Innovation in the banking and financial services is not limited to the incumbent leaders. Change is inevitable, and the incumbent has to embrace it. Increasingly, several banks / financial services companies opening accelerators, investment funds, innovation labs etc., globally.
Whether it is for borrowing purposes (ie. P2P lending), financial planning (ie. Robo-Advising), buying stocks or bonds (ie. online brokerage) or efficient payments (ie. mobile/electronic payments), the consumers now have the power to make a BUY decision, rather than being SOLD financial products. This is a seismic change compared to the conventional methods of how money and investments were handled.
There is a whole new generation, the millennials, who are self serving and are transacting differently than the previous generations, this is a significant trend which is changing the way every business is done.
But it’s worth giving credit to some of the traditional financial services players who have enabled innovation opening up their APIs, which new age startups and third party developers can tap into.
FinTech is not merely a buzzword in the finance sector, but rather a catalyst for change. If not for innovative mindset embraced by traditional players like banks and financial institutions, then there wouldn’t be a new FinTech revolution stromming right now. That brings us to the point of collaboration and co-innovation.
Fintegrate Zone 2017, a FinTech conclave at Mumbai is a first of its kind where you can witness a confluence of learning, knowledge and networking. Business Insider is exclusively covering this conclave which will commence on the 1st of March 2017, at BSE, Mumbai.
The only medium through which a nation could reach its fullest economic potential is through financial inclusion of every member in the country. In India, 70% of our population live in rural areas. Out of a staggering 600,000 villages, merely 30,000 of these villages have a commercial bank branch. This disparity in accessibility is a leading cause of financial exclusion in India. Accessibility is the key to the service sector, be it banks, financial services or even insurance.
Another reason, for banking institutions failure to penetrate and serve the rural market, is due to unfeasible operational costs. Additional issues like lack of awareness, insufficient documentation and lack of collaterals or history of financial transactions are shortcomings that hinder financial inclusion for the unbanked millions. There is great potential for financial inclusion of the rural population by exploiting mobile technology. FinTech start-ups that are agile in nature can offer seamless delivery to these lacking services of the BFSI sector. Their low overhead costs, paperless approach and moreover great connectivity to rural lands via mobile technology creates a multitude of opportunities for them. For instance, during note ban numerous vegetable vendors in rural areas began to embrace mobile wallets as a payment option to ensure they never lost a customer.
The irony is that a multitude of villages in India are still without a commercial bank branch, while there are over 350 million rural mobile subscribers. Mobile wallets and digital payments, the largest subset in the FinTech system, have received two thirds of the total investments in India’s FinTech. Wallets and digital payment startups majorly cater to the B2C sector, while for the B2B sector a major leap is seen in the lending space.
MSMEs face umpteen problems to source financial help, start-ups like Capital float are taking the lead, understanding their difficulties. The company has enabled merchants on e-commerce platforms to finance their growth by assessing their history through partnerships with e-commerce players. This inclusive growth is a major driver, benefitting both the merchants and e-commerce platforms.
The Indian Government too has undertaken several initiatives to address the issue of financial inclusion like JAM which comprises of PM’s Jan-Dhan Yojana (PMJDY), Aadhaar and Mobile connectivity and Digital India which is trying to solve the gap in terms of identification, internet connectivity and digitisation. Additionally, the Unified Payment Interface and other digital initiatives are giving budding FinTech ventures a much needed foundation to build robust businesses. Availability of financial facilities to the underserved communities should be top priority for economic growth and this can be done by bridging the gap between customers and financial institutions.
2. Collaboration among Financial institutions and technology companies
The financial sector often falls behind in terms of innovation and adoption of latest technological trends. They face several problems due to outdated and non-integrated systems. Today, technology has redefined the expectations of customers. Clients expect services in real-time, instantly, personalised and with the least documentation processes. Indian FinTech startups are identifying the gaps in the existing financial systems and through innovative digital offerings they are disrupting the financial service industry by addressing the customer’s pain points.
Startups are using tech-based solutions like Data Analytics, Blockchain technology and Artificial Intelligence to solve these key problem areas.
“Today India is at a cusp, where technology takes formal financial services to the unbanked millions. At FinMitra for example, we use e-KYC for identification in a zip, each individual gets customised investment options and investments can be made at a click of a button. Earlier people looked at finance as something scary and formidable, today technology makes finance easy and friendly.”
– Bhargavi Sridharan, Founder Finmitra.
The BFSI sector has realised the need to work along with these trailblazers thus forging partnerships with FinTech start-ups. These mutually beneficial partnerships prove to be exceptionally profitable. For instance, established BFSI brands have the ability to share their large customer base, piles of accumulated data, varied financial funds, risk management abilities and a trustworthy brand name. While start-ups share the advantages of low-cost solutions, latest technological expertise, personalised solutions and creative ideas to innovate.
Private sector banks are leading the way, forming internal research teams that focus on digital innovation. Banks in India are opening up their Application Program Interfaces (APIs) to FinTech start-ups, allowing them to test and innovative new products using their customer data. Some financial institutions are collaborating with FinTech start-ups to plug the gap in their business model. A collaboration between IDFC Bank and alternative lending start-up Capital Float gave the new venture the ability to channel higher sums in loans to SME borrowers while IDFC bank has gained access to Capital Floats small and medium enterprise customer base as well as its loan origination and underwriting technologies. Collaborations like these will give banks and financial institutions the edge to stay ahead of competition.
Technology can be exploited to thwart old business models paving the way for quicker, productive and reliable financial services in future. There is a massive opportunity for FinTech start-ups to enable and ensure financial inclusion for all. The expectation from the progressing FinTech ecosphere is to drastically change the medium of supply of financial services in India.
To drive an absolute and efficient collaboration with existing big guns in the BFSI sector, new ventures need a support system to mentor them. Thought leadership programmes like Fintegrate Zone 2017 provide that much needed platform for FinTech start-ups, innovators and investors to engage, co-exists and transform traditional business methods into modern innovative processes.
Join the fintech movement at Fintegrate Zone by registering here bit.ly/fintegratezone