The advent of the fintech industry has made banking simple and straightforward.
These days, AI and machine learning has influenced many aspects of financial services such as credit, underwriting, insurance and more.
Fintech companies are enabling larger financial inclusion, better decision-making and a lot more. Modern banking in India originated in the last decade of the 18th century. Struggling through colonial to post-independence era and from nationalisation to liberalisation, the fintech industry has witnessed a massive transformation over the last two centuries.
The technology-led revolution in the 21st century, government efforts such as UPI and the rising fintech industry has placed the Indian banking ecosystem at the global epicentre. Going by facts, as per a report from May 2019 published by PwC and ASSOCHAM, the adoption rate for fintech in India is the second-highest globally at 57.9%.
What Is Fintech?
The term fintech is said to be in existence since 2011 when new-age companies (startups) came into being to solve complex financial procedures/ transactions. However, it gained greater prominence post the November 2016 demonetisation.
Investopedia defines fintech as “any new technology that seeks to improve and automate the delivery and use of financial services.” While that’s a broad definition, these days fintech is being used by businesses to help consumers manage their payments, transactions and billing, and for B2B payments as well. Specialised financial software, SaaS solutions and AI algorithms have played a major role in increasing fintech adoption.
What Is The Impact Of Fintech On Banking In India?
Gone are the days when customers visited the branch for their banking needs. Be it transferring money, opening a fixed deposit, or requesting for stop cheque payment, it can be done by sitting at home or office. The use of technology even made service delivery more efficient. For example, paper-based KYC docs were replaced with identity management tech, cheque based payments were replaced with NEFT or UPI payments or a multitude of wallets made available for the customer.
The advent of the fintech industry has made banking simple and straightforward. Fintech products were built from the ground, keeping in mind the new audience, who were more tech savvy and looked for ease in the transaction. Overall, fintech has brought some key changes in below-mentioned areas in the Indian banking ecosystem:
Enhanced opportunities for financial inclusion
- A culture of innovation and entrepreneurship
- Rise of NBFCs as tech-enabled players
- Tech-enabled credit assessment
- Improved customer experience in loan approval and disbursal
- Transformed KYC documentation process
- Streamlines products and services for SMEs
- Revolutionising how people make daily payments
- Faster and more secure money transfers
- Improved wealth management options
- Reduced complexity and ambiguity in insurance
- Data analytics and blockchain for transparency
- New banking models like neobanks, cloud banking and more
How Are Fintech Startups And Banks Collaborating?
The relationship between banks and the fintech industry is of a collaborative nature rather than the competitive one. Fintech companies are enabling larger financial inclusion.
The banks are following suit with fintech companies for enabling smoother operations for consumer and business lending while UPI has brought top banking features, seamless fund routing and merchant payments at consumers’ fingertips. Also, fintech startups are working to bridge the gaps in sectors such as insurance, wealth management and remittance.
Fintech has also made data analytics and data-driven customer insight a focal point across the BFSI industry. The advent of technology has encouraged collaboration between multiple financial service providers to deliver products and services via an open architecture framework. Also, the adoption of technologies such as AI, blockchain, robo-advisors among others is bringing traditional banking ecosystem to the 21st century.