Loans for small and medium enterprises, credit to bridge a month’s budget deficit, the ability to host an online e-commerce site by tiny businesses, the ability to pay or receive cash on the mobile – all these have one thing in common. They are all innovations introduced by financial technology firms, commonly referred to as fintech.
This segment has changed the lives of the masses for good. Now, even a small kirana shop owner can avail an instant loan. The vast chunk of the unbanked population left outside the purview of banks are being financially included by fintechs.
In a report, Boston Consulting Group (BCG) and Ficci predict that the value of fintech companies will be three-fold within the next five years. The report estimates the sector to hit $160 billion by 2025. Growth in the last five years has been phenomenal for the sector. The fast-evolving industry has over 2,100 companies and 67 per cent of them were launched in the last five years.
Fintech powers lending or credit without customer intervention for any technology. Akshay Mehrotra, Co-Founder and CEO of EarlySalary, says fintech has enabled the concept of online instant buy-now-pay-later (BNPL) which is slated to evolve. It will introduce the concept of honest finance which involves converting a lumpsum into EMIs without the intention of taking a separate loan.
Lalit Mehta, Co-founder of Decimal Technologies, believes investment in fintech will grow as we see more niche offerings in the ecosystem. Whether it’s banking and payments services, digital lending, insurance, or crypto, new technologies have helped drive cost efficiency and better customer experience. “When it comes to digital lending, we have barely scratched the surface,” he says.
Artificial Intelligence and cloud will continue to reinvent lending by introducing data analysis for better credit decisions and speedy disbursal. In addition, the rise of hybrid banking will drive financial inclusion and in creating personalised, flexible, and convenient offerings. “Fintech is likely to enable customer interface for almost everything related to financial transactions,” says Global PayEX Chief Revenue Officer, Narayan ‘Naru’ Ramamoorthy.
A decade from now, there will be a complete transformation in how consumers interact with financial services. With accelerating penetration of smartphones, internet connectivity, the advent of technology and growing digitisation, lending, and investments are evolving. In addition, the rise of e-commerce and services will change the future lending trends. “Fintechs will start operating like banks and thus eventually become banks with comprehensive services and a customer-centric approach with a plethora of options owing to more straightforward, transparent, cost-effective solutions,” says Bhavin Patel, Co-Founder, LenDenClub.
Innovation, efficiency, and ease of use of financial services will become critical drivers for adoption. Fintechs will make these services cheaper, faster, and simpler. Within the next 10 years, nearly all banks will partner with fintechs or acquire players to enable digitisation and transformation of customer journeys across B2B, B2C, C2B, and even C2C. Banking products, business models, and profitability will also mirror this reality.
Going by the present trend where fintech firms are expanding fast from payment businesses to providing complete suite of financial services, it is evident that banking and lending – two key financial requirements across consumer and business category – will emerge as the holy grail.
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Value of fintech to rise three-times within next five years
The sector to touch $160 billion by 2025.
The industry has over 2,100 companies.
Of this 67% were launched in the last five years
Indian Fintech
- ePayLater
- ZestMoney
- PineLabs
- Shiksha Finance
- Policybazaar
- Paytm
- Razorpay
- MoneyTap Lendingkart