Here’s How You Can Transform Fintech By Going Digital

As of June 2022, India had over 80 crore Internet users. With a smartphone penetration of 75 crores and 4G/5G services in place, there is no doubt that the nation is waking up to the age of digital transformation. From the largest corporations in the country to your neighbourhood fruit seller, digital technology, UPI payment systems, Aadhaar, social media, and e-commerce have changed the lives of nearly every Indian.

If there is one industry in the Indian economy where the impact of digital transformation has been significant, it is banking and financial services. Till about a few years ago, the financial services industry has been very traditional and resistant to change. The COVID-19 pandemic, however, rapidly accelerated the integration of technology and innovation and the change in consumer behaviour. Banking, seeking loans, applying for insurance, and making investments through mobile and web platforms have become more common. This digital transformation has prompted the rapid development of fintech innovations as well. Financial software, AI and Machine Learning based platforms, agile technologies, cloud computing, and the use of data analytics for insights into customer behaviour are rapidly transforming banks and NBFCs into modern, lean, and highly-customer-centric businesses.

How is Digital Transformation Boosting the Fintech Industry?

• Breakdown of legacy models – The very foundation of the fintech industry is based on the premise that traditional models of financial servicing and banking cannot meet the populace’s evolving needs. They are lacking in scalability and extremely limited in terms of the customer experience they offer. In a vast country like India, traditional banks and NBFCs have been able to offer services only to the urban tracts. With the growth and development of Tier II and Tier III cities and rural areas, the growth potential is immense. This is only within reach if SMEs and NBFCs adopt robust fintech innovations. This is the advantage that the top financial leaders of the country have set out to leverage.

• Evolution of digital India – The government’s drive to improve India’s online infrastructure found a catalyst in the aftermath of the COVID-19 pandemic. With more SMEs acquiring digital platforms and more businesses adopting digital payment systems and integrating UPI, it was only natural that the demand for loans, insurance, and investment would go online. Some of the top finance and business leaders, such as Sanjiv Bajaj, the Chairman & Managing Director of Bajaj Finserv and President of CII (2022-23), initiated complete digital offerings. Fintech leaders like Bajaj Finserv offer online applications, KYC, onboarding, legal checks, underwriting, and disbursal – a completely seamless experience for the end consumer. In FY 2022 alone, the company disbursed 24.7 million loans, a growth of  46% in FY 2021.

• Leaner models and operation efficiency – NBFCs and banks have depended on DSAs, external agencies, and third-party institutions for sales and outreach for decades. Adopting AI-driven Robotic Process Automation (RPA) technology, digital advertising, and Social Media outreach has greatly reduced this dependency. However, the greatest advantage going digital has brought to the fintech industry is optimising efficiency and reducing costs. Some top entrepreneurs, such as Nithin Kamath, the founder, and CEO of Zerodha, have managed to transfer these benefits to the end user, creating a whole new operational model. Taking the ‘low margin – high volume’ philosophy to online trading, Zerodha now has over 6 million active customers.

• Tech for simplification, amplification, and risk mitigation – Big data and cloud computing have completely transformed the fintech industry. They aid banking and financial services companies handle different demands such as storage of customer data, digital verification of customer identity, customising interest rates based on customer segment, reducing customer loan disbursement times, designing customised financial products, and enhancing customer experience. Uday Kotak, CMD of Kotak Mahindra Bank, believes end-to-end digital transformation has the ability to transform the MSME landscape with loan disbursement without the need for physical interaction.

• Mobile tech for fintech – Famous personalities in the field of finance agree that mobile apps for banking and financial services are set to revolutionise the industry. Nearly 80% of Indians with a bank account from metro cities use mobile banking apps. The fintech industry is all set to metamorphose this trend further.

Digital transformations are all set to change the fintech industry. The adoption of technology and innovation will not only expand the market scope for banks and NBFCs but will also enable these organisations to offer a range of exciting new services better suited to meet personal and organisational goals. 

Conclusion – Digital transformation in India is all set to have a significant impact on the Fintech industry. As banks and NBFCs scramble to use the best of innovation and technology to reach a broader market base, tech tools are also enhancing customer experiences in various ways.