Innovation Is The Key Factor For Fintech To Keep The Pace Going
During the dotcom boom from 1995 to 2000s, then commerce startups like Amazon, eBay, PayPal, were able to build businesses and scale them on an already available payment infrastructure. India is unique in that sense, where the financial and payment infrastructure are still early stage and being built out currently. But with cheap data now broadly available citizens are coming online and discovering content, news, social media and are getting acquainted with finding information online.
In this article I will summarize some broad areas which are ripe for disruption in the fin-tech space and are essential for extending financial inclusion and reach.
Big Data & AI First Approach, for alternate Data from Transactional SMS, banking, Point of Sale, Invoices, Internet of Things (IoT) etc is a huge lever to understand underserve and credit starved customers better. Big Data along with AI on alternate data is key to discovering hidden patterns for better risk management, convivence, recommendations, fraud detections and more.
“A major advantage of Indian companies are their quality computer personnel, which are being lost to technologically superior competitors with better research facilities, working conditions and often higher remuneration”
Data safety and security are the holy grail for building trust in this early stage of fin-tech eco system. To Identify an individual, Biometrics technology uses physically unique features like fingerprint, face (with mask now), voice, retina. There are behavioural biometrics like the way a person types on the keyboard, touches, drags etc can also be used to detect account take overs, identity spoofing and present second factor authentication. These requirements are pushing new set of innovations in driving data safety and security to the next level in the fintech space.
Compliance Tech: As Data Privacy, storage, compliance, consent becomes mainstream, regulators are trying to bridge the gap between policies and technology advances. There is a need for predictive analysis, services and tools to automate compliance tasks, address and reduce risks and auto detect compliance breaches as new features are released at breakneck speed. As financial regulations become complex, compliance Tech will help bring transparency and early warning systems and reduce compliance costs.
Blockchain Technologies, ability to provide a distributed ledger which is transparent, secure and reliable is quite powerful. While cryptocurrency is the is the biggest use-case on blockchain technology, use of blockchain in fintech mainly remains untapped. There is big scope of innovation in areas like reconciliation, settlement, open systems build for credit, payments, banking, invoices etc.
Bank as a Service (BaaS) and Bank as a Platform (BaaP): Open platform and open API access allow Banks, NBFC, and partners consent based access to banking information to build innovative products which adds to the value chain by creating better financial products addressing specific customer needs.
Overall, Exponential growth in mobile data subscriptions (~500MM currently), has provided access to these potential customers. Basic financial transactions like payment, banking, loan, etc are still something that needs grass root level built-up of trust, convenience and financial inclusion to scale it to Tier3 cities and beyond. Innovating your way out of these fundamental tight spots are the need of the hour for fintech firms to build customer centric products which in turn will help them scale and extend reach. I believe we are at the tip of the iceberg currently in India / South East Asia, and most of the addressable opportunities are mainly untapped.