India provides a unique opportunity for FinTechs to innovate and grow because of specialized needs of economically diverse groups. Fintechs in India have seen a lot of investment from venture capitalists, private equities and also have been well supported by various government initiatives. Today they operate in virtually every space which are core to any traditional Bank.
Lending has been one of the prominent functions in which Fintechs have shown tremendous momentum and potential. Few of these have been able to change the way traditional lending used to operate, and while doing so, they are efficiently serving the masses which were inadequately served by the traditional FI’s.
By leveraging cutting-edge technology, FinTech startups have served the under served customers and their specific needs, which the traditional FIs and banks couldn’t meet over the years. The incapability of the traditional FI’s had created a void in the market, which these FinTech’s have been able to fill. Traditional FI’s had few inherent weaknesses:
The bank-branch penetration statistics are alarming, where there are on an average 13 branches per lakh Indians. The rural and semi urban figures go down to 8 branches per lakh Indians.
India is one of the most under penetrated market for lending where the credit to GDP ratio remains low as compared to many developed nations across the world. This can also be attributed to the inability of traditional FI’s to meet the growing and changing consumer needs
The inability of the traditional lending function to meet the specific demands of SMEs and MSMEs has been a key concern, can be attributed to few basic reasons:
FinTechs have been able to fill this void in the market space. Use of alternative ways of lending, coupled with excellent use of advance technology has fueled the FinTech’s growth.
Today’s credit underwriters are increasingly following one mantra, all data is CREDIT Data no matter how unrelated the data is.
With the advent of Cloud computing, the businesses have increasingly shifted to a new, less capital intensive, model of Software As A Service (SaaS) or Pay Per Use model. This model is extensively used by new age FinTech’s to bring down the per transaction costs. Cloud computing has also been leveraged to make the data available anytime-anywhere.
Changing regulatory landscape, data and cyber security risk and consumer protection are a few challenges that fintechs in India are facing. To overcome these challenges, FinTech’s are collaborating with traditional FIs and Banks, which are operating on a strong foundation of India’s robust banking framework. The future definitely lies in strength of this collaboration – we shall call this entity as BanFinTechs. Hopefully with such strong traction the industry will tide over all these challenges.
The Indus suite of products have the necessary scalability, stability and at the same time the agility to support the future Bank and FinTech partnerships and to enable them to serve customers seamlessly. Indus offers an iMobility Suite for customer acquisition, customer servicing and loan collections which helps banks to have a customer centric approach to serve a variety of segments and at the same time having the agility to remain viable in an ever changing competitive market.
