Over the past few years, Fintech industry has been embedded in the financial services ecosystem to such an extent that the term has now made its way into our daily lives. While the general perception of ‘Fintech’ is ‘products and companies that employ newly developed digital and online technologies in the banking and financial services industries’, we believe that Fintech industry has evolved to perform a much more strategic and focused role.
The wider objective of Fintech is to serve the unmet financial needs of those segments of the population which are not the core target segments of traditional financial services models. Thus, Fintech mainly focuses on a core objective to contribute to the larger goal of financial inclusion for one and all.
Efforts in this direction have manifested by key factors: The substantial rise of Fintech start-ups rolling out solutions and services; Strategic partnerships between with industry and allied service providers; and the launch of new digital products or digital-only banks by incumbents.
By creating a sustainable ecosystem, the ultimate aim of the industry would be to ensure a significant impact on the country’s gross domestic product (GDP). Although the first wave ushered in innovation across all phases of the customer lifecycle, the reach was limited to the affluent sections of society.
Fintech 2.0 would now pick up the baton and focus on the next 500 million of the population. This would cover segments across urban and rural areas narrowing on Tier I and Tier II Cities. Reaching out to the next 500 million of the population has its set of challenges. In order to create a cost-effective and sustainable ecosystem to serve the untapped segments, a few interventions are proposed.
In India, as per the study and research by various industry bodies and agencies, only 10 per cent of people are medically insured. Various organizations in India are emerging and willing to facilitate loans to the families of the patients, who are financially fragile. They avail loans from INR 20,000 to around 5 Lacks for the tenure of 6 months to 1 year period. Banks grant the loan from 0 to 6 per cent interest rates as people can afford.
A medical loan is paid directly to a hospital after it generates a bill for a medical procedure to avoid further misuse. The need for creating a feasible healthcare financing model acts as the catalyst which has triggered the medical loans, which are unsecured. Medical loans can be available on submission of a convincing income proof and are presently used for elective surgeries.
NBFCs and fintech firms generate medical loans within a day or two. The normal practice asks the applicant to deposit 2 EMIs in an up-front manner and the balance payment needs to be paid back in 10 instalments while the hospital pays 7-9 per cent of the loan amount as subvention fee. The scale differs from organization to organization. Certain NBFCs ensure the due diligence protocols are followed by hospitals.
A salaried person who wishes to avail loan should be earning more than INR 20,000 and should be drawing a cheque or RTGS. Documents like Pan Card, ID proof, address proof, bank statements including salary slip while applying for it. A self-paid applicant, whose venture has to be Pvt. Ltd will need put in details like ITR and bank statements with address proof, office address proof, business existence proof and house ownership proof while applying for a medical loan. The Credit Information Score or CIBIL score is the key factor for determining the loan eligibility apart from the scrutiny of standard income documents.
To discuss the benefits Fintech is not just about digitizing money, it’s about monetizing data. It’s about how we create value‑add from data. It is the second‑round value surge that is now starting to flow from an increasingly digitized economy. Fintech can offer an efficient and effective solution which will be beneficial to small businesses and increase funding options. The fintech products include marketplace lending, e-commerce finance invoice finance and even online trade.
Innovative solutions can assist small business by providing better cash flow, improved capital management and secure funding. It allows people to perform transactions through mobile phones which improves the customer experience. It also reduces compliance costs for business.
The fintech industry adds liquidity to the market as it improves the ability to match investors, lenders and borrowers. Innovative financial services such as robo advice have potential to extend financial advice to the individuals and more sophisticated investors, to a wider cross-section of the community. The fintech is reducing the equivalence in the market and thereby help to reduce risk and promote allocation of resources.
The digitized transactions support audit capability, transparency in payments and security in transactions by reducing risks. Fintech Industry has majorly reduced the labour as everything is digitized. Fintech sector can aid the positive transition that will occur in our national economy. The competitive policy and microeconomic reform will be triggered by innovations in India.
To sum up, Fintech can also help drive improvements in traditional financial services and promote disruption through innovative products and services, which can offer benefits to consumers and various sectors of the economy. The key enabler in reaching out to the needy is to have an asset-light architectural platform that leverages open source technology and sows the seeds of a pan-India fintech-driven digital finance ecosystem.
Source Enterpeneur