Chief Technology Officer, Fibe
Pune, 26th July 2023: Traditional banking organisations have had a stranglehold on the market for financial services globally for a substantial amount of time. These institutions, which are legitimate, strictly governed, and compliant with the laws of their respective countries, get a lot of help from the governments of the countries that are in power in order to have an impact on the economy. However, in recent years, the provision of financial goods and the treatment of customers has been impacted by the rapid growth of technology.
In recent years, fintech technology has established itself as a leading provider of banking solutions, resulting in significant modifications to the way financial services are provided. Customers now benefit from a range of personalised experiences, quicker transactions, increased accessibility, and tighter security measures thanks to this shift. As a result, banks have increased their influence, entered new markets, and improved their business practises, which has benefited the sector as a whole as well as its clients. By combining banking and fintech, the financial environment has changed, allowing traditional banks to embrace innovation and maintain their competitiveness in the fast-moving digital world.
“The financial environment in India has changed due to technology advances and the fintech revolution”.
India has seen a noticeable push towards the general adoption of digital financial models in recent years, as well as an increased embrace of FinTech companies. A wide range of financial services, including paperless lending, mobile banking, digital payments, mobile wallets, insurance, and lending, have been significantly impacted by this boom in fintech. Banks have historically dominated the financial services industry, but other players like Paytm, Google Pay, and PhonePe have progressively gained prominence and are now widely used. The use of these digital solutions has been increasingly prevalent, extending to transactions for groceries, recharging mobile devices, and hotel reservations.
According to the latest data compiled by the National Payments Corporation of India (NPCI), which oversees UPI, both the quantity and monetary value of transactions have tripled during the previous fiscal year (2020-21). In March 2021, there were a total of 2,732 million transactions, amounting to Rs. 5,04,886 crore. The overall volume of transactions at the start of the fiscal year in April 2020 was 999.6 million, with a combined value of 1,51,141 crore. Notably, the number of banks utilizing UPI has grown from 153 in April 2020 to 216 currently.
The fusion of fintech and banking has resulted in significant improvements and transformations within the financial industry. Fintech, which utilizes technology in financial services, has simplified and streamlined banking procedures, leading to increased efficiency and convenience for both banks and customers.
The financial industry is currently undergoing a profound metamorphosis, exemplified by initiatives such as open banking, which permits third-party financial service providers to access bank data through APIs, and regulatory advancements. Simultaneously, the fintech revolution, characterized by the extensive utilization of mobile and digital technologies, blockchain, and personalized financial solutions, is disrupting conventional banking institutions. Fintech startups and technology companies are challenging established norms by harnessing technology to provide more efficient and customer-centric financial services. To remain competitive in this evolving landscape, traditional banks are embracing advanced technologies like artificial intelligence (AI), machine learning (ML), and big data analytics. These technologies play a pivotal role in improving risk assessment, detecting fraudulent activities, and delivering personalized financial guidance to customers. By utilizing these tools, banks acquire a deeper understanding of their customers’ requirements and preferences, enabling them to offer tailored solutions. Integration of fintech and banking has brought about substantial enhancements and changes in the financial industry. The availability of online tools, regulatory developments, and the disruptive nature of the fintech revolution are reshaping the sector and is pushing traditional banks to adopt advanced technologies to remain competitive and meet customers’ diverse needs.
Creating opportunities for banks with Fintech: The relationship between banks and fintech technology marks a transformative shift in the banking sector, bringing forth various advantages and overall enhancements to the banking experience. Recognizing the numerous opportunities presented by fintech, banks have embraced its potential, leading to a range of positive outcomes. Fintech empowers banks to streamline their operations, fostering cost-effectiveness. This not only improves efficiency but also allows banks to allocate resources towards more valuable endeavours, such as innovation and enhanced customer service. This evolution in the banking industry yields benefits for both banks and their customers, creating a mutually advantageous relationship.
Role of AI and ML: AI and ML technologies have played a pivotal role in the fintech revolution, transforming the industry by analyzing vast amounts of data. This enables banks to make precise lending decisions based on a customer’s creditworthiness, leading to improved loan approvals and reduced default rates. Through the utilization of sophisticated algorithms, AI empowers banks to gain valuable insights into customer behaviour, market trends, and risk patterns. Adopting a data-driven approach allows banks to offer personalized financial products and services, deliver tailored recommendations, and enhance customer support with AI-driven chatbots and virtual assistants. Furthermore, AI and ML have introduced innovative solutions such as algorithmic trading, and automated underwriting, allowing banks to effectively meet the evolving needs of their customers.
Fraud detection plays a vital role in the Fintech domain within the banking sector. Banks utilize sophisticated algorithms and real-time analytics to swiftly detect and prevent fraudulent activities. By employing data analysis and machine learning models, banks can effectively recognize dubious patterns and behaviors, thereby minimizing the risks linked to fraud and financial offenses.
Making SMEs more efficient with fintech: The adoption of digital fintech solutions is on the rise among small and medium-sized enterprises (SMEs) and start-ups globally. They are recognizing the benefits of these solutions, which offer them efficient, fast, and secure access to digital profits and loans. These fintech solutions are supported by dependable infrastructure protocols, creating a reliable and trustworthy environment for financial transactions. This has led to the emergence of an entirely new array of offerings exclusively designed to cater to the needs of SMEs. Notable examples include e-commerce financing, online supply chain financing, invoice financing, peer-to-peer (P2P) lending, and financing for P2P lending. Study reveals that the adoption was more focused on different motivation factors: While 41 % felt it was timesaving, 34% preferred it for the ease of access from anywhere. The emerging technologies role in easy and quick implementation has driven more than 17 % of SME to adopt efficient system. As SMEs become increasingly aware and open to embracing digital financial solutions to improve their financial operations, the fintech sector is poised to experience significant advantages from the ongoing digital transformation.
Conclusion: With the integration of fintech into the banking sector, there have been significant advancements that have transformed our approach to financial affairs. As technology advances, new innovations are emerging, expanding the possibilities within the financial industry. To stay competitive in this revolution, banks need to seize the opportunities that fintech presents while effectively tackling the associated challenges. By consistently adapting and delivering top-notch financial services, banks can maintain their leading position in this transformative movement, meeting the evolving demands of their customers.