India has been an underbanked country for many decades, in spite of an existing ecosystem of banks and financial institutions. A number of critical financial services like loans, insurance and wealth management continue to be the privilege of a few. The numbers validate the sad state of affairs — less than 10 per cent of Indians have access to credit and insurance penetration is only about 3 per cent of GDP. The reasons are aplenty including high costs of the traditional banking model, lack of relevant products, and limited financial literacy.
The potential is immense but there is a need to leverage technology to disrupt the way financial services are distributed to ensure that it makes inroads into the real India and impacts lives of millions of Indians.
Fintech has emerged as the problem solver as it has disrupted the financial services market. Fintech companies are working to transform the way the real India transacts financially. Armed with top-of-the-line technology driven models, fintech companies are delivering all financial services digitally. They are reaching out to millions of unexplored Indians and offering customised solutions, delivered instantly and seamlessly on a phone. The first and foremost is credit.
There is a huge portfolio of fintech solutions that new age fintech companies are offering to tap the unserved, first time user base. These are individuals who would have had the intent to use financial services, but were either never approached or did not have high amounts to start their journey. This is a common case when we consider insurance and wealth management. Today, with advanced data analytics and robo-advisory, firms are offering wealth management advice to millions of users, on an app.
The advantages for fintech companies are many, including better product lines, lower costs, wider and effective reach, strong risk management capabilities, deep data analytics for a thorough understanding of consumer segments, convenience and ease of access. They do not operate on a ‘brick and mortar’ model but utilise cutting edge technology and data analytics — their biggest advantage. They can offer their services 24x7 across India, irrespective of location, on the mobiles.
I believe financial access and financial inclusion beyond cities is what will drive the next level of growth for India. As high-speed mobile internet with affordable data plans propel the next level of growth for digitisation, it is time for the un-banked and under-banked population to explore the range of financial service available on smartphones. 2019 will belong to new and unexplored users, who will begin exploring financial services on their phones. While artificial intelligence, machine learning and deep-data analytics will be critical, innovation and speed to market will be the real game changers. The future is bright and the day is not far when a majority of Indians will prefer to do financial transactions digitally.
(Views expressed are personal)