What future does the fintech ecosystem hold?

We live in the age of fintech — that statement is no exaggeration. Today, India is home to over 2,100 fintech startups, including platforms aimed at disrupting traditional lending, savings, payments and other financial transactions. Of these fast-growing startups, more than 67% were created in the past five years.

Unsurprisingly, India is currently emerging as a global fintech superpower. In fact, it has the highest global fintech adoption rate in the world. It is estimated that the fintech industry will grow from $50 billion to $150 billion between 2020 and 2025. Needless to say, the growth of the fintech sector has taken a huge upward spiral in recent years. And if the growth trajectory of 2020 and 2021 is to be considered, 2022 is expected to bring further acceleration in the fintech market.

Against this backdrop, here are five key trends that will shape fintech growth in 2022:

Fintech Trend 1: Improved Credit Cards for Simplified Transactions

“Buy now, pay later” is the hottest trend in modernist financial services. Today’s consumers want convenient, hassle-free, secure yet simplified transactions without going through complex procedural hassles. Many financial institutions offer smart credit cards that effectively meet the personal and business needs of consumers by offering flexible payment solutions.

For example, the Slice-SBM prepaid card is specifically designed for young Indian customers. It offers benefits specifically to users who are not accepted by traditional banks to establish a credit score. UNI is another financial entity associated with the State Bank of Mauritius (SBM). The UNI SBM card is a prepaid card that allows users to pay their monthly expenses in three parts over three months without charging any additional fees. Companies such as Slice and UNI are aiming for convenience and faster action to issue cards without procedural delays, addressing the issues faced by young customers.

Fintech Trend 2: Focusing on the behavior of Millennials and Gen Z towards financial products

Fintech lenders are constantly looking for new demographics and new audiences to onboard as customers. Some millennials and most Gen Z customers are absolutely digital natives. In fact, since most millennials need to be involved in the labor economy, they are the first testers of financial products. It goes without saying that modern-day consumers have a knack for technological advancements, hate long lines, and are comfortable with DIY rather than dealing with a relationship manager for transactions. They are also looking for bonds from sustainable lenders. Lenders who want to make the most of the millennial and Gen Z market should focus on student loans and loan products. They will need to embrace digitization, simplify their process, use reliable software, and manage achievable interest rates to ensure a good funnel for early user capture.

Fintech Trend 3: Expand Asset Classes for Investing

New-age investors have a greater appetite for risk than their predecessors. They are always looking for high-risk, high-return asset classes like stocks rather than traditional options like fixed deposits and mutual funds. Needless to say, investment goals change with income, age, and generations. Many millennials and Generation Z are inclined to invest to prepare for early retirement. Due to these trends, wealth management platforms and stock trading platforms like IndMoney, Zerodha, and Groww will continue to gain adoption as more retail investors enter the public markets. New asset classes such as cryptocurrency, non-fungible tokens (NFTs), and fractional real estate will gain popularity.

Fintech Trend 4: Serving the underserved economy with viable lending options

For years, certain sections of society have faced economic hurdles when applying for loans or establishing credit scores. New era startups, especially Non-Banking Financial Companies (NBFCs), have significantly penetrated underserved sections with new methods of credit disbursement. These futuristic fintech platforms leverage artificial intelligence, machine learning, and consumer behavioral analytics, among other tools, to employ more comprehensive credit underwriting metrics. On the back of these advances, solutions such as social scores for consumer loans and small loans to the underserved economy, which are not part of formal banking channels, have started to flow in remarkable fashion. To continue this unprecedented growth, fintech alliances with standard bank loans and improved value proposition will give brands an edge over their predecessors.

Fintech Trend 5: Zero Percent EMI to Encourage Product Purchase

Over the past decade, merchants and bankers have developed innovative solutions to counter the economic downturn. One such measure was to offer interest-free equivalent monthly installments (EMI). Zero-rated EMIs in conjunction with brands to encourage product purchases have worked exceptionally well. Leading brands such as Dyson, FabIndia, MegaMart, Lifestyle and Godrej have repeatedly stated that zero rate EMI options are far more successful than any great discounts they could have offered. For most property, the interest loan is relatively insignificant and hence these loans get instant approval with minimal hassle or documentation. The push in this particular category will continue for years to come, especially because most consumers today prefer to buy products that offer some form of cashback or rebate.

Last word

The aforementioned trends only scratch the surface of the rapidly evolving fintech segment. With the average income increasing every year and consumers becoming more aware of financial attributes, it’s safe to say that the real power of the fintech industry is yet to come.

(Neha Khanna is Director, ValPro.)

Posted: Saturday, March 5, 2022, 1:14 PM IST