How Fintech is Disrupting the Financial Services Ecosystem in India

While many of the intricacies in the broad and specialized fintech space still need to be ironed out, the momentum among existing and new entrants in this space continues to prevail.

The financial services industry is one of the most fast paced and precision based
industries, owing to its needs of long-term data maintenance, transaction accuracy,
security etc. Hence technology is not new to this sector. Today though, new set of
technology trends are disrupting this sector, creating a huge opportunity for fintech
start-ups. From currency notes to human interface and data management,
everything in the sector has gone digital.

Technology is a must-have in BFSI for managing risks, customer profiling, large-scale
data operations etc. Technology is now being utilized to acquire online users. Most
financial products are now available online too, to feed the growing mobile
population. Disruptive technologies in financial services or fintech have changed
almost every financial activity from banking to payments to raising loans etc. The
targets of most BSFI startups today, unlike traditional companies are the number of
transactions rather than increasing the transaction size. What fintech start-ups might
not make in size of transactions, they are more than making up in the number of

The key for fintech companies across the board is to capture numbers and serve
them without adding any extra cost. There are two major challenges, which
companies, from financing to insurance, are facing today. Firstly for traditional
companies, managing a legacy technology stack with the new-age set of technology
paradigms is a fairly complex problem and secondly, servicing costs for small
transaction sizes have to be kept at the minimum. Until and unless companies are
able to manage these two together, they will not be able to make a breakthrough in
the online market. This requires evaluation of existing processes and elimination of
unnecessary ones and more importantly a willingness to learn from the new kids on
the block.

How the insurance space is evolving online

Within the fintech space, digital insurance is set to become massive in India, on the
back of a growing number of internet users, expected to touch 402 Million by end of
2015 (per the recent IAMAI &IMRB report). Improving infrastructure, affordable
internet, and the spread of mobile phones in equal measure to urban and rural India
are key reasons for this growing internet penetration.

A BCG Google report claims that by the year 2020, the non-life insurance industry is
poised to grow to 3-3.5X to about INR 230K crores, of which online insurance will
contribute most to this growth. In fact, the online insurance market in India is likely
to grow 20 times. Moreover, 3 in every 4 insurance policies sold will be impacted by
digital channels at either pre-purchase stage, purchase or renewal stages.
Insurance per se is seeing a massive change — from being a seller’s market to
becoming a buyer’s market. Online insurance marketplaces are going to be a catalyst
in this change by providing a seamless insurance buying experience. More choices,
niche products, rising consumer awareness regarding protection and savings
solutions, backed by good technology that enhances customer experience, among
other factors, all point to digital players leading the insurance industry into a new

Successful digital insurance brokers stand apart because of their great proprietary
technology and tech prowess that powers buying of insurance products across
insurers in a simple, quick and personal manner for the user. [Company].com for
instance enables our customers to buy their insurance, via the website or mobile
website, in less than 5 minutes! An extremely user friendly and contemporary
interface is essential. In one quick glance, a user should be able to understand the
key features one needs to consider. Investing in a strong support team that hand
holds customers through the tedious claims process is also necessary as is setting up
a qualified advisory team to provide real insights and advice to customers on the
right insurance choices, when they look for advice.

Looking forward

Most of the growth in the fintech space today is being fuelled by the e-commerce
revolution and the adoption of mobiles as the primary device. Frequent transaction
models, like banking, wallets have been able to make direct use of mobile
technologies to engage customers, but others are trying to find proxy ways to get
into the mobile space. For e.g. mobile apps, which provide telematics are being used
to understand driving behaviour and underwrite risk in motor insurance. A ton of
service requests for all financial segment have moved to mobile, which is where
companies end up saving a lot instead of opening stores and offices.
The next set of cutting edge technology that can disrupt financial technology space
will be Artificial Intelligence based bots which can identify trends and classify
customer profiles all on their own. The bots will figure out your risk profile, do the
sales while engaging you in meaningful conversations and service you right on your
mobile device. Intuition got replaced with data patterns based decision making, and
the bots will replace the complete cycle from data to decisions.
At the end of the day, fintech is here to stay and start-ups are leading the way.
According to a report by an analytics company, Tracxn, there were 750 registered
fintech companies in India in 2015 of which 174 launched that year alone. Banking
regulations are becoming more inclusive and banks are investing in fintech start-ups.
It’s yet to be seen which ones will emerge as winners but for now the momentum is
on in this space.

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