Trends That Will Shape The Fintech Space
The current scenario continues to have tremendous economic repercussions not just on India, but the world. Each and every sector is grappling with certain issues and this crisis has given rise to a new normal that we all are constantly adapting to. With each passing day, technology has led to significant developments in almost every industry. In the fintech space, it has been the foundation for growth and has completely revamped the way we transact. The outbreak is also encouraging the use of digital payments and adopting digitization in our processes. About 74% of consumers in India will prefer carrying out payments through the digital medium in the next six to nine months, according to a report by Capgemini Research Institute on the effects of COVID-19 on the consumption of financial services in April 2020.
Talking about the fintech industry, over the past couple of years, various aspects like speed, convenience, safety have gained prominence and have had a sizeable impact on our transactions. They have made traditional financial processes an easier and seamless experience. Fintech continues disrupting the way traditional banks offer services to customers, as banks look to integrate digital aspects in their functioning.
Fintech has transformed all aspects of the industry - banking and capital markets, wealth management, insurance, and funds transfer and payments. Fintech has grown rapidly and offers several advantages such as a substantial reduction in costs, improved customer retention, etc.
The financial landscape is evolving with each passing day, below are a few emerging trends that are surrounding the fintech space:
Bring about digital inclusion
Like every other sector, technology will only bring about transformation in the financial sector. It has brought a radical change in the manner in which people carry out transactions. With so many companies and start-ups already working in the digital payments gamut, it has made the lives of small businesses easier, as they have adopted online payment methods. Digital methods are being adopted not just for singular transactions, but for recurring invoicing as well. Micro-entrepreneurs like local cable operators, local Internet service providers, newspaper vendors, milk vendors are increasingly preferring to adopt digital processes for payment collection than doing it manually. Looking at the current situation, be it large companies or small businesses, every company will begin to opt for the digital medium and will bring about digital literacy and inclusion.
Hassle-free apps
The pandemic has given rise to newer apps with startups exploring solutions to the current issues. People are avoiding stepping outside and everything is being carried out online, to ensure minimal physical contact and follow social distancing norms. With a wider demographic of customers now using these apps, companies have to make sure that they are extremely user-friendly and hassle-free. Fintech companies should have apps with a smoother interface and focus on providing a great customer experience.
Rise of Contactless Payments: There is an emerging trend that usage of cash is diminishing because it can act as a carrier of the coronavirus. But also shoppers are reluctant to hand over cards to biller for swapping it on PoS machine for the same reason and rise of contactless payment is on the rise. Tap to pay or Mobile pay methods are on the rise as shoppers are looking quick way to get in and out of stores without exchanging cash, touching terminals, or anything else. MasterCard has reported a 40 % rise in contactless payment in the first quarter. There will be a rise in SoftPoS, where NFC enables mobile phones can be used to receive payments from Contactless payments enabled cards and debit card.
Importance of Cybersecurity
Around 28% of consumers are now exercising more caution while making payments using various digital modes, according to a study conducted by YouGov and ACI Worldwide. With the rise in digital payments, cybersecurity also gains utmost importance. When fintech companies go digital, it opens avenues for attacks and threats as they collect large volumes of customer data. It may lead to issues of identity theft, fraudulent transactions, access to sensitive user dataset. These issues have caused huge operational, reputational and financial damages to organizations. In such a scenario, cybersecurity is a priority in the fintech sector.
Focus on gaining customer trust
The digital revolution has brought an increase in online payments along with looming threats of fraudulent activities. At such a backdrop, gaining and sustaining customer trust will become even more significant. It will take the country some time to reboot and for customers to feel safe to visit banks. In such a situation, it becomes important to develop trust and enable seamless communication between banks, fintech companies, insurance companies, mutual fund providers, and their audience.
Emergence of Blockchain
Blockchain has been revolutionizing the fintech industry, more and more fintech, insuretech, banking startups have adopted it. This technology is extremely beneficial and can make the financial services industry more efficient and secure, saving significant costs in preventing fraud and identity theft. Implementation of blockchain would also bring about greater transparency and traceability for businesses. We can expect to see the use of Blockchain in several areas like digital payments, smart contracts etc.
Increasing usage of AI
Artificial Intelligence has been transforming every industry and the fintech industry is no different. The increasing role of AI would result in more efficient transactions, more accuracy in risk management, and fewer errors on the lender side. The new-age financial institutions, including banks, NBFCs, and fintech firms are adopting AI in most of their activities such as assessment of the credit profile of customers, analyzing customer bank statements, auto computation of internal risk assessment, use of Chatbots and many others. AI has been evolving the digital banking landscape by increasing the accuracy and personalization of payment, lending, and insurance services, etc.
The role of fintech has been strengthened further and has become even more integral owing to the current scenario. The fintech world is surrounded by many other trends and will continue to develop unique and innovative solutions to improve the quality of financial services. As newer technologies and developments continue to emerge, the fintech sector will also bring newer disruptions in the future and enhance the financial ecosystem.
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