Digital Transformation in Finance-FinTech
FinTech (Finance+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 the companies are better managed by utilizing specialized software and algorithms which are used on computers and smartphones. It has applied innovations in business transactions, digital wallets, cryptocurrencies, banking and so on.
Government of India, by launching Digital India Programme had given a green signal to transform the entire ecosystem of public services by using information technology with a vision of 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 rising for a start-up, investment management can be performed without the assistance of a person. According to Fintech Adoption Index, 2017 one third of consumers are utilizing at least two or more FinTech services and customers have been increasing became aware and has adopted FinTech in their daily lives. FinTech has been revolutionising 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 first quarter of 2019 a shock wave was sent by Apple Card through credit card space, FIS setup a $35 billion wirecard acquisition and has setup 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 take appointments with bank consultants and spend hours for discussion to put their portfolios.
It has been already realised by FinTechs that all kinds of financial services need to be integrated seamlessly in 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 which 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 second round could raise $35 million from Tencent a Chinese major, Horizon ventures and JS Capital. It will be invested for business development, marketing and distribution, rolling out new products and explore 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 1 million user base and is planning to target 5 million in next three years which shows the expansion that Fintech companies are planning in next three to five years.
As the technology is making on roads in every aspect of our lives there is a need to upgrade ourselves and fill the skill gap by familiarising with the emerging technologies. There is a need to develop financial innovations and technology market which access the existing practices applied in the field of FinTech. Risks banks could be exposed with development of FinTech and financial innovations need to be identified and efforts should be made to reduce at micro and macro level. There is a need to strengthen the regulatory framework so that practical recommendations can be given to commercial banks to scale the position in financial innovations and control the risks associated with introduction of financial innovations.