The advancements in technology are unprecedented, it has entered all industries including finance. The fintech companies have thrived especially during the pandemic since they were quick to adapt to the cashless, contactless and paperless format of transactions. The emerging markets have particularly embraced fintech, and the fintech companies have particularly have entered the credit space and are making unprecedented headway.
Some of the reasons why Fintech have thrived during this pandemic era are:
1. Agility and quick adaption to the virtual world:
Since the businesses are well invested in technology, they were quick to adapt to the requirement of moving the business activities remotely. Operational resilience was top priority for fintechs. They were also able to equip their employees to work remotely, thereby ensuring that the operational efficiency did not fall sharply. They were also able to sustain their revenues during this period due to their agility and the staff’s ability to service the customers through virtual means.
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2. Ability to penetrate the impenetrable market segments:
Fintech can reach out to segments that the traditional financial setup has not been able to service. Fintech has leveraged social media and mobile phones to reach out to these segments. Over 85% of the population has a mobile phone connection, and the effort of digitization also got a significant boost during the pandemic.
3. Leveraging on digitization mandate of the Government:
Many fintech companies mushroomed on the backdrop of the digitization objective of the Government. The online transaction costs have been brought down by these fintech establishments. For example, acceptance of payments on platforms like Gpay, and Paytm do not cost money for either party (payer and receiver). This has been the key propeller for digitization, it offers convenience and documentation of all payments and receipts. It is also greatly encouraged by Government.
4. Government initiatives to promote investments in the Fintech sector:
The Pradhan Mantri Jan Dhan Yojana (PMJDY) was introduced to bring individuals who were not within the formal fold of the financial system. There was an unprecedented number of bank accounts opened for direct benefit transfer and accessibility to basic financial services. This has also enabled fintech to penetrate the areas which were earlier deprived of basic financial services.
Apart from this, there are Aadhar enabled payment systems and Aadhar payment bridge systems that serve as Micro-ATMs and fintech has been a key enabler in enabling these roll-outs. They have in turn been a facilitator for the growth of fintech over the past few years.
India stack is an initiative that has been aiming to create public digital infrastructure, this enables fintech to share digital infrastructures which improve operational efficiency. This also promotes corporates both public and private ones to adapt to digitization in all their operations.
The fintech hub is developed at the International Financial Services Centre (IFSC) called, as an effort to grow the global fintech segment. In addition, the RBI Hub has been created to promote innovation in the finance sector by leveraging technology. There are efforts to reduce the compliance burden, this could potentially encourage more fintech to be set up and boost investments in this sector.
5. Enhanced data protection; safe secure and quick movement of funds:
With the advent of fintech, there has been a substantial effort in ensuring optimal data security. The platforms that now offer seamless transfer of funds have much better digital security. The 2-factor authentication model is one of the methods in which they ensure that there is no misuse of sensitive data being leaked or funds being misappropriated.
6. Effective solutions in poverty reduction, increased job creation and better credit accessibility:
Given the present situation, the gap between the rich and the poor has been increasing rapidly. The Government has identified that fintech will be able to bring a large part of the populace under the formal fold of the financial system, thereby providing access to basic financial needs. By continuing to incentivise the FinTech firms, there is a likelihood of better job creation which will benefit the economy. There is a huge problem with credit accessibility among MSMEs, there is substantial innovation in this space by FinTechs to identify means of credit assessment when companies do not have a credible credit footprint.
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From the above note, it is apparent that it is only the beginning for FinTechs. The pandemic only accelerated the growth substantially. If you are a FinTech, then you can connect with the experts at Tata Capital Wealth and they can help you borrow at competent interest rates or raise funds through alternate means. Our experts can also handhold you with the set-up process.
21 April 2022
4 mins read
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