India’s market for personal finance products remained largely unchanged till the end of 2016. However, beginning with demonetisation in November 2016, the space has been tangibly disrupted over the last year through the introduction of new technologies and systems. Here are the some of the biggest personal finance disruptions which were witnessed in 2017 in India:
1. Social credit scores
The legacy credit appraisal system required a long transactional history to certify creditworthiness, and many Indians were often denied credit, mostly due to a lack of data. “Several fintech companies are now leveraging data derived from the social media accounts of users to bridge this gap and provide more accurate credit scoring than before. Further, the use of artificial intelligence (AI) has made the credit assessment process seamless,” says Surendra Kumar Jalan, Founder and CEO, OMLP2P.com, an online peer-to-peer lending platform operating in India.
2. Digital Payments
While initially buoyed by demonetisation, digital payments have finally come of age. Users have a plethora of digital platforms that act as wallets, allowing seamless payments at the touch of a button. Even as cash has come back into the Indian economy, digital payments have remained popular; 105 million transactions were recorded on the Unified Payments Interface (UPI) in November 2017 alone.
3. eKYC and Aadhaar
The documentary requirement for loan applications continued to be a tremendous liability, until Aadhaar created a secure database that allowed for electronic identity verification. In 2017, customers could just quote their Aadhaar number for verification for most KYC requirements. This made the entire process for applying and receiving financial products much easier.
4. P2P lending
The RBI directions on P2P lending were released in 2017 and came into force with immediate effect. These regulations have come as a massive boost for P2P lenders in the country, offering them statutory recognition and making them part of the country’s financial mainstream. India’s nascent P2P lending industry is estimated to cross $2.4 billion in value by 2020, indicating a seismic change for those looking to lend or borrow funds in the coming years.
5. Algorithmic-driven personal finance management
With the wide choice of financial products available, people are often at odds to decide what product matches their requirements. Leveraging AI-driven algorithms, fintech players are now offering data-driven financial product recommendations to customers based on their individual profiles. “These are invaluable for product discovery, and this development holds much promise for the years to come. Automated, AI-driven financial advisors are being deployed to assist users in taking financial decisions. Using their systems to constantly monitor various market positions and a user’s portfolio, they can offer buy/sell recommendations on a variety of potential investments. These systems, known as ‘robo advisors’, are known to be more effective than their human counterparts,” says Jalan.
6. Bitcoin and Blockchain
While the crests and troughs of the market value of Bitcoin come at a furious pace, there’s no denying that Bitcoin has become the most talked of new asset class. Blockchain – a distributed ledger for all Bitcoin transactions – has become a new way for people to transact without intermediaries, and holds great promise for all types of digital transactions and in for financial transactions.
“While fintech companies have the technology, they lack the deep pockets that legacy banking and financial services players possess. Recognizing that both fintech companies and legacy institutions have something to offer, many players are entering into strategic collaborations to enable greater cooperation in the eco-system. We will see many such collaboration between the existing large financial players and fintech players in these emerging technologies,” informs Jalan.