How can investment and loans overload the fintech world?
The Indian startup galaxy is making its mark around the world, having become a comfortable home for the third largest unicorn ensemble in the world. E-commerce as well as Fintech platforms have been the spearhead of this progression.
India’s FinTech ecosystem has experienced unique growth as it relies on strategic partnerships as well as the development of digital public infrastructure.
Supported by growing connectivity and digital public infrastructures such as the API stack in India, fintech platforms are now transcending other slices such as insurance, investments and lending.
Fintech beyond payment gateways –
With manageable communication and transparency in transactions coupled with the pandemic, accelerated digital growth innovations have triggered a paradigm shift in the fintech market.
FinTechs are no longer payment gateways, they now offer a whole range of services in a single mobile application, from opening a bank account to paying for insurance with one click and an onboarding process of 2 minutes.
Mobikwik and Paytm were the first to adopt this integrated platform offering. Various other fintech companies followed suit and started partnering with NBFCs and banks to grow.
Fintech lending platforms –
Traditional banking and lending services were undoubtedly polluted by red tape, lack of customer support, and reliance on credit rating, which was even more problematic with the rise of the industry. unorganized.
The retail digital lending market has generated over 40% CAGR over the past decade. This growth is evidenced by the integration of payments and loans. Using the merger of a lightweight asset model, paperless KYC, smaller loan ticket size, and faster disbursing digital lending platforms have managed to gain over 40% market share in personal loan segments and are moving towards a larger ticket size and underwriting.
These digital lenders monetize the short-term credit industry by providing hassle-free Buy-Now-Pay Later credits and EMIs.
Razorpay, a payment gateway, offers Razorpay Cash Advance and Credit products that help businesses solve their cash flow issues with fast business loans and instant settlements. These accessible funds and transparent pricing mechanisms level the playing field for MSMEs.
Pine Labs is considered the one-stop solution for promising companies. Pine Lab’s post-payment offerings are not limited to credit and debit cards, but extend to UPIs and online payments. BNPL’s offerings help businesses promote loyalty while creating a payment experience.
Other platforms worth mentioning are Lendingkart, Krazybee, and Dhani.
However, with the proliferation of digital loan applications in India to fill the loan gap, unsecured applications that promised quick loans with high interest rates and unsecured started to flourish. These dubious platforms come under heavy criticism for the misuse of customer data, discriminatory credit check practices, and aggressive loan collection practices.
These digital lending platforms were developed to solve the credit problem in India, but in the absence of regulation, India could move towards solving the problem of Chinese loan applications at the national level.
FinTech investment solutions –
Since the disruption caused by the pandemic and people working from home, personal finance and financial literacy have become table discussions. This can also be evidenced by the influx of retail money and the rush of Demat accounts opened in India.
India’s wealth tech market is expected to grow over $ 60 billion by fiscal year 25. These platforms leverage analytics, artificial intelligence and big data to deliver solutions and tools effective in preparing consumers to create wealth.
One of the main global investment trends is Robo Advisory, the main one in India being Tavaga Advisory. Tavaga is a SEBI Registered Investment Advisor who uses algorithms to analyze risk appetite and promote goal-oriented investing. Tavaga democratizes investment advice by eliminating discrimination on portfolio size.
Spenny capitalizes on millennial trends by making investing quick and easy. The platform has a simple activation process that automatically invests roundups into a diverse portfolio.
Small case, Harmoney and likes help investors make better financial decisions.
However, the gap between advancing technology and established, heavily regulated institutions is an issue that deserves to be highlighted. Multiple platforms have emerged without any experience in banking and market risks, which makes hygiene control difficult.
With people relying on social media for financial advice, it’s critical that regulators develop a plan to make financial literacy a daily conversation.
The author, Nitin Mathur is CEO of Tavaga Advisory Services. Opinions expressed are personal