Fintech - Disrupting the finance ecosystem in India

Finance is one of the most rapidly growing sectors with a strong need for high precision and extremely low tolerance for errors. This sector spurred the development of the first calculating machines in the 17^th century and was never far away from technology. Today, financial technology, or Fintech, has transformed the way money is managed. It affects almost every financial activity, from banking to payments to wealth management. Every aspect of finance is turning presence-less, paperless, and cashless.

Technology advancements promise better convenience, higher speed, and smaller overhead costs – factors that no one, especially the financial sector can afford to miss. And these new trends are having a disrupting effect on this sector.

Technology is unavoidable for the BFSI sector. Ithas been the backbone for data maintenance, transaction enablement, customer profiling, security, and much more for decades now. However, the changing consumer behavior, spurred bythe proliferation of smartphones and the internet,is rewriting the role of technology in the BFSI sector.

Online marketplaces:Today, technology has gone beyond back-end support and has come to the forefront as an enabler for acquiring customers online. Online marketplaces are changing the way people consume personal finance. With the plethora of information available online and the ability to compare products based on every feature and price points at the swipe of a screen is making consumers look at purchasing personal finance products akin to shopping for any consumer durables.

Paperless authentication:Pen and paper application are passé; documentation and authentication is now virtual and remote. Technologies such as e-Sign and Digilocker allow access of authenticated digital version of documents from bank statements to PAN cards to educational certificates and more, sourced directly from the issuer. Authentication, too, is unique, digital, and simplified with Aadhaar-based e-KYC systems.

Virtual money:Money is no longer hard cash; it has gone from paper to plastic to virtual wallets. Financial companies would be able to transfer funds virtually through wallets and the Unified Payments Interface (UPI). Online and mobile-enabled transaction models, be they wallets or IMPS or UPI, engage with customers directly, reducing chances of fraud at both ends.

This wave of change in the BFSI space today, brought about by the e-commerce revolution and the adoption of mobiles as the primary device, brings never-before advantages to the sector:

• Today, service requests in the financial segment are moving online, if not directly to mobile. This is replacing the brick-and-mortar structures of yore, and breaking down the barriers of geography as well as associated costs of setting up and maintaining physical infrastructure.
• Paperless transactions and automated handling of service requests along with proper documentation and tracking facilities have brought down the overall turnaround time significantly.
• Online or mobile systems like wallets, IMPS, and UPI record more and more transactions, providing a more detailed financial history available for analysis and verification.

All these factors, when put together, make a compelling case for a single integrated solution that allows finance companies to reach to geographies and populations that were out of their reach until now securely and reliably.

This mobile- and internet-enabled disruption in the BFSI sector by Fintech is just the beginning. The future cutting-edge technology that is poised to disrupt the BFSI space is Artificial Intelligence. A sophisticated AI bot with complex algorithms to figure out your risk profile, filter the universe of financial products, curate the best and most suitable products for you, all through your smartphone, fits the bill. Data patterns will take the place of intuition when it comes to decision-making, and bots will enable the complete cycle from data to decisions. Another wild card that could change the BFSI space is blockchain, which stores and records Bitcoin transactions. This technology could disintermediate many financial processes and substantially lower operating costs.

The bottomline is that Fintech has arrived, and it is here to stay. This is a change that has garnered government and regulatory support, with regulations becoming more inclusive. The entire idea is to maintain a technology-enabled low-cost structure to provide a plethora of financial services to the excluded, thus democratizing finance.For the BFSI sector and the consumer, it heralds convenience and cost-savings – a win for both.

Authored by Murari Sridharan

Chief Technology officer, Bankbazaar.com