is well appreciated – after all the finance industry requires close monitoring – experts believe that paper money will soon be obsolete. Cryptocurrencies can do much more than act as a medium of exchange. In fact, they are already being leveraged for payments and tracking – effectively merging logistics and receivables.
What Does the Future Hold?
The possibilities are infinite. What we are currently witnessing is just the tip of the iceberg. Why then has it not taken hold? The answer lies in the need for close regulation and monitoring of the finance industry. Unlike other sectors, where adoption of technology is merely a matter of logistics, the finance industry touches the lives of its users deeply through their wallets. Given the general mistrust of Fintech and the substantial investment required in any technology, finance companies hesitate to take the next step.
Experts opine that Fintech will rule the financial world, but there is still a long way to go. On the horizon is the day when technology will be all-pervasive, and paper money will be obsolete.