Fintech

Impact of Financial Technology Companies on Indian Economy

Fintech stands for the combination of “Financial Technology”, which are the technique and innovation methods of delivering financial services. These technologies are competing with traditional methods of providing financial services. This technology is used to improve and automate financial services. Specialized Software and Algorithm are used to simplify the process of financial services for Business users, Consumers, and Companies. Fintech makes use of technology crypto-currencies such as bitcoin.

Significance of Financial Technology Companies

Financial technology can be used in the following ways:

• It is an innovative technique that is used for the invention of digital money.
• It also can be used for double-entry bookkeeping
• Fintech originally referred to as computer technology, is now widely used at the back offices of banks or trading firms.
• Fintech now is being used for various financial activities like bank transfers, a deposit of check via smartphones, apply for credit, raising funds for business start-ups, etc.
• Awareness of the use of fintech is being increased and is popular nowadays.

Scope of Activities Using Fintech

The scope of work of these technologies has been increasing in a broad range. It covers from traditional banking activities to mortgage and trading activities.

• Fintech Services are cost-efficient as they combined streamlined offerings with Innovative Technology.
• With the help of these technologies, financial service which was earlier under the branches, desktop and salesmen are now mobile and moves freely on laptops and mobile phones.
• ‘Robinhood’ charges no fees for trades. It’s the mobile app for trading.
• Kabbage, Lendio, Accion, etc are the business loan providers that offer and help a startup or established entity easy, smooth and quick way of securing loans and credit.
• Technologies like machine learning, predictive behavior analytics, help users to make an informed decision about their savings, spending by learning the habits of users.

Read our Recommendation: Fintech is Hot: All about NBFC Registration.

Active Areas of Fintech Innovation

Fintech Innovation revolves around the following areas:

• Crypto-currency
• Digital money
• Blockchain technology
• Distributed Ledger Technology (DLT)
• Automatic execution of contracts between buyers and sellers using smart contracts.
• Third parties should have access to Bank data so that connected network of financial institutions and the third-party provider is created using a concept of Smart Contracts.
• For the streamline and simplification of insurance services, there is a fintech technology named Insurtech.
• Regtech covers Anti-Money Laundering and KYC to safeguard and protect from fights.
• Robo-Advisors using algorithms automate investment advice by lowering the cost and increasing the benefits.

Users of Fintech Technology

Following are the broad two categories of users of Fintech Technology:

1. B2B (BUSINESS TO BUSINESS):

Before an era of Fintech Technology, businesses need to move to banks for obtaining loans and finance. However, with these technology businessmen can obtain loans easily through one click using mobile technology.

Many Customer Relationship Management Companies and cloud-based platforms are also using Fintech technology to provide B2B services.

1. B2C (BUSINESS TO CLIENTS):

Fintech has a good base of customers serving B2C applications. Money Apps such as PayPal, Google Pay, Apple Pay, etc uses these technologies that allow its clients or customer to transfer money through the internet on mobile phones. Also, there are certain apps help their customer to manage their finances and expenses.

Revolution of Fintech in India

With the evolution of this technology, the entire industry of financial services, financial products, and financial procedures has changed and improved a lot in a few decades. There is a great transformation in the methods and ways of working of the financial institutions. It’s Collaboration between Technology and Financial service that has led to a change in tradition operations of banking, investment, trading, etc.  In India, people are mostly cash-driven. With the innovative ideas of Fintech, there is a step towards creating a cashless society. Fintech has a huge impact on how people handle their money and to change the ways of carrying their daily transactions.

In the recent 5 years, it has become one of the most economical sectors. It has a huge fund base and investments from big players in the Indian market such as Google and Whatsapp. Indigenous firms play a significant role in the development of industries including Paytm, Phonepe, Mobikwik, and Free charge.

There was a report in the year 2017 by the National Association of Software and Services Companies (NASSCOM) that 400 Fintech Companies has started operating in India. There was a boost in Indian Fintech Companies by a large number of foreign investments.

Impact of Fintech on Financial Sector of India

Fintech helps in the scope of activities of the financial sector on digital platforms. With the rise of Innovation and technology, Fintech has affected Banking and Financial Sector of India in the following ways:

• Loans: There is a huge transformation in the methods of operating of Banks. Nowadays, there is a new market for the Lending-based market. Loans and similar advances can be easily availed by a consumer.
• Payments: Payments are easily made online through the internet via mobile phones. Online payments are the key benefits of online shopping these days. Also, money can be transferred easily from one Bank Account to another with a lesser amount of transaction fees and also chances of fraud are minimized.
• Fund Management: With the emergence of this technology, there are lots of changes in the habits and ways in which consumers are saving money, investing or managing their assets. A company aims to provide complete solutions for investment and savings. Fintech Software also helps in choosing the best investment by giving an option to compare.
• Remittance: Initially there was a struggle with traditional remittances that were expensive, complicated and time-consuming. With the help of Fintech Companies, these inbound and outbound transactions are simple, easy and affordable.
• Insurance Services: One can acquire Insurance online with all the customized plans and details available. Every process is now paperless and cashless starting from applying the payment of premium.
• Equity-Funding: Through these technologies, new Project Ventures and Business can raise the fund in the form of Equity from a large number of people.

Also, Read: NBFCs Leveraging Fintech to Build a Customer-Centric Business Model.

Frequently Asked Questions

With the emergence of digital and online trends, segments of payment have undergone a vast change. Earlier were the days when for withdrawing the money in ATMs one has to line up. Now on with the help of online apps easy and fast payment can be made from anywhere to anyone. Various segments covered by Fintech Technology in India are Digital Payments, availability of Loans, Investment Management, Fund Management, Banking, and Insurance.

What preparations have been done to make Fintech a success in India?

An Internal Task Force on Financial Technology was set up by the Commission, to prepare SWAT analysis to address potential opportunities and challenges faced by Fintech. The Commission discussed with stakeholders to gather their views and information on the impact this technology will have on financial services.

What is Blockchain?

Blockchain is known for the best ledger technology. Ledgers are the databases that are prepared in the Companies, to keep the records of each transaction.  Blockchain helps in storing ledger across the network base and avoids any centralized location and intermediaries.

How Demonetization has affected Financial Technology in India?

In developing nations like India, Fintech startups have great potential for growth. Due to Demonetization, the digital movement has been transformed into a reality encouraging consumers to go cashless, due to which Fintech has widely emerged in the financial markets of India.