FINTECH

- Nimesh Jain 

 

History has taught us that times of crisis drive demand for technological advancement. Such includes the intersection of Finance and Technology first during demonetization in 2016 and now during COVID 19. Yes, we are going to discuss “FINTECH”.  

 

It includes the use of Big data, Artificial Intelligence (AI), Blockchain, and Machine learning across domains like payments, lending, wealth management, insurance, and many others. It includes a huge range of products, technologies, and business models that are changing the financial services industry. 

 

Fintech includes everything from cashless payments to crowdfunding to advisory to virtual currency. So, if you ever transfer the money using UPI or Paytm wallet, or if you invest in Insurance using Policybazaar, its FINTECH.  

 

The global investment in the Fintech sector has added up to $1billion since 2010. From startups to the world’s biggest companies are part of this industry like apple pay from Apple or Alipay from Alibaba. 

 

China and India are emerging markets where half of the consumers using services like money transfers. Financial planning, borrowing, and insurance. Experts say that both countries are considered as driving fintech evolution going forward over the next decade. 

 

Why Fintech? 

 

In payments, we are moving more towards contactless and digital payments avoiding the use of physical money. The main reason is the increase in e-commerce sales. Also, many consolidations and mergers can be seen in the next few years because of many payment players around the globe.  

 

Banking also seeks an opportunity in the Fintech industry as it will be very easy to provide services online. And in India with the Digital India initiative, Banks can provide services online with proper transparency and efficiency.  

 

At a virtual conference conducted by the Confederation of Indian Industry (CII), SBI managing director Ashwani Bhatia said that the fintech sector has a lot of growth potential and opportunity as is evident from the example of the State Bank of India itself. He also added that the bank currently gets 91% of jobs done digitally now. He believed that this 91% will become 100%. For a bank like State Bank of India, and other banks obviously, he is sure that everything is going to move digitally. 

 

Customers are accessing 90% of the banking services using mobile apps like the HDFC Bank Mobile Banking app, SBI YONO app, etc. And also 82% of customers rely on websites or web-based platforms. Banking applications also provide personal financial management tools to its customers.

  

                        

Fintech companies provide easy personal loans to customers like BajaJ Finserv, Pay Sense, etc. The insurance sector has been a boom online. Different Fintech companies like Policybazaar.com, Bajaj Finserv general Insurance, etc are very popular among the customers to provide the services only with no delay and no inconsistency. 

Many companies deal as a stockbroker for the customers to trade and invest and providing them the guidelines and suggestions regarding the trade. Groww, Zerodha is such a company that provides a platform for easy trade in the stock market.  

 

However, the major concern remains with the cybersecurity. During COVID 19 there is an increase in cyber-attacks on financial institutions globally. Banking and fintech have to always update and invest in IT regularly. If fintech institutions lack cybersecurity they can be out of business. Getting cybersecurity up to mark is very important and also there is a strong investment opportunity in cybersecurity for fintech in the next few years. 

 

Impact of COVID-19 

 

Lockdown across the countries had led to a change in behavior of consumers as they have relied more and more on the e-commerce ecosystem and companies were also forced to make adjustments as per the change during the period. According to experts, this change can be long term and this led to more online transactions which create a long term opportunity for fintech institutions. 

 

During this period in the year 2020, a large number of transactions took place which includes Mergers and Acquisitions, Venture Capital, and Private Equity Investment. According to the report by KPMG, out of the 4 years’ lowest total global investment of $25.6 billion, Indian startups have raised almost $1.7 billion only in the first six months of the year 2020 which is almost double from the last year’s, $726.6 million. There were a total of 70 deals took place in H1, 2020 in India. The solid fintech investment in H1’20 was led by a US$398 million angel investment in Navi Technologies, a US$300 million PE raise by Pine Labs, and the US$185 million acquisition of PaySense by Netherlands-based PayU. 

 

As we get to know that India is an emerging country for the fintech industry. And there is a very high growth opportunity for the Fintech companies in terms of working and valuation. So the very appropriate time to invest in Fintech companies is now. 

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Author: Nimesh Jain