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Fintech adoption: How startups have impacted banking, financial services, insurance in India so far

The advent of fintech players had somehow made banks a little bit conventional in the initial years. However, banks are now joining forces with fintech startups to upgrade their existing systems and enable smoother operations to deliver a better experience for consumers.

Over the years, fintech players seem to be foraying into other domains such as insurance, and wealth management.

There is no denying the fact that fintech players have disrupted the Banking, financial services and insurance (BFSI) sector by storm, and it is only a starting phase. Concepts like paperless lending, mobile-first banking, secure payment gateways, mobile wallets, etc. are not a distant future anymore, it’s already happening. Thanks to fintech startups for understanding consumer requirements and serving them more seamlessly than ever before. According to a study talking about the different factors that will drive fintech this year, 91 per cent of Indian respondents would consider financial products from tech firms they already use, indicating a larger adoption of fintech across India, and giving enormous scope for players to release more diversified products even if they have an existing product that is doing very well.

Key Drivers

In fact, India has emerged as one of the fastest-growing fintech hubs in recent years. After the US, India houses around 3,174 startups at present. The accelerated pace of growth these players have achieved can be majorly attributed to government moves like the introduction of demonetization and GST, and the payment stack, creating a significant growth opportunity for fintech startups, and more importantly, transform financial services for consumers. Adding to this push was the recent pandemic, which locked people in their homes, and enabled fintech players to innovate their offerings and make their solutions more digital and mobile-friendly.

Collaboration Between Fintechs and Banks  

Though digital technology and big data/analytics have been shaking up the financial-services industry, a Mckinsey report released recently states that investors believe fintech start-ups will become a significant force in the future, and that future has arrived. The advent of fintech players had somehow made banks a little bit conventional in the initial years. However, banks are now joining forces with fintech startups to upgrade their existing systems and enable smoother operations to deliver a better experience for consumers. Similarly, by leveraging data analytics, fintechs have encouraged collaboration between numerous financial service providers and enabled them to deliver products and services through an open architecture.

How Fintechs are Extending Services

Over the years, fintech players seem to be foraying into other domains such as insurance, and wealth management. For instance, there are three parties involved in the insurance sector: customer, distributor, and insurer. But fintech apps are bringing a systematic change to business operations. Banks are also partnering with fintech enterprises to operate at lower costs and alleviate the reliance on legacy systems. Today, there are mobile insurance solutions that offer several areas of assistance to consumers.

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In wealth management as well, we have a deluge of mobile-based applications that can take us through the entire journey of making small and large investments, without any middlemen. If you remember, one had to follow a completely manual process of visiting an agent, filling forms, and finally making payment to initiate investments, as small as SIPs. But gone are those days now. Today, you just need an app to invest in SIPs, shares, IPOs, and even gold, which are available in a digital form. All this creates a great opportunity to create partnerships and build mobile strategies focused on providing value in this increasingly digitized financial ecosystem.

Welcome to Era of Digital Lending 

While a few years ago, it was extremely challenging to get a loan or borrow money from the bank easily. There were a lot of rules, wait times, documentation hassles, etc. However, that has allowed fintech companies to come in introducing tools and advantages to push the boundaries of existing business models. Although digital loans can be accessed via smartphone apps by going through a seamless paperless application, fintech players have also come up with innovations like the credit line.

A credit line allows borrowers to apply for a loan amount of up Rs 5 lakh and repay it in the form of convenient EMIs through different routes, unlike traditional banking that was limited to a few options like cheque and cash. The best part is, one has to pay interest only on the amount actually used rather than on the entire loan amount. Similarly, there are other innovative credit solutions, including Buy Now Pay Later (BNPL), EMI Cards, and others that were recently launched by fintech players in the country to enable consumers to shop anytime from anywhere without worrying about money or making payments immediately.

Imagine credit 10 years ago and what it is now. Credit is available in ways that weren’t visualized 10 years ago. With the digital-lending revolution of today, bringing the “time to get an approval” is now in minutes, and time to cash to less than 24 hours in many cases. From Rs 500 to 5 lakh is not a dream. And additionally, the fintech companies are continuously augmenting ways in which they can automate their processes, right from loan applications to disbursal and everything else in between.

All these innovations brought in by the fintech startups indicate their potential to further transform the BFSI sector in India by making them more convenient, simple, and hassle-free. As technologies evolve, these players are likely to bring more such breakthrough solutions to the table, steering India towards a truly digital-first economy.

Bala Parthasarathy is the CEO and Co-Founder of MoneyTap. Views expressed are the author’s own.

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