How FinTech is disrupting the financial services ecosystem in India
While many of the intricacies in the broad and specialized FinTech space still need to be ironed out, the momentum among existing and new entrants in this space continues to prevail.
By Devendra Rane
The financial services industry is one of the most fast paced and precision based industries, owing to its needs of long-term data maintenance, transaction accuracy, security etc. Hence technology is not new to this sector. Today though, new set of technology trends are disrupting this sector, creating a huge opportunity for FinTech start-ups. From currency notes to human interface and data management, everything in the sector has gone digital.
Technology is a must-have in BFSI for managing risks, customer profiling, large-scale data operations etc. Technology is now being utilized to acquire online users. Most financial products are now available online too, to feed the growing mobile population. Disruptive technologies in financial services or FinTech have changed almost every financial activity from banking to payments to raising loans etc. The targets of most BSFI startups today, unlike traditional companies are the number of transactions rather than increasing the transaction size. What FinTech start-ups might not make in size of transactions, they are more than making up in the number of transactions.
The key for FinTech companies across the board is to capture numbers and serve them without adding any extra cost. There are two major challenges, which companies, from financing to insurance, are facing today. Firstly for traditional companies, managing a legacy technology stack with the new-age set of technology paradigms is a fairly complex problem and secondly, servicing costs for small transaction sizes have to be kept at the minimum. Until and unless companies are able to manage these two together, they will not be able to make a breakthrough in the onlinemarket. This requires evaluation of existing processes and elimination of unnecessary ones and more importantly a willingness to learn from the new kids on the block.
How the insurance space is evolving online
Within the FinTech space, digital insurance is set to become massive in India, on the back of a growing number of internet users, expected to touch 402 million by end of 2015 (per the recent IAMAI &IMRB report). Improving infrastructure, affordable internet, and the spread of mobile phones in equal measure to urban and rural India are key reasons for this growing internet penetration.
A BCG Google report claims that by the year 2020, the non-life insurance industry is poised to grow to 3-3.5X to about Rs 230K crore, of which online insurance will contribute most to this growth. In fact, the online insurance market in India is likely to grow 20 times. Moreover, 3 in every 4 insurance policies sold will be impacted by digital channels at either pre-purchase stage, purchase or renewal stages.
Insurance per se is seeing a massive change — from being a seller’s market to becoming a buyer’s market. Online insurance marketplaces are going to be a catalyst in this change by providing a seamless insurance buying experience. More choices, niche products, rising consumer awareness regarding protection and savings solutions, backed by good technology that enhances customer experience, among other factors, all point to digital players leading the insurance industry into a new era.
Successful digital insurance brokers stand apart because of their great proprietary technology and tech prowess that powers buying of insurance products across insurers in a simple, quick and personal manner for the user. Coverfox.com for instance enables its customers to buy their insurance, via the website or mobile website, in less than 5 minutes! An extremely user friendly and contemporary interface is essential. In one quick glance, a user should be able to understand the key features one needs to consider. Investing in a strong support team that hand holds customers through the tedious claims process is also necessary as is setting up a qualified advisory team to provide real insights and advice to customers on the right insurance choices, when they look for advice.
Most of the growth in the FinTech space today is being fuelled by the e-commerce revolution and the adoption of mobiles as the primary device. Frequent transaction models, like banking, wallets have been able to make direct use of mobile technologies to engage customers, but others are trying to find proxy ways to get into the mobile space. For e.g. mobile apps, which provide telematics are being used to understand driving behaviour and underwrite risk in motor insurance. A ton of service requests for all financial segment have moved to mobile, which is where companies end up saving a lot instead of opening stores and offices.
The next set of cutting edge technology that can disrupt financial technology space will be Artificial Intelligence based bots which can identify trends and classify customer profiles all on their own. The bots will figure out your risk profile, do the sales while engaging you in meaningful conversations and service you right on your mobile device. Intuition got replaced with data patterns based decision making, and the bots will replace the complete cycle from data to decisions.
At the end of the day, FinTech is here to stay and start-ups are leading the way. According to a report by an analytics company, Tracxn, there were 750 registered FinTech companies in India in 2015 of which 174 launched that year alone. Banking regulations are becoming more inclusive and banks are investing in FinTech start-ups. It’s yet to be seen which ones will emerge as winners but for now the momentum is on in this space.
The author is founder and chief technology officer at Coverfox
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