In my previous article, I talked about the disruption caused by FinTech startups in Indian financial sector and how the startups have to use data analytics diligently to effectively cross the chasm. So, let’s now have a look at the other side of chasm. Majority of the startups that open after the sector has been announced as the new profit churning machine fall under this category. These companies are backed by calculated risk takers and shrewd businessman. They are pragmatists in who care about the company, quality of the product they are buying and the supporting systems, interfaces and infrastructures.

A systematic and methodical approach and deep insight of the sector allows these startups to go about their business without any fuss. The large customer base is ensuring that there is some share of pie for every stakeholder in the picture. As start-ups emerge as enablers for the business of large financial institutions and seem to be in the spotlight, government bodies and other market players have been stoutly serving their part to establish an environment for the growth of innovation and technological advancement in the financial sector.

A systematic and methodical approach and deep insight of the sector allows these startups to go about their business without any fuss. The large customer base is ensuring that there is some share of pie for every stakeholder in the picture. As start-ups emerge as enablers for the business of large financial institutions and seem to be in the spotlight, government bodies and other market players have been stoutly serving their part to establish an environment for the growth of innovation and technological advancement in the financial sector.

Start-ups are also spending big to fight perceptions Fintech scales up for a third and possibly fourth era of advancement with blockchain in picture. The companies will have to fight more for the market share and less for the technological innovation. This phase is about execution and be it whatever business model, P2P lending, Crowdfunding, etc.

The global FinTech sector is expected to become $45 billion in value by 2020, growing at a CAGR of 7.1%. India would play a critical role, given that the backdrop is highly supportive. The Indian FinTech market is expected to reach $2.4 billion by 2020. FinTech in India is only about half a decade old and is at a very nascent stage. Funding of fintech start-ups more than doubled in 2015, reaching 12.2 billion USD, which is up from 5.6 billion USD in 2014, based on the companies included on the PwC DeNovs platform. The mood in India, like that for the rest of the globe, has been bullish. Investment in fintech companies has touched 1.2 billion USD in 2015, compared to 145.1 million USD in the previous year. Many multinational banks are also looking to invest in early stage fintech start-ups in India, and these trends are moving at a considerable pace.

While the availability of multiple digital channels fits in with the needs of today’s tech-savvy millennial crowd, the key to differentiation and value would lie in providing an integrated, consistent and seamless omni-channel customer experience as opposed to disjointed multichannel customer interaction.

Leveraging the access to a host of new and meaningful customer data points that such digital channels provide, the current generation of fintechs are using the power of analytics to identify malleable propositions that can be moulded to meet very specific customer requirements. It gives start-ups a tremendous opportunity to create more ‘customer delight’ moments and also open up the scope for additional services and fresh revenue streams.

A number of online marketplace lenders have made lending as easy as an Internet search — one can just enter some information online and have a loan approved within a few hours. This is the transformative power of fintech. Marketplace or P2P lending is growing in popularity with borrowers because of its perceived low interest rates, simplified application process and quick lending decisions. Alternative lenders today account for nearly 10 billion USD of the 600-billion USD small business lending market.

This built-in cost advantage enables P2P lenders to offer better prices to the customers consistently. This cost-efficient structure and the user-friendly experience are working strongly in favour of alternate money lenders. It is predicted that loan originations will reach 1 trillion USD by 2025. By prioritising 24/7 access, FinTechs offer services available via non-traditional channels, such as social media, that empower customers to a great extent.

Last but not least, the digital channel also gives a wiser approach to risk measurement for financial institutions. The credit scoring methods have been improved these last few years and banks are now able to make predictions about their borrowers’ behaviour and fraud detection solutions have also been developed to secure credit delivery.

In short, the fintech sector offers innovation and disruptive technology, which can drive customer demand.