The year 2021 was filled with challenges. On one hand where people were trying to adapt to their pre-pandemic ways, meanwhile on the other hand there was a surge in digitization and technological development. The post-pandemic era has fuelled the growth of fintech in the country.
The year 2020 saw the rise of fintechs whereas 2021 was all about survival and innovation. The fintech ecosystem played a pivotal role in businesses and lives of people and helped them tide through the uncertainties that the pandemic brought with it. More and more entrepreneurs and consumers shifted online given the nimbleness and agility offered by the fintech sector.
Looking at the growth spurt and adoption of fintech, the industry itself focused on further innovations and disruptions and underwent sweeping changes to offer more convenience to the consumers.
Given below are some trends observed in the fintech industry in 2021.
The rise of Digital-Only Banks
Digital-only banks saw traction with more than 2043 million people worldwide using digital banking platforms for their daily transactions. The pandemic made people realize that banks have become incumbent when it comes to offering speedy transactions, low overheads, higher interest rates and the likes. Consumers could easily have access to cash at any given time without having to be there physically. However, they also needed some level of human interaction for challenges faced during the transactions. This propelled the growth of AI chatbots to provide bespoke customer solutions and address and resolve customer queries.
Increase in fintech-bank partnerships
Banks are increasingly realizing the power of FinTechs and the challenges that it can help banks to overcome. This includes wider range of services, technological innovations and enhanced user experience. The year 2021 also saw increasing bank-fintech partnerships.
Rise of micro services
In layman terms, micro services are autonomous entities that can be designed and developed and run independently. These micro services can be integrated with others through APIs to make such applications look like a single platform to end users. Fintech companies are increasingly adopting micro services as they provide safety, agility, scalability, and lower cost of development. Digital banking systems are increasingly becoming safer to use with the support of micro services. Ifone system fails, the other will not get affected.This has encouraged further innovation and adoption of more robust features.
Increased adoption of blockchain technology
Blockchain technology or decentralized finance is increasingly becoming a buzzword in the fintech industry. Till recently, financial institutions were entirely centralized, and banks acted as a consortium and intermediary for lending and borrowing between two parties. However, with DeFi (decentralized finance), it is now possible for the two parties to directly deal with each other with greater safety and transparency and without worrying about frauds and cyber threats.
Robotic Automation Process
There was also increased adoption of robotic automation processes which helped in automating the huge volumes of repetitive onerous tasks such as KYC verifications, data inputs, customer onboarding and loans. This further helped in decreasing customer service calls and overtime hours.
Increasing use of mobile wallets
It is no news that millennials and Gen Z are increasingly shifting to mobile wallets for their payments. The use of mobile wallet has dramatically expedited digital payments as convenience became a key driver for consumers.
As with every other sector, the fintech industry has also grown with digital systems being adopted in 2021. There is increased financial inclusion and the fintech industry has been able to educate and make people aware about the ease and accessibility of finances. Increasing digital payments, and speedy disbursals and paperwork have helped people to adopt fintech rapidly in 2021.
Likewise, 2022 will also witness a further uptick in financial inclusion leading to innovations and disruption in this space. Fintech as a service (FaaS), banking as a service (BaaS), open banking and APIs will gain further momentum. The amalgamation of FaaS and BaaS will offer a slew of exciting products and features to regular customers. The sweeping changes taking place in this space will turn around the entire financial landscape in the years to come. That being said, according to FICCI and Boston Vonsulting Group, the fintech sector is poised to touch a valuation of $150-160 billion in India. The country is fast emerging as of the biggest hot spots for the fintech industry. This has also given way to massive investments in this sector. Although the fintech sector is changing the face of banking, its growth is limited due to strict regulations and laws imposed by the government. Ironing out these challenges can enable the fintech industry to take India to newer frontiers and faster economic development in the times to come.
(Raj N is Founder and chairman of Zaggle, ZikZuk)
