FinTech : The Change Agent

  The COVID 19 pandemic was formerly notified by World Health Organisation on 11^th March 2020. This prompted governments worldwide restricting movement of people which brought manufacturing, supply chain, trade , distribution channels and general mobility to a grinding halt impacting economic activity negatively. While on the one hand, the social distancing norms created a void in the entire transaction cycle , it also gave headwinds to the growth of contact less transactions to bridge that.  The FinTech model have been evolving over last few years, thanks to the innovations of FinTech players worldwide, to compliment the traditional Financial Service industry and help them provide services to the unserved and underserved segments. Fintech disrupts, enables or collaborates with various segments of BFSI ( bank, financial services , insurance) sector. With the pandemic induced closure and restrictions in the neo normal, FinTechs have many opportunities given the strong need for digital and contactless delivery of financial services. As  Ficci-PWC report “ Re defining the FinTech Experience : Impact of COVID 19” published recently ,have observed  “ the need for digital awareness and presence is prominently recognised by individuals, businesses and governments alike. FinTechs can act as enablers for the banking and financial sector, playing a crucial role in ubiquity and adoption of digital financial services. A few measures related to policy and regulation can support the FinTech sector during the ongoing crisis”. 

 

FinTech models have a sheer advantage over the traditional Financial Service models which are likely to be  more visible in the neo normal. In the immediate term there will be a need of, not only digital mode of working but also contactless sales and service delivery ,  which are basic precepts of FinTechs. The demand side drivers in the form of rising customer needs and market potential with a dash of innovation , can actually work wonders towards seamless delivery of service till the last mile. Phenomenal penetration of smart phones and high speed net connectivity have made the tech savvy customer wanting more of “delights” in the service level,  be it banking , insurance , credit , portfolio management or investing. Cashless payment , which is one of the key pointers to such digital revolution, has increased to 18 per person in 2018 vis-a-vis  2.2 per person  in 2014.  

 

In a way, therefore, the ecosystem was already in an adoptive mode to lap up  FinTech. Enabling technologies such as AI, ML, big data and cloud computing are some of the underpinning technologies transforming operations, products and services of BFSIs, which incubated in FinTech lab. The contagion is likely to work as a watershed and take this to the next level. Some of the areas where the enablement is likely to have greater visibility : 

 

a) Agent productivity: Seamless distribution of financial products and services to targeted prospects, supporting agents and banking correspondents based on parameters such as unique preferences, risks and prospect conversion probability. 

b) E-KYC, fraud and compliance: Technologies such as biometrics, AI and video analytics ( V-KYC) are helping banks to create advanced solutions for digital onboarding, securing transactions and mitigating fraud and anti-money laundering (AML)/combating the financing of terrorism (CFT) risks. 

c) Account aggregation: This involves extraction, aggregation and analysis of information from multiple accounts, such as loan/credit accounts, savings and current accounts, credit cards and investment accounts, telecom / internet /OTT billing , Government repositories such as public provident fund (PPF) and income tax return data; and supplementary business or consumer accounts such as those of e-commerce, food or mobility aggregators and social media tags,  in a single platform. Data collection, collation and sharing are enabled through open API connections. Moving beyond the traditional, asset based approach of credit rating agencies, account aggregation incorporates cash flow based inputs such as income from various sources, expenses, invoices, receipts and tax returns. 

d) Customer acquisition and service: Chatbots and robo-advisory services can be used for attracting new customers and retaining existing ones. They provide low-cost, efficient and time-bound services in domains such as digital wealth management and financial marketplaces. 

 

The COVID-19 crisis has changed not only the way BFSIs conduct their business, but also how their employees do their work and deliver. Across the counter , the customer also learns to adopt newer ways of availing services. Investor manages finances without stepping into a bank or agent’s office. A borrower can have her loan applied, approved, disbursed , serviced and closed entirely on digital platform. An insurance policy can be bought remotely.  The value of digital channels, products, infrastructure and operations is increasing in the financial industry. FIs are increasingly moving towards working remotely to safeguard the well-being of their employees.  

There may be small hiccups in the transition. Main concern being the additional investments in building up the digital infrastructure for the entity.  As the Report observes,  “... not all financial firms have the infrastructure, tools or processes in place to enable a seamless transition to remote working. While FinTech start-ups and digital-native firms are handling the swift transition to remote working relatively well, traditional FIs are finding the transition challenging.” 

 

With direct and indirect support from the Government and the apex bodies like RBI , SEBI and IRDA, players in the  BFSI sector  can scale up  its operations and innovate at a pace that is significantly greater than traditional businesses. 

The common denominator of most FinTech disruptors is that they harness modern technology and its applications along with optimised processes to create scalable and sustainable business models. 

#peerlessfinance