India is one of the largest Fintech markets in the world today with over 2100 Fintech companies and robust adoption of digital financial services. Fintechs have acted as a catalyst for the BFSI ecosystem at large opening up Financial Services access to large parts of the population, bringing in a digital first approach and offering world-class customer experience.
On the consumer side, India is seeing a massive digital transformation, with over 600M Internet users and changing demographics young, technology friendly audience who have higher spending power. There is a never-before-seen focus on reimagining services and offering them digitally. This shift is evident in many parts of the BFSI space, from investment to insurance to lending to payments. Incumbent leaders such as traditional banks, have their own structural challenges (higher operating costs, reliance on older technology stacks, etc.) and this has given rise to new business models.
Fintechs have fundamentally re-imagined the delivery of financial services in India. Unlike the traditional BFSI players, Fintechs have unbundled the offering, simplified the proposition, created context-specific financial products, slashed pricing and increased transparency. The focus is on offering brilliant customer experience at an affordable price. While payment providers dominated the early landscape, Fintechs have increased access and penetration in other sectors too such as lending, payments, investments and insurance .
In fact, the consumer acceptance of Fintech products has accelerated the pace of digital transformation for traditional players such as banks. Witnessed by the increased push towards online and digital banking and the partnerships being forged between Banks & Fintech companies. The future potential for these tech-led FS players is also evident from the amount of PE/VC interest they are generating with Indian players having raised $10B over the last decade.
There are four key drivers that led to this impressive pace of growth:
Demographic dividend:
India is one of the worlds largest internet markets. A large millennial population with strong mobile adoption and historically lower financial services penetration makes it an attractive market for Fintechs. With the help of tech, powerful customer engagement for this demographic is now possible. Personalized engagement, powered by customized offering and interactive user journeys provide a brilliant customer experience.
Data explosion:
Data explosion and increasing tech-savviness of the Indian customer backed by robust smartphone penetration, cheap data rates, swift adoption of mobile and the availability of vernacular content has catalyzed the growth of the consumer-tech ecosystem.
Public digital infrastructure and favourable policy environment:
All of this comes on the backdrop of the regulatory push from the RBI and the government and their focus on financial independence and inclusion. The account aggregator program, innovative KYC regime, creating a space for payment banks, enabling payments infrastructure are examples of the transformative changes underway on the Policy front.
The governments focus on creating efficient public infrastructure Aadhaar, UPI, Digilocker etc. has further enabled access to digital financial solutions. Regulatory sandboxes, for instance, indicate the forward looking intent of our policy makers.
Disruption enabled by Tech:
The use of technology is helping crash the cost of delivery. For example the technology now exists to enable remote-onboarding, AI based decisioning, processing data from multiple & non-traditional sources.
Digital lending companies, for instance, are opening up access to credit to previously underserved segments in the form of quick and smaller ticket size loans (not usually offered by traditional banks and lenders). Since they use technology to underwrite a borrower they are able to reach deeper into the customer base and serve even those who dont have bureau history. The use of AI, leveraging alternative data sources and using digital distribution channels allows them to serve customers hitherto underserved.
These increased efficiencies and lower costs will make financial services providers more competitive and offerings more affordable and accessible to the consumer.
Views expressed above are the author's own.
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