As consumers’ appetite for smartphones and mobile devices continues to grow exponentially, the demand for digital financial services has been never been greater.
Combined with advances in technology and a push by the Indian government towards digital adoption along with growing smartphone penetration, India now stands on the cusp of a fintech revolution, upending the traditional notions of banking and how financial institutions serve their customers.
The potential for digital is evident in the evolution of customer preferences in the country. In India, smartphone adoption is expected to increase to a whopping 500 million users by 2020, representing an unprecedented opportunity for fintech to touch consumers’ lives. India’s Internet base is now second in the world behind China with eight out of 10 Indians using phones to access the Internet. That has spurred a growing wave of mobile commerce, with the potential to disrupt traditional commerce.
Fintech promises a radical shift in access to financial services. From paperless banking processes to third-party digital payment providers, to alternative lending and digital insurance, fintech is not only enabling financial inclusion but also giving faster and hassle-free access to financial products and services, fast becoming a social good.
According to research by IDC Financial Insights, about 86% of the financial services customers in Asia Pacific will be active on digital channels by 2020, with 15% transacting on digital channels alone. In the West, the demand for digital banking is so massive that even Goldman Sachs, a multi-billion dollar investment bank, plans to foray into digital consumer lending to diversify against its trading operations.
While traditional financial institutions in India and elsewhere recognize the need for digital transformation and superior customer experiences, they are often hindered by legacy technology and traditional processes. With nimble and agile fintech players leveraging the latest technology to create hyper-efficiencies, many financial institutions have begun to collaborate with fintech players in order to stay relevant in the rapidly-evolving digital age.
Enabling the fintech revolution
Underpinning the emerging fintech revolution are the latest advances in technology – from big data analytics and machine learning to cloud adoption, artificial intelligence, blockchain, and open banking application programming interface (APIs), among others.
Many banks and financial institutions are keen to leverage their vast trove of databases, partnering with fintech players that can create transformational banking experiences for customers using the latest digital technology. Overall, a quarter of Asia Pacific banks plan to have an API strategy by 2018, allowing digital platforms to leverage their database towards creating more customer-friendly experiences, as IDC research shows. APIs enable customers to view and compare banking information securely in one place, for instance.
Meanwhile, the most promising fintech opportunities in India will lie in leveraging existing data and analytics as well as in improving customer experiences, research by PWC shows.
One of the largest beneficiaries of fintech will be small and medium-sized businesses who have thus far been underserved by traditional lending. Alternative lending platforms are set to fill this huge unmet demand for more efficient and seamless access to credit for businesses. Rubique’s proprietary algorithm, for instance, helps bring much-needed predictability for loans for small and medium-sized business. The cost and operational efficiencies from fintech-enabled lending aren’t lost on banks and NBFCs keen to seek out more creditworthy customers.