In the past couple of years, along with the rest of the world, India witnessed tectonic shifts in the way it made transactions and did business. While the pandemic raged across geographies, physical exchanges and social interactions had to take a back seat and social distancing became the norm. As a substantial part of the population remained indoors, transactional, recreational, and educational habits had to undergo a change in form. Even with certain fluctuations, consumption was inescapable, and more or less in place. The mode of delivery, however, required innovation. This is where digital technology took over. The financial space too witnessed a growing wave of digital. As we stand at the doorstep of a new year, 2022 might witness the following trends in the fintech space.
Digital banking will continue to witness steady growth. Enabled by cutting-edge technology that ensures the safety and security of consumers, virtual banking is hassle-free, and convenient for the end-user. Lesser time required for documentation and enhanced security measures are some of the reasons that attract new-age urban users. In rural areas and hinterlands, inadequate availability of brick-and-mortar outlets will result in the popularity of micro ATMs that enable people to conveniently withdraw cash from their bank accounts without having to travel long distances to avail of banking services.
The age of artificial intelligence is here and while AI is a key component for fintech companies, it has also been adopted by traditional establishments for introducing automation. AI assistants are now a frequently found feature on apps and websites of traditional banks. Going forward, right from further enhanced automated advisors to algorithms that can assess credit profiles, we are set to witness companies increasingly take to artificial intelligence. While making life easy for the end-user, these new technologies like AI, machine learning, and process automation will also increase efficiencies in the financial industry, like decreasing the risk from loan defaults, superior risk management, and other operational enhancements that involve rigorous data analysis and logic. This would also be used to create customer profiles and easy access to loans for people in the rural areas, who have to struggle to get access to legitimate credit, and often fall victim to unscrupulous moneylenders and the likes.
Buy Now Pay Later (BNPL)
The pandemic has witnessed a surge in online shopping. This will only continue, with the introduction of convenience features like Buy Now Pay Later, which is an already popular global fintech phenomenon, especially among millennials and Gen Z. Its growing popularity in India makes it poised to emerge as one of the most preferred credit options, especially for smaller purchases like groceries, movie tickets, food delivery etc. Consulting and research firm RedSeer estimates India’s BNPL market to increase tenfold, to a whopping $45-50 billion by 2026 from the current $3-3.5 billion now. The research firm also estimates that the number of BNPL users in the country may rise to 80-100 million customers by then, from the current 10-15 million. BNPL can be a potential game-changer in rural areas, with the communities and individuals low on liquidity now getting an option to purchase instantly. Instead of first having to travel long distances to withdraw money or get a loan from a moneylender, they can get a transparent and formal BNPL deal.
Embedded Finance and Embedded Credit
A manifestation of embedded finance which includes in-game purchases, integration of wallets in e-commerce platforms etc., was already popular before the pandemic. Other forms like embedded credit, which involves application and repayment of loans within a merchant platform, and embedded insurance, which involves buying insurance within a merchant platform, are set to only grow in popularity over the next year.
These are exciting times for the Fintech industry. This new year, the industry in its entirety will witness further growth as small, medium and large players embrace deeper tech, and introduce more and more innovations, bridging gaps wherever required, ensuring customer convenience and delight, while also growing their business. I’m hopeful 2022 will see Fintechs innovating more with the support of cutting-edge technology and the digital divide in India will see significant changes. Together, we’re moving towards achieving financial inclusion and the holistic progress of the nation.