In the last three years, India has produced the second-largest number of fintechs. The adoption rate in India is 87 percent compared to 64 percent globally. This tremendous market expansion may be seen in the lending and personal finance areas, in particular. According to some statistics, India has around 17 fintech startups that have achieved "Unicorn Status" with a worth of over $1 billion as of December 2021.
Traditional retail investor routes such as fixed deposits can no longer keep up with inflation, thus a growing trend of 'new-age investors,' primarily young millennials, is pursuing asset allocation with the support of the fintech industry.
The convergence of technology and finance has the potential to have a tremendous impact on people's lives, particularly in a country like ours, where the number of internet users is expected to continue to rise. Fintech will change investment banking in a variety of ways, including by leveraging sophisticated technology such as the cloud and artificial intelligence. Investment institutions will need to adapt and embrace these technological advancements in order to stay competitive. Fintech and associated services can provide both immediate and long-term benefits.
Unification of innovation and efficiency
Compliance is one of the largest roadblocks to efficiency in investment banking. The necessity to keep up with regulatory change can sometimes stifle innovation as financial teams struggle to keep up with new compliance standards while maintaining updated systems. As a result, a team of investment bankers may face organizational tiredness and productivity declines. Fintech technologies such as platform installations and cloud migrations, thankfully, are changing the way financial institutions perceive compliance.
Investment management has steadily caught up over the last decade, accepting fintech and ushering in the emergence of digital asset management services and platforms. Investment management organizations have been able to innovate not just the design but also the delivery of their financial goods and services thanks to technological advancements.
Data and Artificial Intelligence are increasingly being leveraged efficiently to identify risk variables, optimize portfolios, and evaluate numerous investment possibilities. Furthermore, the emergence of Machine Learning, which allows computers to train themselves how to perform specific tasks, has aided in the advancement of investment decision-making capacities.
Investment in fintech
According to Accenture and CB Insights, global funds have invested over $100 billion in financial technology businesses in the last decade. This fund-raising frenzy has continued in recent years, with over $20 billion invested in the fintech industry in the first quarter of 2021 alone (CB Insights).
The United States received the most investments (54 percent), followed by India and the United Kingdom. Due to the rise of data analytics and growing investment in data tools, banks, and other financial institutions have been able to develop better models to aid in their day-to-day operations.
In the emerging market and developing economies (EMDEs), there is a significant infrastructural gap. According to World Bank estimates, EMDEs will need to quadruple their present annual infrastructure spending over the next decade.
According to Asian Development Bank, the infrastructure finance gap might be as much as 5 percent of a country's gross domestic product (GDP). The majority of infrastructure investment needs (about 63 percent) are focused in EMDEs. The importance of infrastructure in poverty reduction and long-term growth in the developing nations emphasizes the necessity to close these gaps.
Summary
Instead of using a relationship manager model, many finance sites have turned to Artificial Intelligence technology for advice. The customer receives fact-based counsel since AI is data- and insight-driven and free of subconscious prejudice.
And it is exactly what India's financial services sector requires: transparency and openness. The goal of new and rising fintech businesses is to provide individuals with options that were previously only available to institutions or HNIs, as well as to educate investors about products. Finally, it is all about empowering consumers to make decisions by giving them all the information they need, whether it's about risk or business model, to make an informed decision.
(The writer is Partner at 9Unicorns Fund)
