What Lies Ahead For India's Fintech Sector?
2017 has been a fantastic year for the Fintech industry in India, spurred by the positive policy environment and increasing deployment of new technologies that are changing customer behaviour and interactions. The Budget 2018 announcement too brings much cheer to the country’s fintech companies serving as a key vehicle to achieve their growth objectives. Despite the progress in recent years, there is still a long way to go for India’s fintech companies to understand their potential in greater measure.
Lessons from Singapore’s Fintech boom
To understand what lies ahead for India’s fintech sector, it makes sense to understand the fintech growth is expected to boom in the Asia Pacific region. A Frost & Sullivan report predicts that the region is expected to grow at a CAGR of 72.5% from 2015 to 2020, reaching US$72 billion. The positive outlook is fuelled by growth in digital payments such as increasing adoption of cashless payments by small and medium sized enterprises. There is also more widespread awareness of the viability of using P2P financing as well as new methods of crowdfunding using Blockchain, which will lead to growth in the personal and business financing segment, believe experts who are observing the fintech sector in the APAC region.
Leading the trend is Singapore government’s push to develop a cashless society. Spike Choo, Consulting Director at Frost & Sullivan’s ICT Asia-Pacific practice expects to see more innovative Fintech services being launched in the areas of financial investments and advisory services as well as insurance due to advances in Big Data Analytics, Artificial Intelligence and Blockchain. “However, the sustainability of these Fintech services would depend on how well they are able to address the wide-ranging consumers’ investment and insurance needs while ensuring the business model is sustainable without compromising on the customer experience,” he added at a recent Fintech conclave.
According to Quah Mei Lee, Industry Principal, ICT, Asia-Pacific, the mobile payments market in Singapore was estimated to be worth US$1.4 billion in 2017. The market is still small but is growing fast. There are many supportive regional and local regulations and initiatives that will help Singapore move towards a cashless Society.
Singapore already has an optimal number of complementary mobile payment solutions to drive acceptance on the island state. Despite this, more and more “me too” solutions are entering the market. With only limited partnerships underway and a local first mentality, the market risks not achieving its full potential. Mei Lee stresses that mobile payments of the future needs to be global first, inter-operable and secure. Global alignment will be key to mobile payments going mainstream.
India catching up on fintech trends
India too is catching up with these trends. Indian payments industry is largely dominated by cash-based transactions. The banking industry in the country was majorly branch-based till 2014. Later, there was a considerable growth in the branch-less channels of banking, which has further explored into digital payments in both rural and urban regions. Indian digital payments industry is expected to reach $700 billion by 2022 in terms of value of transactions.
It is expected that more than 80% of the urban population in India will adopt digital payments as a part of their routine by 2022, and 70% of the retail chains will adopt the same. The reduced transaction charges and the degree of ease of cash transfers associated with the electronic fund transfers and mobile banking will further drive the growth of digital payment systems in India. Also, the Indian Government is bringing positive policy framework such as Goods and Services Tax (GST), financial inclusion, improving digital infrastructure, launching payment systems such as Aadhar enabled payments, UPI, and others which are supporting the digital payments industry.
In 2016, Indian Government made a significant move, i.e. demonetization, to curb black money circulation within the country and to increase digital payment penetration taking the country towards improving cashless economy, resulting in sharp increase of several digital payment channels in the country.
The Budget 2018 announcement brings much cheer to the fintech sector appeared buoyed by the measures announced for the Digital India program. The sum of Rs 3,073 crore will enable many fintech startups to boost their businesses, potentially translating into benefits for Indian consumers, believe experts, as Bipin Preet Singh, Co-founder, MobiKwik, noted, “…disallowing cash payments beyond Rs 10,000 by trusts and institutions will boost digital payment.”
Also, the disruptive market innovations have forced a radical shift of business models in the Financial Services industry, notably within the P2P Lending segment. Frost & Sullivan believes that leading banks and financial institutions are driven to be lean and agile on multiple fronts, including but not limited to new digital services, elevated customer experiences and innovative technological solutions.
Ambar Kasliwal, Founder & Director of PaisaDukan.com said “The P2P lending space has been gaining traction, even small and micro enterprises have also been reaching out to P2P lenders to access credit. This might be because of a slump in the economic activity or because banks have reduced lending to the SME space” said Kasliwal, addin that “To excel in providing every Indian a robust and transparent technology platform to meet their life goal and achieve financial freedom.”
No longer just a channel, ‘digitalization’ is the new paradigm for leading banks and financial institutions in Southeast Asia to cater to the increasingly important SME client base. Such widespread adoption of Fintech will continue to reshape the financial services industry, making it more customer-focused than ever. Taking India as an example, Bhupinder Singh, Founder and CEO at InCred said, ”Allocation of Rs. 3073 cr to digital India initiative by the government will further fuel the financial services eco-system with increase in access to credit for the SME. Additionally, with cutting edge technology, achieving the ultimate aim of financial inclusion will become easier and further pave the way in shaping the industry.”
Despite the Indian financial services sector is at the cusp of a revolution, the country’s bid for robust financial inclusion demands a more resilient delivery of financial services.” said Biz2Credit Co-founder and CEO Rohit Arora, who added, in the coming year, the digital payments sector will continue to focus on getting the fundamentals in place. “Complex interfaces, multiple processes, and putting the technology before the customer are counter-productive and won’t help winning the trust of consumers – or creating a dent in the age-old habit of using cash,” he mentioned.
Sirish Kumar, Founder and CEO - Telr believes payment service providers need to work towards earning the trust of consumers – regardless of government initiatives or private sector innovation, without consumer trust of online payment channels, and the perception that they are more convenient than cash, the move to a cashless society will be slow. One of the foremost ways of achieving this is by offering effortless ease to consumers; in understanding where and why consumers instinctively reach for cash, and in presenting them with payment options such as QR codes at those points that outweigh cash in terms of convenience.
At the same time, with increasing number of digital touchpoints, managing customer experience would require revisiting customer journeys to provide a seamless experience. The CX strategy would need to ensure that there is greater personalisation of services coupled with proactive engagement. According to Nishchal Khorana, Consulting Director, ICT, Asia-Pacific at Frost & Sullivan highlighted that a successful CX strategy would be based on an integrated approach to people, processes and technology in the digital era.
Analytics and Artificial Intelligence related technologies will also be fundamental to raising the bar for customer experience. On one hand, analytics will aid in developing a predictive approach to address customer needs, while on the other, Virtual assistants and Chatbots will drive greater operational efficiencies and standardization.
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