Banking In India
Indian banking system consists of Public Sector Banks (27), Private Sector Banks (21), Foreign Banks (49), Regional Rural Banks (56), Urban Co-operative Banks (1,562) and Rural Co-operative Banks (>94,300) (Source: IBEF-July 2018). Public Sector Banks control approximately 70% of the banking system assets.
Rise of Fintech
A new group has emerged, known as Fintech, to address the needs of Indian entrepreneurs – Be it loans, payment or money transfer. As per Business World article, India’s fintech market is forecasted to double by 2020, from $1.2 billion at present.
Here is the list of 5 activities, which has allowed start-ups to deliver better customer service, quicker turnaround time at a lower operational cost:
- 1. Social media behaviour analysis.
- 2.Online fetching & uploading of documents.
- 3. Data analysis through big data & machine learning.
- 4. Quick query resolution through Chatbots & Robo Advisors.
- 5. Use SSL layers for encryption to ensure customer data security.
Opportunities for Fintech
- 1. Improve Portfolio Quality: As per CRISIL, the gross non-performing assets (NPAs) in the Indian Banking system amounted to around Rs 10.3 lakh crores as on 31 March, 2018. Fintech can certainly improve the credit appraisal process with AI enabled tools, which will subsequently improve the portfolio of the banks.
- 2. Meeting Customer Expectations: Technology has redefined the way people used to interact, compare & purchase products/ services. To extend better deals in such a competitive era, one needs the support of Fintech to meet customer expectations.
- 3. Helping Hand to Small Business: About 80% of entrepreneurs are still forced to arrange funds from unorganized financial avenues. With the implementation of GST, accessibility to organised finance has improved manifold for small businesses. It’s a great opportunity for Fintech to cater the need of this deficient units.
Challenges of Fintech
- 1. Required Huge Investment:Many investors including established ones lacks an understanding of how this industry works. A Fintech requires huge amount of capital. To arrange such level of funds is quite a challenging task.
- 2. Security Issues: In a digital world where business functions are undertaken through technology, cyber security measurements are of utmost importance. Adequate measurements such as investment in security framework, digital awareness, secure payment experience and such others are required to ensure data security and reduce vulnerability to sensitive data.
- 3. Geographical Reach:In India, the financial & technological literacy as well as quality & availability of internet will play a huge role in the success of Fintech. Around 65% of Indian population still lives in rural areas, where basic infrastructure & education skill set has not reached the desired level. Moreover, migrating tech-savvy urban users and making them comfortable with digital financial transaction space is also equally important.
It is evident that technological advancements have a great impact on financial industry. The Indian banking sector is at its inflection point. On one side, banks have a huge customer database and resources. On the other hand, Fintechs have innovative ideas and new age technologies. This has led financial institutions as well as businesses to either develop their own technological capabilities or to partner with Fintechs. Hope this new wave of Fintech wash away the existing limitations of banking system & serve Indian Population – underserved, unserved and to better serve the already served.