Change is inevitable - Fintech (Contd.)

Written By- Vibhav Bhat and Yash Bhave

PGDM Finance, TAPMI Manipal

History has shown that financial crises lead to advancements that always create disruptions. However, with advances and changes comes a threat to the traditional way of working. New Fintech NBFCs today have the traditional banking infrastructure worried. The previous article set a preface for discussion of the ground scenario of the Fintech industry today.

Threat to Traditional Banking

Indian fintech companies have picked up the pain points that customers are facing with traditional banking infrastructure. They are targeting customers with better services, improved experience, reduced operational intricacies and wider outreach.

Traditional banking infrastructures have been designed with inflexible operating procedures. Fintech companies have automated processes which in banks require endless hours of manual hours. This has reduced the time needed to serve a customer.

If we take a simple transaction of applying for a loan in a bank, there are a lot of rules, documentation and reworkings that are needed. In sharp contrast digital loans are available through smartphone apps which provide paperless applications and quick service. Moreover, this provides startups time to build their products/services more attractively then spend it on application processing as in traditional banks. They are capable of analyzing individual customer needs and cater specifically by tailoring their products.

---

Future Outlook

Banks over these years have gained trust and built a massive customer base as compared to the fintech startups. However, today customers value service quality as much as trust. The fintech companies have been able to serve the needs of consumers much more efficiently and have started gaining their trust. Although the shift is not yet prominent with passing time the startups will have built a strong base and potentially disrupt the traditional sector.

Banks on the other hand have realized the potential opportunity along with the threat that this revolution possesses. They have started collaborating with fintech companies rather than treating them as competitors. ICICI bank in Feb 2021 bought stakes in 2 fintech companies (CityCash and Thillais Analytical) for Rs 6.03 Cr. It has also launched iMobile Pay in Dec 2020 to enter into the fintech market. Some banks have even started to build a fintech base. Axis Bank started its fintech program in Feb 2021.

Deloitte has predicted the recovery of Indian economy is to go hand in hand with the opportunities for fintech. Long term growth remains intact and imminent. Although the companies have suffered a few setbacks due to global business slowdown in pandemic, it is predicted to give the necessary boost for recovery. The banks having the trust and customer base along with expertise of digital era innovation from fintech in future are expected to change how we view banking and business finance in the coming future.

---

FinTech: Pros and Cons

It is a generic word for all the technologies that are transforming the way we operate with business and personal finance. Fintech has made the lives of consumers convenient.

The biggest benefit is it can supply a huge chunk of money. For the traditional functioning stores and facilities are must but as fintechs take over, it helps people to join the social economy and afford a way to credit in a simple way. In the traditional way of dealing, many loopholes can lead to scams. In contrast, fintechs are more transparent. All the transactions are digitally visible. Also, businesses that use blockchain ensure high transparency inherently.

On the other hand, as automation and artificial Intelligence will take over operations the requirement for professionals for few jobs will reduce. Although we believe that this should be a short-term impact. In the future job opportunities will be grow with different skill sets and these professionals can be upskilled to fit in new roles. It may create a gap as some countries do not have established digital infrastructure. While developed countries will utilize this to the maximum potential this can widen a gap between the two countries. As private and confidential data is handled by most of the fintech companies, data privacy also plays a major role and also currently as hindrance in growth potential of these companies.

---

SWOT Analysis of fintech industry

Fig: SWOT analysis fintech

---

How to get ready to embrace change?

What fintech companies can do:

• Infrastructure development to develop and further abilities of companies. It will include the systems designed to protect the personal data of consumers.

• As too many players are entering the market, companies have to identify the niche and maintain profitability through innovation.

• Make applications and workflows more customer oriented and develop reputation and trust by serving customers ethically.

• Hire for agile mode with cross functioning in app development and finance. Train the current employees for the future. Maintain continuous employee development.

What is as a consumer we are supposed to do:

• Need to understand the applications and nuances of using fintech NBFCs for financial needs.

• Keep a check on operations of fintech companies we want to get services from. Including their operations, customer reviews and data handling.

• Along with the company’s recommendations for your needs, analyze your own requirements and select the best option for yourself.

---