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"The rise of fintech is a sign of the times. It's a reflection of the fact that consumers want more control over their financial lives." – Dan. S, CEO of PayPal .
The term “fintech company” is often misunderstood and is described as mere startup junkies who hops from one startup to another but in its true meaning it describes any business that uses technology to modify, enhance, or automate financial services for businesses or consumers. For example, peer-to-peer payment services (e.g. Phonepe, Paytm, venmo, PayPal etc.), or trading platforms such as (Zerodha, Paytm money etc.)
FinTech can take the form of software, a service, or a business that provides technologically advanced ways to make financial processes more efficient by disrupting traditional methods.
Companies in Fintech Industry uses innovative technology to deliver financial services in a more efficient and effective way. For example, mobile apps and online platforms can be used to provide banking services, allowing customers to manage their finances on-the-go.
Future of FinTech industry looks promising and growing rapidly on the back of: -
In a report, by Research and Markets, as of March 2020, FinTech market in India is expected to expand at a compound annual growth rate (CAGR) of ~22.7% during the 2020-2025 period.
Over the past few years India has seen a rapid increase in the fintech space, credit can be given to government initiatives of UPI, payments bank and granting multiple licenses for differentiated banking to small finance banks.
Fintech basically operate in 5 areas- deposits, distribution of credit, remittances, payments and insurance and these are the areas where bank also operates so what differentiates fintechs from Banks? According to us what Fintechs are doing is componentizing each of these areas and breaking it open and then deliver it to customer so they can actually use it, while banks are thinking let me manage the money and where it sits but they are happy to let go the apps that moves the money around.
In 5-10 yrs., we think this trend is going to solidify and more and more fintech start-ups are going to emerge. As more and more customers get on the digital board, FinTech’s will have to focus on building trust and consumer engagement. To be critical and to stay ahead of the competition than other FinTech brands, it is necessary to focus on the security along with making the procedure simple for consumers.
It is not surprising that going forward, financial services will offer a customized and local offering to their customers using data analytics. The more and more advances in technology financial services adapt to upgrade their strategies, more growth in this sector is foreseen. This is just the beginning of a huge FinTech market in the upcoming decade.
While the FinTech industry is still in its early adoption stage, we believe it is well-positioned to witness long-term growth in the coming years. The changes will be more focused on digital lending (alternative finance) and open banking.