The fintech industry in India is growing rapidly. They have captured a good space with advanced technologies like smart usage of Data Science, Artificial Intelligence and Machine Learning. Even large banks and financial institutions have now started to value the importance of fintech.

The rapid growth of India’s fintech space can be attributed to the success of mobile payments and digital lending. Hence, it is not very surprising that traditional banks are also keen on embracing new technologies and partnering with fintech players to improve their service standards.

Many large banks have even set up fintech subsidiaries to internalise fintech competitiveness and export technology capacity to smaller banks. Fintechs are also stepping in to help financial institutions handle the large number of loan applications by enabling digital applications, facilitating data collection or assisting with the underwriting and approval process.

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Fintech has significantly pervaded the mobile payments landscape. Many fintech players are taking advantage of the rise in the use of smartphones, improvements in digital infrastructure, and a growing interest in online shopping.

The advent of UPI has further eased the process of making payments online. The biggest advantage offered by UPI is its interoperability among multiple banking platforms. This enables customers to enjoy a fast, seamless and reliable payment experience, and pay utility bills. In addition to this, they can send money to their family and friends almost instantaneously.

Digital lending

The process of availing loans from traditional banks is not only time-consuming but also paper heavy. It sometimes takes weeks to just get approvals for the loan. The COVID crisis has further worsened the situation as most of the banks are reluctant to lend in this uncertain scenario. Against this background, digital lending NBFCs have emerged as a saviour for customers.

Fintech companies operating in the digital lending space uses new-age approaches to disburse credit. Instead of relying on traditional financial data, they are now using alternative data to make more accurate and informed credit decisions.

Alternative data for credit scoring can cover employment history, academic background, rental payments, utility bill payments, insurance payments and even social media activities.

Since there is a shortage of credit data on MSME borrowers, fintech lenders leverage alternative data to assess their creditworthiness. This method improves access to credit for MSMEs, who are often declined credit from the formal banking sector.

Not just MSMEs but alternative data also helps salaried professionals and freshers who do not have any credit score. This explains why despite being a fraction of the banking system in size, the digital lending space is growing at a rapid pace owing to the faster and hassle-free process of loan disbursal.

Another main advantage of digital lending is that it allows for digital customer onboarding and credit disbursements, thereby eliminating the need for the customer to be physically present at the lender.

The digital lending space apart from being hassle-free is also helping the new to credit customers and those who have lower income to avail short term personal loan with a few clicks. The fintech companies, through technological means, can promptly evaluate credit risks by using the database containing loan applicants’ background and approve the loan.

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Savings and ProtectionFintech firms are offering platforms to customers to enable them to save, manage their wealth, and make investments. They also help them to choose from a spectrum of financial products across categories such as insurance, savings account and mutual funds.

Some fintech companies are also providing customised financial advice on a range of financial products. Mutual funds, for example, can play a key role in addressing the credit needs of customers.

In March and April this year, around 1.2 million new investors opened demat accounts with the Central Depository Services (CDSL) despite the ongoing nationwide lockdown. This is an indication of more and more retail investors in the country taking to equities and MF route as against the more traditional forms of investments, viz., FD, gold, property, etc.

As many as 122 million Indians have lost their jobs due to the pandemic during the period between March and April, according to the Centre for Monitoring the Indian Economy. This means a large portion of the population do not have a steady income source and are suffering from a liquidity crunch. While traditional banks are not much of help in this situation, fintech NFBCs are providing a wide array of products and services to cater to their liquidity requirements.

Be it a personal loan or insurance, fintechs are using their strategic partnerships within the industry to financially empower their customers. The uptick in smartphone use and availability has also prompted many insurance providers to enable customers to complete applications and file claims from their smart phones.

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)

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Original Source: yourstory.com

The global Covid-19 pandemic has impacted us in ways that we could not have imagined. With countries going under lockdown,  businesses and entrepreneurs have been among the worst hit. It was inevitable that the global markets would also follow suit. The Sensex, which peaked at 42,273.87 points in February 2020, crashed over 38 percent by March 23 to 25,638.90 points, making it one of the fastest crashes in stock market history, even worse than the 2008 market crash. While existing investors will feel the pinch, this could be a great opportunity for first-time investors. The pandemic has also resulted in a significant increase in mobile trading.  

5paisa.com, which recently became the first Indian fintech firm to go public, has been supporting its investors by focusing on customer-centricity; innovation; expansion to Tier 2 and 3 cities; and using technology to serve customers looking for a  broker-free and secure platform. The platform currently boasts a daily turnover of over Rs 30,000 crore,  over 450,000 clients, over 3.5 million downloads, over Rs 1,000 core in  Assets under Management and more than Rs 500 crore in Market Capitalisation.

As part of YourStory’s new series, ‘Money Matters with Shradha Sharma’, we talk to experts, entrepreneurs, and investors for insights on investment opportunities, savings, spendings, and more. In this episode, YourStory Founder and CEO Shradha Sharma was joined by 5paisa.com Founder and CEO, Prakarsh Gagdani, who spoke about the changing face of broking, the new-age investor, and tapping into unchartered markets. Here are some of the highlights from that session.


Investment grew despite the dip in the market

Prakarsh says that they noticed some very surprising trends following the pandemic.  Despite the market not being favourable for nearly a year-and-a-half, retail investors were still coming to market and showing interest in Systematic Investment Plans (SIP) and mutual funds were booming. After going public, 5paisa was optimistic about retail investors coming. “But suddenly the COVID-19 outbreak happened and we thought interest would fade.  But we saw a completely reverse trend. The markets were going down, but people started approaching stocks at twice the speed.” He adds that  March, April, May, and June have been among the best in terms of people coming to capital markets and the highest number of Demat accounts were opened in the months of March and April. 

With people spending less during the lockdown, and the future being uncertain, Prakarsh says that there has been a huge shift in the mindset of the investor. “That's why they're coming more towards investment. It's a very healthy trend, and a very good trend, which I feel that it will continue for a long time,” he says.

Catering to first-time investors

“A lot of our investors are first-timers. So they come with basic queries about how to transfer funds and what documents to give,” says Prakarsh. To address these queries, 5paisa.com has created an instructional video in Hindi that they share with their introductory email. “Video consumption is high. So, we focused our entire energies on building our video inventory, training, and imparting process knowledge to people. Our YouTube channel has more than 1.1 lakh subscribers, one of the highest in the industry. We have five to six million views a month on these videos. We decided to make these videos in Hindi from the start so that subscribers from the Hindi belt should not face any barriers,” he says.

When it comes to giving investment advice, Parkarsh says, “Let me state my disclaimer that I am no expert in advising, so please ask a financial advisor.” He says a few sectors like anything agri-related are logical choices because, “People don't stop eating. In fact, they may be eating more since they are stuck at home.”  Fertiliser, which is an allied sector, private mobility, oil and natural gas and pharma are all sectors that Parkarsh believes are likely to see traction. 

Exploring new avenues

5paisa.com recently entered the peer-to-peer lending space. “This is at a very nascent stage in India. However, lending itself is age-old in India. There are businesses that require short-term loans. There are people who need three-month, six-month, one-year loans. On the other hand, there are people who want to give money. I mean, if you talk to any business guy, he must have lent money to someone as a short-term loan at some point. The entire peer-to-peer lending platform makes it organised and under the purview of the regulators, which is very stringent in India,” says Parkarsh. He acknowledges that this is a difficult time, and people are currently loan-averse. “But I think in some time it might change because the moment we go back to our normal lives, the requirement of money will come. I'm pretty optimistic about this business, and we're promoting it internally with our customers and externally as well,” he says.

 

5paisa.com’s objective has always been on financial products that can be digitally served end-to-end and doesn't require any human intervention or paperwork. “We started with equities, then we had mutual funds, personal loans, and now peer to peer lending. We sell gold and health insurance. Our energies are focussed on equities, which is seeing a great momentum,” says Parkarsh.

The future of Fintech

Parkarsh believes that most of the disruption in Fintech is happening in the payment space along with digital lending, banking and broking. “But because it is highly regulated, they needed to become an intermediary to come into Fintech. One interesting trend is neo-banking. There are players who are not full-service banks and or registered banks, but offering services. I think that's an interesting space. Secondly, how do you get international investment in India? It's tedious and it's highly regulated. But I think that's an interesting space,” he say

Want to make your startup journey smooth? YS Education brings a comprehensive Funding Course, where you also get a chance to pitch your business plan to top investors. Click here to know more.

Original Source: yourstory.com