Fintech Landscape & Emerging Trends In India

Avnish Mehta, Director - Digital Transformation, CollaberaAN IIM Bangalore alumnus, Avinash, in his career spanning close to two decades has held key positions across many corporates such as Wilshire Associates, Oracle, Egon Zehnder and Collabera and even co-founded Digital Republic, a Digital Solutions startup.

Decentralization of finance is one of the logical byproducts of the Digital revolution. The spurt in Fintech startups in India are a testimony in this direction. As per PwC report in last five years, about 2000 FinTech companies have been founded leading to a virtuous cycle of increased consumer adoption of FinTech solutions. Currently, India ranked second globally in the setting up of FinTech startups behind China.

Ecosystem Foundation & The Drivers:
What makes India a fertile ground for FinTech growth is huge under served segments of unbanked population, young digitally native demographics easy access to mobiles with cheap internet and supportive government regulatory policies. There is a realization with the policy makers that to lift the people out of poverty easy and low cost access to credit and movement of money is the need of the day. There is some empirical evidence, though disputed by few that introduction of M Pesa in Kenya has lifted almost 200,000 people out of poverty.

Traditional banks and their processes to provide access to formal banking are cumber some, time consuming and also not considered useful or helpful by the poorer sections of the population. This provides huge opportunities to FinTech companies to offer their products and services in a costeffective and efficient way. On the other hand we have young consumers who prefer to use their ubiquitous mobiles to shop and transect due to immense convenience they provide, hence providing a huge market for mobile payments.

The trigger for sustainable large scale movement towards digital economy and FinTech revolution in India can be attributed to:
•Allowing Aadhaar for KYC
•Provision of Zero balance accounts to help un banked population
•Launching of UPI
•Roll out of GST to bring MSME to generate their digital footprints in GSTN.
•Allow private players to access these platforms and data to create an ecosystem

Regulatory Support: Along with setting the digital infrastructure the policy makers made the movement conducive by regulatory support and evolution. RBI allowed for e-Commerce players to enter the wealth management space, permitted online MF transactions using e-wallets or payment banks. It also launched an Ombudsman Scheme for Digital Transactions (OSDT)for redressal of complaints regarding digital transactions. The RBI boosted the P2P lending segment by categorizing it as NBFC.

In August this year, RBI permitted startups, banks and financial
institutions to setup regulatory sandbox(RS) for live testing of innovative products in areas like retail payments digital KYC and wealth management. This move not only is a booster for FinTech ecosystem and innovation, it also shows seriousness of the policy makers to envision regulations that supports industry rather than stifle them.

To safeguard the customers and give them a say in how their data can be used, Indian government is bringing Personal Data Protection Bill in coming session. The bill draft suggests setting-up of Data Protection Authority of India to prevent any misuse of personal information.

Technological Drivers: Social and other audio visual mobile apps have set high standards for an engaging customer experience. FintTech applications need to match these expectations of personalized services by leveraging latest technological advancements. IoT, big data, voice NLP along with evolution in AI/ML, distributed ledger and Cyber security technologies are helping FinTech companies to offer new personalized offerings best suited to the individual consumers.

What Future Looks Like?
Technology is the DNA of FinTech and is playing a key role in creating new service lines innovative offerings by creating new markets, and customer segmentations by facilitating rise of decentralized & personalized finance and new ecosystems. Currently Indian FinTech footprints are more pronounced in Digital Payments and alternate Lending space, but we are seeing a lot of focus and work in RegTech, InsureTech WeathTech Security and Corporate banking space. In coming days, we will see some key trends and business models getting more pronounced and capturing market:

New Ecosystems: With the digital infra in place and supported by government regulations we already see movement towards Open Banking allowing for close coordination co-development and collaboration between financial institutions. In coming days, we will see more integration between transnational financial institutions. Online international remittance will become cheaper and faster. It will lead to smoother and seamless global tourism and purchases. We will see rise in international e-wallet and prepaid cards.

Also, this will be rise in FinTech building P2P platform to connect borrowers and lenders with built-in protection mechanisms to safeguard the stake holders. This will help is very short duration low cost micro lending. Corporate banking will become more integrated, providing better business advisory, cash management, and forex related services based on analytics.

While on technology front we will have startups providing services around cybersecurity biometrics, and data analytics across verticals, there will be rise in more FinTech startups integrating with other industries like AgriTech, HealthTech, Retail and supply chain management.

Personalized Financial Products: We will see new data driven, risk scoring/credit scoring models based on individual behavior data gleaned from social media location spending and earning patterns. This will lead to new services like micro-credit or micro insurance on-demand. Current under writing practices and processes will be completely disrupted due to big data gathered from various sources, including government data and disrupt the whole lending and insurance industry.

RegTech: Financial sector is one of the most heavily regulated sectors for obvious reasons. It makes many processes very resource, cost and time intensive due to complex compliance requirements. RegTech focused FinTech firms can help in reducing time and cost by providing on-boarding data management, ID management and compliance solutions. With new regulations around Regulatory Sandbox and Personal Data Protection Bill, we will see a rise in new FinTech startups.

Digital Assets: The evolution in blockchains (distributed ledger technology)is leading to new form of financial assets like cryptocurrency that are gaining traction globally as well as new ways to go transactions using Smart Contracts. More and more institutions will work to integrate into their portfolio.

The fintech space has immense potential to disrupt and revolutionize Indian and global economy. With policy makers also becoming a partner in clearing the path and providing regulatory support Indian FinTech ecosystem is well poised to grow big time and even give rise to few Unocorns.