Fintech stands for financial technology. Fintech can provide alternative solutions to both banking and non-banking services. The concept of fintech is new in the financial industry. This paper examines the challenges and opportunities in this industry. It describes the development of fintech in India and current financial technology (fintech). Fintech makes it easier to transact digitally and provides more security for the user. Fintech services offer many benefits, including lower operating costs and more friendly users. India’s fintech services are the most popular in the world. Fintech services will revolutionize the Indian finance industry.
FinTech India
In order to take over the majority of the banking system’s basic banking activities, FinTechs are now able to do so by leveraging faster, cheaper, and more efficient technology. This has allowed intelligent minds to focus on customer pain points and disrupt existing business models across various sectors. Unfortunately, they have not been able to create barriers to capital and scale up.
India’s Fintech Invasion: Future Of the Banking Industry
Banks have traditionally been intermediaries between investors and savers. They offer protection for their funds and return to them while pricing out the risks for the former. They also cover their operational costs, which in turn helps to increase their margins. Banks earn fee-based income by transferring money on behalf of customers. This increased their profits. Their incomes increased further when they started cross-selling to customers for mutual funds, cards, broking, and insurance. This allowed them to establish separate subsidiaries that leveraged their customer relationships. Investors and bank sponsors enjoyed decent returns due to the leverage provided by a low capital base.
The industry has not seen much in the way of cosmetic differentiation. However, segmentation by customer and product remains largely consistent, partly because of regulatory guard rails.
Post the explosive telecom growth, the UPI and Aadhar were introduced to facilitate the development and use of other options for payments, investments, as well as data-based low-ticket loans. Their deposit growth has remained steady, while risk aversion has slowed loan growth. Most banks have seen an increase in treasury activities.
While they are content in their current position and have deployed most of their growing debt to higher-rated loans and bonds, mostly placing the surplus in Gsecs, there is pressure for them to increase their program-based MSME and Agri loan books.