One of the highest fintech adoption rates, globally. Exceptional levels of banking and mobile penetration. A fast-growing middle-class. Even amid a crippling pandemic, India’s fintech sector is ready for take-off. But, with worldwide disruption impacting businesses, what does the future of India’s fintech look like?
India is among the fastest-growing fintech markets in the world. The comparatively low cost of data and expanding network coverage has been enabling India’s end-users to accelerate the adoption of financial services.
But not everything about India’s fintech sector is rosy. Developed countries were early movers and they are already global leaders in adopting BFSI best practices and leveraging technology advancements. The endgame in these countries is very different from what it is in India.
While the focus in developed countries is on the adoption of advanced technologies to deliver differentiated and innovative fintech services, in developing countries, like India, the perspective is slightly different.
There are several challenges on the road to India’s digital inclusion:
- There are perceivable lags in last-mile connectivity.
- Fintech adoption levels in the lower-income strata are visibly lower.
- Regulations around security and data privacy are still in nascency.
- India is yet to tailor a regulatory strategy for fintech that balances convenience with security.
- Data policies need to be customized more to India’s distinct banking and fintech ecosystem.
Reform-centric endorsements from Indian regulators and positive indicators on the VC front are enabling fintech to move past these challenges. Rapid technological advances, too, have helped accelerate India’s fintech growth.
Six technology trends shaping fintech in 2021
The banks & financial institutions of today are a blend of technology companies specializing in financial enablement. Technology is the glue that holds together its specific stakeholders, assuring cohesive functioning. 2021 will usher in dramatic reformations in India’s banking sector led by:
- Hybrid cloud – Hybrid cloud brings businesses the convenience of lower capital investments and unwarranted delays in the set-up. Flexible, pay-as-you-go models, express commissioning, and the certainty that comes with the mixed bag of hybrid cloud will enable companies to remain more fluid and Opex-centric, without spending millions locked in Capex.
- Microservices – The emergence of microservices has helped us bid goodbye to large monolithic application structures. This change – to a sleeker, lightweight, and fluid architecture – was driven by the need for applications to become more business-friendly, agile, and outcome-focused. Moving to 2021, we will see microservices giving applications the liberty to go modular and bring in increased agility and reduced time to market.
- Blockchain – As a decentralized and immutable source of truth, blockchain will find intensive use in financial services, come 2021. But for discussions to materialize, governments and regulatory agencies will first need to agree on the minimum operational guidelines for blockchain. The convergence of technology with regulations will be a significant challenge to overcome.
- Public Cloud – India’s banking system is already making headway in terms of private cloud adoption. On the other hand, public cloud adoption has been slow due to security concerns – one of the key problems curbing the growth of this segment. 2021 will see newer developments on the cloud security front. And, with hybrid cloud gaining momentum, public cloud, too, will see an increase in demand, due to its ability to resolve infrastructural challenges and the last-mile connectivity issues.
- Feedback-enabled AI – Private and public sector banks are already using AI & ML for credit monitoring and core banking activities. But, in their current state, AI models are built to function like black boxes, completely opaque to the end-user. Future financial services will be powered by developments in responsible and feedback-enabled AI. In 2021, AI will accelerate its transformation into becoming more ethical and explainable to achieve the objectives of fairness, trust, and transparency.
- Open banking APIs – A key use case for APIs in 2021 would be around open banking. Banks, with customer consent, can use APIs to share salient customer and financial data with third parties for use and analysis. When used responsibly, open banking could eventually pave the way to accelerated processing times, shorter go-to-market cycles, improved decision-making, better responsiveness, and have far-reaching consequences on data democratization.
Beating uncertainty with technology
Over the next decade, as AI & deep learning technologies evolve, they will learn to process patterns and historic data more efficiently to arrive at near-perfect predictions – even in highly uncertain scenarios as those involving pandemics.
This will empower socio-economic progress on multiple fronts.
- Better financial decisions by the governments and regulatory authorities
- A comprehensive financial services system that is less transactional and more of a way of life
- Better time and resource management and higher efficiencies through automation
- More trust in the financial system through transparent and ethical conduct
The only way for us to see foresee unknown risks in the new normal is through the use of advanced technologies. Technology is the answer to not only our present challenges, but it is also the architect of our collective future in the new normal.
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