all over the world now have a huge potential to improve and adapt their
financial systems to enable greater inclusivity, efficiency, and equitable
growth. This is largely due to the ongoing large-scale digitalization of the
financial services sector and the widespread prevalence of fintech.
has been established that the fintech sector plays a role that is more
evolutionary or transformative than disruptive. Numerous bank-fintech
partnerships have developed that use the technology to enhance how the banking
sectors function rather than displace or compete with already existing
fintech sector has the capacity to streamline the operations of the traditional
financial sector and enhance efficiency, reduce costs, and make financial
services accessible to more customers. And the good news is that this sector is
growing at a steady pace in the country.
are numerous factors driving the growth of the fintech sector in India
economic growth that is expected to accelerate household consumption and income
penetration of financial services in tier-2 and tier-3 cities
development of digital infrastructure (internet and smart devices)
mobile connectivity and low-cost computing and data
to these factors, the fintech sector is already disrupting the Indian banking
landscape and it’s safe to say that it’s the way forward for Indian banking.
Here are a few fintech-enabled services that are transforming the financial
services landscape in the country.
Fintech businesses, in contrast to traditional banks, need little documentation in order to lend. This makes obtaining credit from them easier and quicker. Using factors like income and spending patterns, fintech companies also utilize AI to analyze the risk of clients with little to no credit history.
Now Pay Later (BNPL), personal loans, salary loans, gold loans, vehicle loans,
school loans, and P2P lending are some of the consumer-focused services
available in this market area. Business-focused services, on the other hand,
include corporate cards, fixed-term financing, and trade financing.
management, credit bureau, alternative credit scoring, lending as a service,
loan origination system (LOS), and loan management systems are among the
fintech services used in this market area.
and embedded banking keeps the financial service landscape competitive by
leveraging payment security, White label solutions, card networks, and payment
gateways. Consumer-centric open banking services include third-party
application providers, prepaid cards, QR code payments, payment aggregators,
and POS. On the other hand, business-centric open banking services are
corporate cards, invoice payments, and B2B payments.
lowers the costs and risks of exchanging customer information. Common standards
for digital payments are made possible through its subsidiary, United Payments
Interface (UPI). Additionally, Aadhaar offers a testing ground where banks and
fintech can try out cooperative business ideas.
is able to provide better-designed, more individualized services thanks to the
data, and embedded banking makes it possible to build platforms that are
tailored to particular markets, like an HR portal that makes it easier to set
up employee bank accounts. These services' main advantages are that they are
rapid, secure, and paperless
order to provide customers, companies, banks, and other organizations with a
better understanding of investment and purchasing risks earlier in the process,
fintech is also making inroads into the wealth management sector. Utilizing
algorithms created to identify trends and hazards, AI and machine learning are
used to process enormous volumes of data.
though the RBI does not yet award banking licenses to purely digital banks, the
drive for cashless transactions in the economy has fueled the growth of
digital-first banks, or "Neo banks," with nearly all large banks now
offering some sort of mobile banking. Moreover. over the course of a year,
digital payments grew by roughly 29% nationwide.
Fintech – Threats and Challenges
While fintech is undoubtedly ground-breaking in the banking
space, it does come with its own threats and challenges. Among these, the
challenge of data privacy and application security is the most critical.
Due to the nature of their business, fintech companies keep
vast quantities of extremely sensitive customer data, including credit card
numbers, income & investment data, and more. This information is always
vulnerable to transit because phone and online banking services are being used
To tackle this issue, fintech companies need to
develop a robust risk mitigation framework. In addition to this, customers also
need to be made aware of the best practices and how to avoid online financial
scams. This is where regulation comes into the picture. Regulatory bodies need
to come up with a protocol that ensures that users are able to leverage the
convenience offered by fintech services while avoiding the risks.