INDIA is changing into an effervescent ecosystem offering fintech lending start-ups a platform to potentially grow into billion-dollar unicorns. Although relatively young at present, the sector is escalating rapidly, fueled by the large innovation-driven start-up landscape, and responsive government policies and regulations.
The year 2016 has witnessed major technology changes in the country’s financial services industry. The traditionally cash-driven Indian economy was seen responding well to the fintech opportunity, primarily generated by an upwelling in e-commerce, and smartphone penetration. Fintech firms have been trying to modify the small business lending market by using technology to simplify the lending process and increase transparency.
Unlike banks and NBFCs, fintech lending platforms are using alternate data sources like social media footprints in addition to traditional sources to decide the creditworthiness of loan applicants. They are giving quick access to lending products through transparent loan processing wherein applicants can keep track of their applications at every stage along with a suggestive pricing. Thanks to such lending platforms, not just the salaried class but even Indian SMEs are seeing a better avenues for financing. The country’s SME lending market is worth about $300 billion today, and digital finance is expected to constitute at least 10% of it. Fintech firms can leverage this opportunity aggressively.
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More and more fintech lending platforms that have started detecting the needs of SMEs are coming up with innovative solutions. They are anticipating a drastic transformation in the country’s financial lending business by changing the way it works — giving loans without collateral or by connecting the consumers/ SMEs to financial institutions on a combined platform for quick sanction of loans. Such neutral platforms offering a wide range of loan products and end-to-end loan fulfillment will allow individuals to focus on building their businesses instead of worrying about getting the funding to fulfill the gap in their cash flows or to fund their expansion and growth plans. This year will also witness more financial institutions cooperating with efficient fintech companies to enable more B2B solutions.
Till now, we saw fintech platforms as a development that has the potential to drive the digitisation and transformation of the entire financial industry in the country. This means consumers will be able to access financial services such as digital remittance, credit, insurance, etc., even without having any accounts in banks. India’s financial services sector is at an inflection point with the digital and technological revolution transforming business operations.
With the maturity of the ecosystem, fintech start-ups will lead the way to India’s financial inclusion. With almost a billion mobile subscriptions and a billion Aadhaar IDs created, financial services through mobiles are being foreseen to dominate all other channels. The success factors for fintech players in India will be the usability, affordability, reliability, and ubiquity of their services.
The writer, Manavjeet Singh is CEO and founder, Rubique