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Fintech Issues and Challenges in India

Article in International Journal of Recent Technology and Engineering · September 2019

DOI: 10.35940/ijrte.C4087.098319

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 International Journal of Recent Technology and Engineering (IJRTE)
ISSN: 2277-3878, Volume-8 Issue-3, September 2019

Fintech Issues and Challenges in India

P. Krishna Priya, K. Anusha

Abstract: India is a growing market for Fintech with a bank sites for comparison shopping. Adoption of Fintech
population of nearly 1.3 billion. A huge percentage of unbanked has increased significantly over the last two years in India
and under banked population is making India an exhilarating .And according to EY’s Fintech Adoption Index 2017, India
global space for financial technologies. Fintech is regarded as a was in the second highest place in Fintech adoption rate
game changer and disruptive innovation which is capable of
(52%) covering 20 markets globally. This was observed in
shaking up the traditional financial markets. Fintech has been
growing rapidly in India in the last five years and is expected to each of the five categories of services. This was visible with
grow further in the nearest future. At this outset the article digitally active Indian consumers displaying 50%— 100%
focuses on the basic types of financial technologies and their higher adoption rates than the global averages
functions and also discusses the opportunities and challenges it
has in the Indian business environment. Adoption of Fintech among digitally active consumers
Keywords: Financial innovation, Customer experience, Money
Payments, Security Financi Savings
transfer
al And Borrowi Insura
and
Plannin Investme ng nce
I. INTRODUCTION paymen
g nts
ts
The term ‘Fintech’, the short form of the phrase financial
technology denotes industry that is comprised of companies India 72% 20% 39% 20% 47%
which use technology for efficient delivery of financial
services. It is an emerging type of service in this 21 st Glob
50% 10% 20% 10% 24%
century. The new start - up companies are trying to replace al
the traditional transaction system with the new, effective
methods by applying technology in financial sectors for Source: EY Fintech Adoption Index 2017 Country
mobile payments, loans, money transfers and even for asset Dashboard.
management.
Some more examples of technology applied to the IV. MOTIVATORS FOR ADOPTING FINANCIAL
financial transactions are peer-to-peer lending, peer-to-peer TECHNOLOGIES ARE
payment technology, digital wallets, Block chain and mobile
1. Ease of setting up of an account
banking. These aim in bringing further benefits and
2. Ability to access to wide variety of products and
achieving high efficiency for the financial transactions.
services
They also help to reduce costs incurred for customers.
3. Effective service quality
4. Good online experience and functionality
II. OBJECTIVES OF THE STUDY 5. Attractive rates and fees
1. To fill the gap in the current academic literature regarding 6. 24/7 access to services
the financial technology (Fintech) companies and its 7. Availability of more innovative products when
functions. compared to traditional financial institutions
2. To provide a conceptual overview of the Fintechs and
adoption of Fintech among digitally active consumers. V. BARRIERS FOR ADOPTING FINANCIAL
3. To identify both the Motivators for adopting financial TECHNOLOGIES ARE
technologies, Barriers and Challengers for adopting
1. Lack of awareness
financial technologies
2. Lack of proper knowledge of their usage and
Dr. P. Krishna Priya, Assistant Professor, Department of
functions
MBA, Koneru Lakshmaiah Business School, Guntur, A.P,
3. Feel traditional financial services provider as more
India [email protected]
reliable
Dr. K. Anusha, Assistant Professor, Department of MBA,
4. Lack of trust on the financial technologies
Koneru Lakshmaiah Business School, Guntur, A.P, India.
[email protected]
VI. HIGH CUSTOMER EXPERIENCES - A WIN –
WIN SCENARIO
III. FINTECH IN INDIA
Customers though are the primary beneficiaries of any
The financial services landscape in India is being
business; a win-win scenario may be created for all
transformed by Fintech firms. The Research conducted (EY
including incumbent firms. If the customer journeys are
Fintech Adoption Index 2017) showed that India has moved
being effectively redesigned, it encourages customers to
forward to the second place after China with regard to the
think of financial institutions to be not only as the service
adoption of Fintech services. Fintech adoption in India is
providers but also as experts who can be relied upon for
surprisingly very high. Powered by mobile wallets, and
advice and also for wider range of services
many more recent innovations like the Unified Payment
Interface (UPI) platform, the Indian consumers have
welcomed the use of mobile payments in their regular day-
to-day transactions. Consumers are running through the

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DOI:10.35940/ijrte.C4087.098319 904 Sciences Publication
 Fintech Issues and Challenges in India

A few factors can impact customer experience positively. If VII. FINTECH INDUSTRY SEGMENTS
firms focus on a few critical elements they can help in
maximizing their efforts in improving their customer
journeys. These factors are discussed below.

I. FINANCING
Source: Created by the author
Higher personalization: Fin Tech companies are changing the financing or lending
Availability of huge customer data can be effectively used in process. People need not to turn to banks for borrowing
providing personalized offerings and services according to money anymore. Many Fin Tech firms are now lending
the tastes and preferences of the customers. loans directly to consumers. They can seek loans through
online and get them approved quickly. Firms assess the
Increased speed of service: Today’s Customers are borrowers’ credit worthiness and automate the underwriting
habituated to get things done quickly and digitally. Excess process quickly.
delays are resulting in customer turn-off. So the speed of the
service have to be increased to minimize this situations. There are two ways of financing. They are Crowd funding
and Credit & Factoring.
Improved convenience:
24/7 services are available to provide access to any time Crowd Funding
service at anywhere through any channel or device
There are different types of crowd funding options. Each
Intuitive interaction: one of them has their own distinct benefits for businesses
Customers can be guided comfortably through their journeys
and investors. Customer has to choose one of them
through design-based
according to his/her needs
User - interface principles. Also Firms can hold AR/VR
technologies for better customer engagement.
Donation based crowd funding
Better functionality: Donation crowd funding is used for charities or for a
Firms keep on improving themselves while solving the particular cause. Here donations are given in expectation to
customer pain points. It helps in providing innovative nothing in return except satisfaction.
solutions. Reward based crowd funding
It is one kind of a source for funding small businesses. This
Proactive insights: is mostly used for creative projects. This permits investors
Firms take the support of predictive analytics to identify and to fund the venture for non-financial benefits. It is like a
understand customers’ needs in advance and provide tired system. The more he donates the greater will be the
services accordingly. Firms help customers in prevention of reward (Reward are like tickets to an event, coupons, free
fraud or money - saving opportunities. These unexpected gifts etc.).The reward given is not going to cost much to
services may sometimes add appreciation and delight to the deliver. This is going to be the benefit to the business.
customer experience.
Crowd investing
It is the term given where a large group of people or the
crowd, co-invest in people or business through online.
Crowd investing comprises of both equity and debt forms.

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DOI:10.35940/ijrte.C4087.098319 905 Sciences Publication
 International Journal of Recent Technology and Engineering (IJRTE)
ISSN: 2277-3878, Volume-8 Issue-3, September 2019

Those investing together need not know each other before Social trading, a relatively new term is built on the concept
they have decided to invest. They either get interest with that thousands of traders collective wisdom is better rather
their investment or shares in return. than the wisdom of one. Traders from different parts of the
globe are connected by social trading hubs. They create a
Crowd lending network where the views and trades of different people are
Crowd lending helps businesses and private individuals to being shared. Investors can make use of the information to
secure loans from the public. It provides a platform for both make important social decisions rather than depending on
the lenders and borrowers. Through an efficient and quantitative data, broker recommendations or company
powerful it brings both the investors and borrowers come fundamentals.
together and lend and borrow money. The lender will be
receiving certain percentage of money as interest for the Robo advice
money lended. This platform perform various functions To help in managing your investments a new kind of
performed by the banks software has been emerged. It is largely automated
CREDIT & FACTORING investment advice based on algorithm. It acts as a good
As such like lending, factoring also has moved to the financial advisor for the one who doesn’t want to take the
internet. Fin tech companies are offering online applications help of financial advisor or for the one who doesn’t have
with just a simple mouse click. This is providing a new way enough assets and can’t afford to pay for the financial
to get access to working capital for small business advisor. Robo advisors build customers a diversified
entrepreneurs. With a simple button push companies can sell portfolio.
the account receivables and have money in their accounts Personal financial management (PFM)
within a very short period of time. In short, factoring is a It refers to the software which helps in managing the money
lending option where a seller can avail loan on his of the individuals. It is just an acronym for technology based
receivables. budgeting. It adds accounts from multiple institutions and
II. PAYMENTS helps you in budgeting. It helps the customers have a check
Financial technology market comprises the other popular on their income and costs and stick to the budget and avoid
category ‘payments’. Companies of this category allow debt.
people to send money to each other without relying on Investment and Banking
banks. Banks are levying huge fees for a simple payment Automation is showing a great impact on the world of
like peer-to-peer transfer. finance like any other industry. Fintech’s are now ready to
Fintech companies allow consumers to send money cost disrupt traditional investment banking models with lower
effectively and quickly. A few technologies like block chain cost banking and financial planning websites. The firms
are making this possible for the companies to process started targeting and invading big investment bank’s
payments in a more cost effective manner than banks. business models. They started probing into private
Alternative payment methods investment, wealth management and small business lending.
Normally we log into the bank account if we want to make a IV. OTHER FINTECHS
payment and manage from there. Bu now Fintech companies The Fintech businesses which are providing other services
developed alternative payment channels for the convenience apart from traditional banking functions like financing,
of the customer. In majority of the customers they facilitate payments and asset management are described as other
payment without logging into their bank accounts. A few Fintech’s. It includes insurance, Search engines &
companies even allow customers to make payments through comparison sites, Technology, and IT & Infrastructure.
social media accounts like twitter and face book messenger.
The customer need not log out of the app and log in to the Insurance
banks app Insurance market was also been captured by the financial
Block chain technology and crypto currency technology companies. Majority of the companies are
Banking and financing industry was made disrupt through focussing on distribution in this category. These companies
block chain technology by the Fintech companies. Today, are trying to reach the customers through different apps.
block chain is used to keep a better track of one’s asset They are very flexible rather than the traditional insurers.
movement and also to record transactions as a shared digital The companies are trying to partner with traditional
ledger. It is impossible to steal th information as it is been insurance provides as the insurance market is highly
stored across a network of personal devices. So the security regulated. These Fintech’s are regarded as InsurTech’s.
problem which is the biggest problem today is being solved. Search engines & comparison sites
It is more affordable and also helps you in quick payments. This is a sub segment which comprises of search engines
They don’t have intermediaries like banks. enabling comparison of various financial products and
services available from various service providers.
III. ASSET MANAGEMENT Technology, IT & Infrastructure
Financial and investment advisory services are been provided Technology, IT and Infrastructure sub segment comprises of
to high-net worth individuals as a part of Asset Management. Fintech’s which provide necessary technical solutions for
Individuals can directly contact the wealth managers and different financial services providers
plan their financial needs like insurance planning, retirement
planning, portfolio management etc. They need not seek the
help of multiple people or firms.

Social trading

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DOI:10.35940/ijrte.C4087.098319 906 Sciences Publication
 Fintech Issues and Challenges in India

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DOI:10.35940/ijrte.C4087.098319 907 Sciences Publication
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