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Demystifying Fintech

/, Tech/Demystifying Fintech

Once upon a time, there were monopolies but now it is a free market where everyone can dare to dream and convert those dreams into reality. Yes, we are talking about the new generation entrepreneurs and their start-ups stories. Particularly, in the day and age of demonetisation, FinTech start-ups have taken the country by a storm.

In fact, the number of FinTech start-ups funded in the first half of 2016 was equal to total number of start-ups funded in the sector in 2015. Further, it is expected that after the demonetisation drive, FinTech firms will grow at a much faster rate in the next three-four years.

 

DECODING FINTECH

Huge institutions, archaic systems and lots of money at stake—these few conditions have brought tech entrepreneurs to the wildly exciting and growing arena of FinTech. FinTech companies are basically technological start-ups in the financial service space. Their businesses include services like consumer financing, SME lending, retail payments, asset management, insurance asset management and the like. These FinTech start-ups are responsible for easing payment processes, reducing fraud, saving users money, promoting financial planning and ultimately moving a giant industry forward.

 

THE FINTECH REVOLUTION

The Dotcom meltdown in the late nineties changed the way every industry conducted its business. It gave birth to business models like e-Commerce, online banking and online share trading, thereby, marking a resurgence of technology players in new avatars as facilitators for new age businesses of the 21st century. It is this Dotcom meltdown which sowed the seeds for the FinTech revolution that we are in the midst of today.

However, the seeds so sowed germinated only post the credit crisis of 2008. Further, with the inability of banks to dedicate umpteen resources for fostering innovation in the wake of the global financial system meltdown and another inability of meeting all the requirements of the technologically attuned and ‘On the Go’ millennial customer base, the FinTech companies got the required boost in India.

The technology companies identified both these inabilities of the banks well in time and took no time in taking root in the financial services space, creating innovative products that enhanced customers’ digital experience. As they say, ‘Rest was history’.

 

CURRENT MARKET SCENARIO

The growing acceptance of digital technology is revolutionising the FinTech sector in India. At present, the firms in the sector that are topping the chartbuster in India include Paytm, Freecharge, MobiKwik, BankBazaar.com, PolicyBazaar.com and many more.

Given the growth, the transaction value for the Indian FinTech sector is forecasted to reach USD 73 billion in 2020 growing at a five-year CAGR of 22 per cent. Further, in the present times of demonetisation and government pushing for faster adoption of digital payments, many FinTech start-ups are joining hands with banks seeking more value in partnerships.

Seeing the unprecedented growth of the FinTech sector, government has also taken interest in this space. For the same reason, the National Payments Corporation of India (NPCI) launched its interoperable payments system and Unified Payments Interface (UPI) last year.

 

FUTURE GROWTH PROSPECTS

From payments to wealth management, peer-to-peer lending to crowdfunding, FinTech companies are changing the face of financial sector in the country for the better.  Further, in future, social collaboration, analytics, cloud etc., will be the important themes for the development of FinTech firms.

As per NASSCOM, “From tapping new segments to exploring foreign markets, FinTech start-ups in India are pursuing multiple aspirations. In fact, the Indian FinTech software market is forecasted to touch USD 2.4 billion by 2020 from a current USD 1.2 billion.”

 

IN A NUTSHELL

The unprecedented growth of FinTech start-ups in India underlies how technology and internet have radically changed the nature of money and financial services in the country. From the ways that people save to how they spend to the tools they used to invest their money, all have changed more rapidly today than ever before. In such a scenario, given the facilities and services offered by the FinTech companies, they have a bright future ahead in the country. What more? With the help of the FinTech firms, users can easily use technology to automate mundane tasks which otherwise might be time-consuming.

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