The Covid-19 was declared a pandemic by the World Health Organisation on March 11, 2020. This prompted governments worldwide to restrict movement of people, which brought manufacturing, supply chains, trade, distribution channels and general mobility to a halt, negatively impacting economic activities. While social distancing norms created a void in the entire transaction cycle, it also gave headwinds to growth of contactless transactions.
The FinTech model has been evolving over the last few years, thanks to innovations of FinTech players to complement the traditional financial services industry and to help them provide services to the unserved and under-served segments. FinTech disrupts, enables or collaborates with various segments of the bank, financial services, and insurance (BFSI) sector. Under the changed realities, FinTech firms have many opportunities - given the strong need for digital and contactless delivery of financial services.
According to a recently published report by FICCI-PWC titled, ‘Redefining the FinTech Experience: Impact of COVID 19’, “The need for digital awareness and presence is prominently recognised by individuals, businesses and governments alike. FinTechs can act as enablers for the banking and financial sector, playing a crucial role in ubiquity and adoption of digital financial services. A few measures related to policy and regulation can support the FinTech sector during the ongoing crisis.”
FinTech models have certain advantages over traditional financial service models. Now, there will be a need of not only digital mode of working but also of contactless sales and service delivery which are the basic principles of FinTechs. The demand side drivers in the form of rising customer needs and market potential with a dash of innovation can actually work wonders towards ensuring a seamless delivery of services till the last mile. Phenomenal penetration of smart phones and high-speed net connectivity have made the tech savvy customer wanting more of the ‘delights’ in the service level - be it in banking, insurance, credit, portfolio management or investing. Cashless payments which is one of the key pointers has increased to 18 per person in 2018 vis-a-vis 2.2 per person in 2014.
In a way, the financial ecosystem was already in an adoptive mode to lap up FinTech. Enabling technologies such as AI, ML, big data and cloud computing are some of the underpinning technologies transforming operations, products and services of BFSI, which have been incubated in FinTech labs. The contagion is likely to work as a watershed and take this to the next level.
(Box) Some of the areas where the enablement is likely to have greater visibility:
a) Agent productivity: Seamless distribution of financial products and services to targeted prospects, supporting agents and banking correspondents based on parameters such as unique preferences, risks and prospect conversion probability.
b) E-KYC, fraud and compliance: Technologies such as biometrics, AI and video analytics (V-KYC) are helping banks to create advanced solutions for digital onboarding, securing transactions and mitigating fraud and for providing anti-money laundering (AML) and for combating the financing of terrorism (CFT) risks.
c) Account aggregation: This involves extraction, aggregation and analysis of information from multiple accounts, such as loan/credit accounts, savings and current accounts, credit cards and investment accounts, telecom/internet /OTT billing, government repositories such as public provident fund (PPF) and income tax return data and from supplementary business or consumer accounts such as those of e-commerce, food or mobility aggregators and social media tags in a single platform. Data collection, collation and sharing are enabled through open API connections. Moving beyond the traditional, asset-based approach of credit rating agencies, account aggregation incorporates cash flow-based inputs such as income from various sources, expenses, invoices, receipts and tax returns.
d) Customer acquisition and service: Chatbots and robo-advisory services can be used for attracting new customers and retaining existing ones. They provide low-cost, efficient and time-bound services in domains such as digital wealth management and financial marketplaces.
The Covid-19 crisis has not only changed the way BFSIs conduct their businesses but also how their employees do their work and deliver. Across the counter, customers are also learning to adopt newer ways of availing services. Investors are managing finances without stepping into a bank or an agent’s office. A borrower can have her loan applied, approved, disbursed, serviced and closed entirely on digital platforms. An insurance policy can be bought remotely. The value of digital channels, products, infrastructure and operations is increasing in the financial industry. The financial sector is increasingly moving towards working remotely to safeguard the well-being of their employees.
There may be small hiccups in the transition. However, the main concern is the additional investment in building up digital infrastructure for the entity. As the report observes, “Not all financial firms have the infrastructure, tools or processes in place to enable a seamless transition to remote working. While FinTech start-ups and digital-native firms are handling the swift transition to remote working relatively well, traditional FIs are finding the transition challenging.”
With direct and indirect support from the government and the apex bodies like RBI, SEBI and IRDA, players in the BFSI sector can scale up their operations and innovate at a pace that is significantly greater than traditional businesses. The common denominator of most FinTech disruptors is that they harness modern technology and its applications along with optimised processes to create scalable and sustainable business models.
The author works for Peerless Financial Services Ltd. as Chief Manager – Legal & Risk. Views expressed in this article is entirely personal of the author.
Saptarshi Roy Bardhan