Digital Transformation in Finance

FinTech (technology) has given birth to many products such as Blockchain Technology, Cryptocurrency, peer-to-peer lending, Artificial Intelligence, Robotics, Machine Learning, etc. It has changed the way banking is done today; financial operations of companies are better managed by utilizing specialized software and algorithms that are used on computers and smartphones. It has applied innovations in business transactions, digital wallets, cryptocurrencies, banking, and so on.

The government of India, by launching the Digital India Programme had given a green signal to transform the entire ecosystem of public services by using information technology with a vision of a digitally empowered and knowledge economy. Our Prime Minister Narendra Modi said’ “Time has come for everyone, particularly my young friends, to embrace E-banking, Mobile Banking, and more such technology”.

Financial activities such as transferring money, cheque depositing by using one’s smartphone, money for a start-up, and investment management can be performed without the assistance of a person. According to the Fintech Adoption Index, in 2017 third of consumers were utilizing at least two or more FinTech services and customers have been increasingly becoming aware of and have adopted FinTech in their daily lives. FinTech has been revolutionizing the whole Customer Experience and has been making business and private life increasingly digitalized. 

In the era of disruption the pace of change in financial services has been so fast that in the first quarter of 2019, a shock wave was sent by Apple Card through the credit card space, FIS set a $35 billion wirecard acquisition and has set a record in the payment industry and MB Financial became a new top-five bank by fifth third acquisition. Millennials (people born approx. the early 80s and late 90s) and the following generations prefer easy banking which is a stress-free process over visiting a branch where they have to make appointments with bank consultants and spend hours discussing to put their portfolios.

It has been already realized by FinTechs that all kinds of financial services need to be integrated seamlessly into the lives of sophisticated and Tech-Savvy customers. Today FinTech companies sell their financial services and solutions to customers directly and try to compete with banks. Banks face challenges to keep up the speed and innovation with FinTech start-ups due to their internal structures and regulatory framework in which they operate.

Small businesses that require more focus on their core business and need to invest in growth can drain their resources in terms of people, finance and time can easily get it done by FinTechs, which provide solutions to small businesses for accounting, procurement, Customer Relationship Management, etc. Hence FinTech players help small business houses to access markets and capital with technology.

Niya which is a Bengaluru-based FinTech Company has initially raised $14 million in the first round and in the second round could raise $35 million from Tencent a Chinese major, Horizon Ventures, and JS Capital. It will be invested in business development, marketing and distribution, rolling out new products, and exploring international markets. Co-founder and CEO Vinay Bagri said, “With this fresh round of funding we aim to fortify our service suite and further accelerate our growth”. Presently Niya has a 1 million user base and is planning to target 5 million in the next three years which shows the expansion that Fintech companies are planning in the next three to five years.

As technology is making onroads in every aspect of our lives there is a need to upgrade ourselves and fill the skill gap by familiarising ourselves with Emerging Technologies. There is a need to develop a Financial Innovations and Technology market that accesses the existing practices applied in the field of FinTech. Risks banks could be exposed with the development of FinTech and financial innovations need to be identified and efforts should be made to reduce at the micro and macro levels. There is a need to strengthen the regulatory framework so that practical recommendations can be given to commercial banks to scale their position in financial innovations and control the risks associated with the introduction of Financial Innovations.