1 FinTech – Disrupting finance with Technology

FinTech – Disrupting finance with Technology

By: Harshit Agarwal (Xavier Institute of Management Bhubaneswar)

Financial technology is the application of technology and innovation in the delivery of financial services to compete with traditional financial methods. It is a new industry that makes utilization of technology to enhance financial transactions. Smartphones used for mobile banking, investing, and borrowing is examples of technologies that increase standards of technologies to increase means of technologies aimed at increasing public access to financial services. Financial institutions, Startups, and technology firms are attempting to replace or enhance the use of financial services provided by existing financial institutions. Investment, insurance, trading, banking services, and risk management have been automated using financial technology.

Globally, the number of unbanked people has decreased in recent years. There were 2.5 billion unbanked people on the planet in 2010. By 2014, the figure had fallen to 2 billion. According to the World Bank, 1.7 billion adults worldwide do not have access to a bank account or a mobile money provider. As the world abandons cash in favor of an e-commerce-first mentality, these groups risk becoming financially marginalized. The vast majorities are from low-income families and work in low-wage, informal jobs or are unemployed. Retail, manufacturing, finance, hospitality, and other sectors were able to adapt to the increasing speed of technology with the commencement of the Digital India campaign in 2015. Traditional small businesses and micro, small, and medium-sized enterprises (MSMEs) have slowly transitioned to digital infrastructure, resulting in enhanced efficiency and simplicity of doing business.

Digital payments grew at a compound annual growth rate (CAGR) of 61 percent in volume and 19 percent in value between 2014 and 2019, according to India's Reserve Bank of India (RBI). This number has increased dramatically since the Covid 19 period. The benefits of fintech were more materialized during the Pandemic through the "Pradhan Mantri Gareeb Kalyan Anna Yojana," under which 800 million people were fed through Direct Benefit Transfer, as announced by our honorable Finance Minister on the Budget Day.

Furthermore, during the launch of the e-Rupi voucher, the prime minister remarked that it would play a vital part in making DBT more effective in digital transactions in the country and give a new dimension to digital governance. More targeted, transparent, and leak-free delivery will benefit everyone. e-RUPI, he said, is a symbol of India's success in adopting technology into people's lives. Indian banks have distributed 230 million debit cards to facilitate electronic payments in addition to JDY deposits. A new cadre of village-level bank agents who previously assisted with account opening can now receive deposits, transfer remittances, and make payments in remote locations where bank branches are unreachable. Fintech can increase economic growth while boosting business and innovation through financial inclusion. Digital finance would add $3.7 trillion to emerging economies' GDP in the years running up to 2025, according to a recent McKinsey Global Institute analysis.

The most significant impediment to weaning rural customers away from traditional banking services, for example, has been a lack of documents. However, AePS (Aadhaar-enabled Payment System) has aided in resolving this issue. Rural citizens can now use their biometric ID and Aadhaar card to conduct basic transactions such as deposits and withdrawals at AePS Kendras. Rural citizens can now use their biometric ID and Aadhaar to complete basic transactions such as deposits and withdrawals at AePS Kendras. Covid-19 and the subsequent lockdown have raised awareness of the need for digital financial services in rural households – daily wage workers, low-

income farmers, and small businesses – and encouraged them to use digital payments daily.

Source: www.google.com

Fintech-driven innovation influences critical parts of the capital markets value chain, from capital sourcing to data and analytics services. The first is capital access, followed by crowdfunding platforms and bond issuances. Another aspect is trade execution. Fintech has resulted in cost savings and improved trading security, benefiting end-users. The third category is post-trade services. Investment in distributed ledger technologies is growing in India and the global markets. Thanks to evolving regulatory and know-your-customer (KYC) services, participants can now access KYC information in real-time. More automation has also resulted in increased security. Data and analytics investments are assisting in developing new techniques for mining and interpreting data to its full potential.

Life cycle management, data and analytics, and value-added services are the top four areas where Fintech must focus on adding value. First, it must oversee the process of tracking and analyzing how customers and prospects interact with an organization through various available channels. Second, it must choose network platforms where connectivity is monetized through direct links between parties that banks mediate.

As a result, the capital market's value chain dynamics have shifted. The third technology is robotic process automation (RPA). Software robots are being used to replicate human-like tasks without disrupting existing processes. RPA reduces costs, increases productivity and quality, and optimizes analytics. The fourth technology is blockchain. By creating richer data sets, universal data sources, and distributed records, distributed ledgers have the potential to alter the critical activities of financial markets. Clearing and settlement is an essential back-office operation that can be cut from three days to just a few minutes.

Because their businesses are primarily based on digital processes, fintech companies typically have a carbon footprint advantage over incumbents. Digital transformation is critical for financial institutions. Firstly, you get rid of paper, and then you get rid of branches. Processes become less cost-intensive, margins increase, and it becomes more sustainable. However, regardless of your company's size, you can still work on decarbonizing your operations and lowering your environmental footprint.

To compensate for any remaining carbon emissions, carbon offsets can be acquired. There could be efforts to install wind turbines to replace fossil fuels, give developing countries cleaner-burning cooking stoves to minimize deforestation or encourage the development of trees. Apart from lowering your carbon footprint, one can help companies in their supply chain track that impacts sustainability where data is a key driver. Finally, fintech firms have long been at the forefront of financial services innovation, and climate fintech is no exception. As a fintech company, you have a unique opportunity to create long-term financial solutions that address climate issues at both the consumer and national levels.

Fintech has helped create a new space for the financial sector worldwide. It has proposed several solutions to the challenges and problems people frequently encounter during financial transactions. Businesses utilize predictive intelligence and big data technologies to provide more personalized services to their customers. Big Data aids in analyzing data and making critical decisions. It is also used in bond and security trading. Big Data aids in analyzing data and making crucial decisions. Innovative technology guides customers in selecting the appropriate products/services. It also protects clients' personal information and the financial assets of Fintech companies. Thus, Fintech has rapidly penetrated the financial market by filling the gaps left by traditional financial institutions and significantly improving the customer experience.

Source: Statista