Corona may just have accomplished what demonetization was aimed for. Back in 2016, when the Indian Government declared that INR 500 and 1,000 notes are going to be pulled back in and discontinued, the whole country was utterly shocked. It happened all too suddenly and people were forced to switch over to digital wallets. PayTM, one of India’s foremost e-commerce platforms and digital wallets found immense success and recognition among the masses.
Given PayTM’s huge success, more and more digital wallets came up. Mobikwik and Freecharge were two of the earliest birds to join the race of digital wallets, however, their returns never matched PayTM’s. It seemed the Indian digital finance sector was already monopolized. However, the news reached internationals markets too, and biggies like Google and Amazon heard it. With such big players launching their own variants in the fintech market, it was clear the Indian fintech space has exciting times ahead!
But then, the pandemic happened and forced a 2-month-long-and-still-continuing-in-parts lockdown across the country. It was coincidentally the world’s largest lockdown too. Shops closed. Businesses collapsed. Liquidity quickly slipped away from the markets, and soon enough, there was a cash crunch. So, two things could have happened to what Indian fintech had been so far:
1) It could ideally come into more usage.
This did happen. Over the fears of surface transmission, people resorted to using digital wallets and mobile apps for shopping and monetary exchanges. With the stock markets declining to a SENSEX of 25,000 – a whopping loss seen after 2008, there were more and more people using brokerage apps to buy shares out. Zerodha, one of India’s largest digital brokerage firms, registered a 500% higher trade and new joiners during the months of the lockdown.
2) Funding in more experimental fintech projects would have suffered.
This wasn’t impractical. With a global recession over our heads, it seems plausible that investors would not fund something that still had a very limited application! FinTech was primarily related to digital wallets and net banking, just a secondary method to make transfers while the larger population still relied on bank deposits, cheques, and cash. So, it would have been practical if the investments tanked! However, they didn’t! fintech investments were double this year from the last.
One Of World’s Highest Fintech Adaptation Rate
Although they did show a negative trend moving from Q1 to Q3, and the numbers continue to decline, there has been a significant 134% year-to-year rise in fintech investments. Besides, India has one of the world’s highest fintech adaption rate at 87%, while the global average is much behind at just 64! With almost 60% of the Indian population still being a rural topography, it presents a wide opportunity for investors to tap into.
The lockdown has led to a decline in budding startups and funding, however, some of the best and most ambitious looking projects we have seen in the Indian fintech space came during this very lockdown.
Indian E-Commerce Made One Of The Largest Fintech Deals Of 2020
Indian e-commerce biggie, Flipkart made a huge investment worth $398 million into Navi Technologies, which also happened to be one of the biggest fintech deals of the year across the world.
So, it is clearly evident that the Indian fintech space is alive and well, however, the way forward is slightly challenging and needs major reworking efforts.
Here is what the future of FinTech would look like in India:
1) Regional penetration:
India has some of the largest base of mobile phone users but with a very stingy penetration level. 880 million, that’s how many people will have a smartphone in India by the next year, however, compared to a population of 1.5 billion, that’s a small percentage.
How Likely Are Digital Wallets In Rural Areas?
So, while it is for certain that with time, digital wallets and transactions will make their way deeper into Indian cities, will they reach Indian villages remains a question? Not only is the technical know-how a challenge, but there is a language barrier too. With over 18 official and hundreds of unofficial languages being spoken across India, fintech ventures have to look at ways of becoming more India-friendly and ditch their usual ways of catering to European and American masses.
The majority of the Indian population is based in rural areas. While Delhi and Mumbai are fine examples of heavily developed commercial spaces, the same can’t be said for small towns and villages, which almost feel like a totally different India. The infrastructure and technology gap is wide!
Not only would the upcoming companies need to speak to them in their languages but also break down the jargon surrounding finance.
2) The Indian Government’s Digital Push:
Ever since the Modi Government was first appointed back in 2014, there has been a shift of priorities from offline to online. The Government even came up with its own fintech platforms, namely the BHIM app and KYC (Know-Your-Compliance) guidelines to help regulate the space. Moreover, India has some of the world’s cheapest 4G data plans, making the internet not a luxury but a common possession.
Reservations Towards Blockchain
However, despite the progressive stint, there happens to be some reservation regarding successful technologies like Blockchain.
Since the past few years, the Government has been oscillating regarding its views on cryptocurrencies. They can sometimes be exchanged but not liquidated, that is, when they aren’t banned. The other times, one has the power to invest in them, however, only to a certain extent.
Blockchain is a front runner when we look at fintech’s future, but until the Government dictates a more open verdict towards accepting blockchain, the digital India movement is just limited to wallets, e-insurance, and e-commerce.
3) The role of Artificial Intelligence and API
When you deal with a population so large, you need smarter protocols. This is where AI comes into the picture. Banks have already begun using API source frameworks to intelligently read through proposals and analyze the credit scores of applicants. Not only that, API may help them mitigate potential hacks and risks too.
Moreover, a lot of bank work is manual, but it doesn’t need to be. Data entry, sending out regular updates via mails, doing follow-ups – all this can be done better without human intervention since humans can err but smart computers don’t! With AI-powered machines and CRMs, banks can look at letting the machine do the job while also retaining their personal touch.
The over-all reputation of Indian banks was slow and redundant, but since the last decade, it has clearly been improved with faster and more user-friendly software at play. The data of a million people is also safer. The way ahead requires smarter algorithms, more usage of machines, and faster output. Moreover, this can evidently reduce the employer’s expense by a whopping 50%, leading to more sustainable businesses and prosperous banks in return.
4) Insurance, Investments, and Awareness
With the Covid-19 fear gripping over the masses, the sudden demand for insurance left the servers hung and dead too. The insurance sector has long conducted work offline. They weren’t expecting such huge traffic.
Well, there is power in numbers, and so they know the Indian market has profits for them, but they also need to know how to handle these numbers.
Just an online repository for policies won’t do!
The Possibilities Of Investments Platforms
The process of enquiring, proposing, and buying policies online could be simpler. Same with investments! Most people using platforms such as ET Money, Razor Pay, Angel Broking, and Zerodha, aren’t yet familiar with terms such as GTT, CNC, etc. The ventures need to ensure the consumer doesn’t leave eventually, which happens when they spend towards educating the masses.
Moreover, with Indians rushing into the cryptocurrency market, there need to be regulations in place for digital assets too like how the US set up SEC regulations especially for crypto-assets.
5) A unified place
This is already being worked upon, with banks providing apps that contain anything you may need from vault facilities to booking your FD to simple payments to mini statements. Similarly, your investment-related apps seem to contain the whole of your portfolio, and your insurance provider sends you a virtual kit with all that you need to know and save on your phone.
The fintech market should look at such apps that give the user the best of all worlds. No difficult user interface, and with everything right there in just one app! To further in this direction, PayTM, India’s oldest yet most innovative fintech venture has constantly innovated their multi-purpose wallet. Time and again, they have updated their pantry to accommodate more treats.
You can buy gold on PayTM, you can send money to your friends, and you can directly book movies there too. If it’s finance, PayTM has it. From banking to insurance to investments, everything is on their simplified blue-and-white fool-proof dashboard. You wouldn’t need to look at other platforms. This is what every fintech venture should aspire to be – smooth, inclusive, and feature-rich.
With so many innovations happening around, these established names may be forced to reconsider their models as well. Fintech is at a young nascent stage in India, and the world agrees there is huge potential hiding in South Asia’s innovation leader.
Across the globe, investments in fintech tanked because of the corona-inspired recession, leaving India and China as the only exceptions. This is good news for Indian fintech! But, the challenges are real too! If in the near future, the Government does choose to open itself to decentralized finance, would it be as sudden as demonetization, leaving the masses paralyzed and their monetary health crippled? The open finance model is the way ahead; time shall tell how India fares here!