Abstract Seminar Report on

Fintech and transformation in Financial services

By

Pranchit Battulwar
Roll No. 20-S-007
Semester – I
MMS – I (2020-21)
Deadline Date – 30/06/2021

Jamnalal Bajaj Institute of Management Studies,

Mumbai.
University of Mumbai
 Index

1 Abstract 3

2 Introduction 3

3 Fintech 4
4 History of Fintech 5
5 Current Scenario 6
6 How does fintech works 7
7 Uses 8
8 10
Users of Fintech Technology

9 Fintech Market Overview 11

10 Fintech Market Segment Analysis - By Service 11

11 Fintech Market Segment Analysis - By Technology 11

12 Fintech Market Drivers 12
13 16
Impact of covid-19

14 Conclusion 23

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Abstract

FinTech, the phenomenon which spans over the areas of information

technologies and financial innovation, is currently on the rise and is gaining more
and more attention from practitioners, investors and researchers. FinTech is
broadly discussed by the media, which constitutes its understanding and
represents social opinion, however, this perception of FinTech should be
supported by empirical evidences.

Digital transformation is changing how and by whom financial services are

provided, how payments are made within an economy and across borders, and
how and where goods and services are produced in a globalized economy. These
transformations bring significant benefits in the form of greater variety and
convenience of financial services, faster speed of payment transactions, and more
efficient production processes. But there are also potential costs. Traditional
commercial banking models are challenged by unregulated FinTech and BigTech
firms, possibly threatening systemic financial stability. Globalization of production
processes has led to greater spillovers of economic fluctuations across borders,
thereby complicating macroeconomic policy decisions.

The main aim of the paper is to give an introduction to Fintech and know about
the transformation happened due to emerging digital platform in Fintech services.

Introduction

FinTech, a combination of the words “financial” and “technology,” is a relatively

new, and often nebulous term that applies to any emerging technology that helps
consumers or financial institutions deliver financial services in newer, faster ways
than was traditionally available. Think of the difference between walking into a
bank to request your balance and the ability to pull up that information in real-
time on your phone and you’ll have a good idea of FinTech’s impact.

Everything from a consumer’s ability to go online and see their financial

transactions to apps that allow you to pay friends to tools that allow financial
institutions to make quick lending decisions are all part of the evolution of
financial services. The ability for investors to do their own research, choose stocks

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and see their portfolio performance in real time is also an example of FinTech in
action.

FinTech is empowering consumers to take charge of their financial lives, leading

to much greater financial literacy than ever before. It’s tearing down the old silos
and helping to advance the consumers’ financial situation and outcomes by
leveraging advanced technology.

Fintech :

Fintech is a portmanteau of the terms “finance” and “technology” and refers to

any business that uses technology to enhance or automate financial services and
processes. The term is a broad and rapidly growing industry serving both
consumers and businesses. From mobile banking and insurance to cryptocurrency
and investment apps, fintech has broad applications.

BANK
HARDWARE PROVIDERSS
NBFC
SOFTWARE PROVIDERS
PAYMENTS FINANCE FinTech TECHNOLOGY
CLOUD PROVIDERS
WEALTH MANAGEMENT
PLATFORM PROVIDERS

The industry is huge. According to CB Insights, there are "41 VC-backed fintech
unicorns worth a combined $154.1B." One driving factor is that many traditional
banks are supporters and adopters of the technology, actively investing in,
acquiring or partnering with fintech startups because it is easier to give digitally-
minded customers what they want, while also moving the industry forward and
staying relevant.

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Fintech companies integrate technologies (like AI, blockchain and data science)
into traditional financial sectors to make them safer, faster and more efficient.
Fintech is one of the fastest-growing tech sectors, with companies innovating in
almost every area of finance; from payments and loans to credit scoring and stock
trading.

History of Fintech

Progressively, the huge fintech industry comprises of new companies and lofty
monetary organizations endeavouring to improve the budgetary administrations
given by money related foundations around the globe. The organizations have
endeavoured to utilize continually advancing innovation and create present-day
techniques for taking care of money.

A large number of us may not understand, yet innovation has constantly assumed
a critical job in the money related division. In any case, the most recent 65 years
have played a huge role in the development of the fintech industry and the
creation of a few fintech arrangements.

The 1950s saw the dispatch of credit cards and 10 years later, ATMs changed the
manner in which cash was withdrawn from banks. The proliferation of the
internet during the 1990s propelled the fintech business to a new level; electronic
instalment framework, web-based business models, web-based shopping,
portable banking, and digitization of banks have brought about a significant
revolution.

The world's first ATM was propelled in 1967 by Barclays and the IPO in 1971, the
principal online installment stage Paypal was established in 1998, the primary
digital money , Bitcoin was propelled in 2009, Google propelled Google Wallet in
2011 and, Fintech startups have been all over the place since then. Earth-
shattering advancements of innovation are paving the way for fintech upheaval.
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Current Scenario:

With a total of $254 billion invested globally into ~18,000 startups through
venture capital funds—a sharp increase of 46% from 2017’s total. Figures for 2019
are not yet completely finalized, but initial reports point to a slowdown in funding
levels in the first half of the year and a mild rebound in Q3. This is true across
sectors, and is most definitely true for the fintech sector, which is the largest
sector in the growth company space. In fact, the global fintech market
was worth $127.66 billion in 2018, with a predicted annual growth rate of ~25%
until 2022, to $309.98 billion.

As within the broader VC sector, there is a general trend in the fintech industry
toward maturity: larger funds (getting closer in both size and behavior to their
private equity counterparts) investing in later stages of a company’s life, as
illustrated in the funding statistics section. This, coupled with the retreat in
funding for seed-stage companies, points toward a general consolidation and
development of the sector. As the market and the fintech landscape are maturing,
now is the time to see which companies are here to stay and can become
profitable - there will be some necessary consolidation and perhaps some high-
profile failures.

The Indian FinTech scene is divided as follows: 34% in installment handling, trailed
by 32% in banking, and 12% in the exchanging, open and private markets.
Visakhapatnam is being created as FinTech valley and the nearby administration
of Andhra Pradesh opened Fintech Valley to advance the interests in this area.

In 2018, more than 12,000 new businesses grew in the Fintech space over the
world with a monstrous speculation of $19 billion. Fintech includes innovative
organizations that are going up against each other and working in unison with
existing money related foundations. These organizations likewise work together
with colleges and research foundations, government affiliations, and industry
bodies.

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India now has a system in place that gives new companies a chance to
exponentially develop into enormous organizations. Directly from digging into a
scope of unexplored portions to outside business sectors, new Fintech businesses
are conveying advancement that was deemed hard to accomplish.

How does fintech works:

Fintech is not a new industry, it’s just one that has evolved very quickly.
Technology has, to some degree, always been part of the financial world, whether
it's the introduction of credit cards in the 1950s or ATMs, electronic trading floors,
personal finance apps and high-frequency trading in the decades that followed.

The guts behind financial technology varies from project to project, application to
application. Some of the newest advances, however, are utilizing machine
learning algorithms, blockchain and data science to do everything from process
credit risks to run hedge funds. In fact, there's now an entire subset of regulatory
technology dubbed "regtech" designed to navigate the complex world of
compliance and regulatory issues of industries like, you guessed it, fintech.

Though the industry conjures up images of startups and industry-changing

technology, traditional companies and banks are also constantly adopting fintech
services for their own purposes. Here's a quick look at how the industry is both
disrupting and enhancing some areas of finance.

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Uses:

Banking
Mobile banking is a large part of the fintech industry. In the world of personal
finance, consumers have increasingly demanded easy digital access to their bank
accounts, especially on a mobile device. Most major banks now offer some kind of
mobile banking feature, especially with the rise of neobanks.
Neobanks are essentially banks without any physical branch locations, serving
customers with checking, savings, payment services and loans on a completely
mobile and digital infrastructure. Some examples of neobanks are Chime, Simple
and Varo.

Cryptocurrency & Blockchain

Running parallel to fintech is the birth of cryptocurrency and blockchain. Though
both are different technologies considered outside the realm of fintech, there are
complimentary applications in which all three can work together to deliver new
kinds of financial services.

Investment & Savings

Fintech has caused an explosion in the number of investing and savings apps in
recent years. More than ever, the barriers to investing are being broken down by
companies like Robinhood, Stash and Acorns. While these apps differ in approach,
each uses a combination of savings and easy, small dollar investing to introduce
consumers to the markets.

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Machine Learning & Trading
Being able to predict where markets are headed is the Holy Grail of finance. With
billions of dollars to be made, it's no surprise machine learning has played an
increasingly important role in fintech. The power of this AI-subset lies in its ability
to run massive amounts of data through algorithms designed to spot trends and
risks.

Payments
Moving money around is something fintech is very good at. The phrase “I’ll
Venmo you” is now a replacement for “I’ll pay you later.” Venmo, of course, is a
go-to mobile payment platform. Payment companies have changed the way we
all do business. It's easier than ever to send money digitally anywhere in the
world. In addition to Venmo, popular payment companies include Zelle, Paypal,
Stripe and Square.

Lending
Fintech is also overhauling credit by streamlining risk assessment, speeding
up approval processes and making access easier. Billions of people around the
world can now apply for a loan on their mobile devices, and new data points and
better risk modeling is expanding credit to underserved populations. Additionally,
consumers can request credit reports multiple times a year without dinging their
score, making the entire backend of the lending world more transparent for
everyone. Credit companies worth noting include Tala, Petal and Credit Karma.

Insurance
While insurtech is quickly becoming its own industry, it still falls under the
umbrella of fintech. Insurance is a somewhat slow adopter of technology, and
many fintech startups are partnering with traditional insurance companies to help
automate processes and expand coverage. From mobile car insurance to
wearables for health insurance, the industry is staring down tons of innovation.
Some insurtech companies to keep an eye on include Oscar Health, Root
Insurance and PolicyGenius.

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Users of Fintech Technology

Following are the broad two categories of users of Fintech Technology:

1. B2B (BUSINESS TO BUSINESS):

Before an era of Fintech Technology, businesses need to move to banks for
obtaining loans and finance. However, with these technology businessmen can
obtain loans easily through one click using mobile technology.

Many Customer Relationship Management Companies and cloud-based platforms

are also using Fintech technology to provide B2B services.

2. B2C (BUSINESS TO CLIENTS):

Fintech has a good base of customers serving B2C applications. Money Apps such
as PayPal, Google Pay, Apple Pay, etc uses these technologies that allow its clients
or customer to transfer money through the internet on mobile phones. Also,
there are certain apps help their customer to manage their finances and
expenses.

Fintech Market Overview

The market for Fintech is forecast to reach $161.2 billion by 2026, growing at a
CAGR of 8.7% from 2021 to 2026. Artificial Intelligence (AI) has taken the tech
world by storm, allowing companies to automate their high-value and
complicated processes. The reason to make a shift towards machine learning is
also motivated by reduction in cost, increasing efficiency, reducing error and
better customer experience through improved digital lending, automated
insurance and personal finance solutions. The Fintech is majorly driven by credit
card fraud detection. With the help of Generative Adversarial Network, Artifical
Intelligence can spot the difference between real data and hacked data in each
transaction and send alert to banks. The biggest challenge with fintech is the
sensitive issue of data privacy and security, which most fintech companies are
facing. The fintech sector is governed by strict compliance to regulations and
governance since any data breach or security failure could be disastrous.

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Fintech Market Segment Analysis - By Service
In FinTech sector transaction type segment discuss about the payments, financial
institution and insurance. Insurance occupied the largest market share in 2020 at
16.5%. The use of FinTech technology across the financial services industry is
growing. Emergence of services such as PayTech, RegTech, InsurTech, and digital
banking highlight the ways in which digitalization has impacted the FinTech
industry. These consumer demand in improved access and anytime anywhere
services is achieving greater transparency and will lead the market in the period
of 2021-2026.

Fintech Market Segment Analysis - By Technology

AI is the fastest growing segment at 21.6% through 2026. AI can be used to find
the relation between world events and their impact on prices by using predictive
analysis. This information is very useful for any kind of wealth investment. AI in
financial services are used to protect the details of their customer. AI is playing
major role by quickly assessing the large algorithms to protect from fraudulent
cases. AI is used to advise the accurate result. P2P organization analyze their
potential customer’s behavior and detect all the risk in the cooperation with that

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particular customer.AI also helps in analyses consumer’s details who doesn’t have
past credit history or his credit history is destroyed. This growing list of
applications will be the major driver of adoption of AI in Fintech sector. Another
application driven by new technology developments has been robo advisors.
Robo- advisor keep monitoring on the events, stocks, bond and price trend
according to user’s requirement which help them in making suggestion regarding
which stock needs to be sell or buy. They play very important role in risk
management, speech recognition, network security access to big data etc. These
technology developments will create new avenues of opportunity for Fintech
thereby driving the market growth.

Fintech Market Segment Analysis - By Geography

APAC region holds the largest market share in the Fintech Market at 34% in 2020.
However, Asia Pacific is also set to witness highest growth during the forecast
period. North American Fintech Market is mainly driven by the large number of
startups and emerged companies offering AI services to financial services. The key
applications include Virtual Assistant, Business Analytics & Reporting, Customer
Behavioral Analytics among others.

Fintech Market Drivers:

Focus of Companies on Cost Reduction and Improving Efficiency

Fintech is allowing companies to cut down their cost, automate their process and
reduce the chances of error. AI Chatbots are used by companies as customer
assistants for various purposes such as sales, customer care executive (over
phone), and online chat executive. AI is empowering small finance companies as it
is affordable as well as chances of error occurrence is very low. In addition, the
insightful details about the cash flow and income and expense is gaining the
traction from the end user as this helps companies to reduce their expenses.

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New Technological Advancements drives Adoption of Fintech

According to McAfee cybercrime currently costs the global economy around $600
billion, or 0.8% of global GDP. One of the biggest cybercrimes is credit card fraud.
Thus companies are designing a new generation of algorithms that are
Convolutional Neural Networks and are based on the visual cortex, which is a
small segment of cells that are sensitive to specific regions of the visual field in
the human body. This means that they are able to extract elementary visual
features like oriented edges, end-points and corners. This technology can study
the spending data of an individual and be able to determine, based on this
information, whether they performed the most recent transaction on their credit
card or if someone else was using their credit card data.

Their Focus On Underserved Areas Of Banking

Incumbent players in the finance industry have traditionally focused on high-

margin business, while lower-margin businesses are often deemphasized. Many
banks have scaled down their retail banking business to focus on more profitable
commercial and investment banking businesses. Even within the commercial
banking business, many have focused almost exclusively on large corporations,
underserving small and medium enterprises. The reduction of retail banking and
underserving of small and medium enterprises have aided the rise of fintech
players focused in these areas.

Financial providers should not look solely at current profitability numbers and fail
to look at the big picture. Instead, we should think strategically by considering the
long-term impact and growth potential of the various businesses within the
ecosystem.

A Lack Of Trust In The Traditional Banking Industry

According to regtech provider Fenergo, since the 2008 financial crisis, incumbent
players have been fined $36 billion for noncompliance with global anti-money
laundering, know-your-customer and sanctions regulations. Furthermore, 12 of
the world’s top 50 banks received fines in 2019.

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In Australia, the government established a Royal Commission in 2017 to
investigate the alleged misconduct in the finance industry. The subsequent
Deloitte Trust Index for Banking 2018 highlighted the public’s opinion of the
industry, with just 21% of respondents saying they thought banks had customers’
best interests at heart.

As a result, a healthy dose of skepticism now pervades the finance industry. This
has benefited fintechs, which have offered tools that augment what banks have
historically offered. The lesson here is that while trust takes time to be built, it can
be destroyed instantly with one mistake. We should never forget that trust is the
foundation upon which the finance industry was built and that it requires a
continuous effort to maintain.

Their Sharp Focus

Fintech players have three main advantages over incumbent players: Focus, focus
and focus.

First, they usually focus only on one product or service. As they are, in most cases,
smaller and nimbler, they usually have lower operating costs. This translates to
the ability to concentrate more on customer experience by providing their
product or service cheaper and more resourcefully than banks.

Second, they have a clear focus on the customer. Without cumbersome legacy
systems operated by incumbent players, they can better focus on solving
customer problems and enhancing customer experiences. The dwindling pool of
legacy system specialists further exacerbates the problem as it is difficult and
often expensive to find people with the coding skills necessary to maintain and fix
legacy systems.

Third, they focus on new technology that gives them an edge. One example is the
use of artificial intelligence technology in traditional processes, like price
forecasting, fraud prevention, risk management and customer service. Another
example is the use of blockchain technology in traditional processes, which offers
greater transparency, increased efficiency, better security and improved
traceability.

The scalpel-like focus of fintech companies helps them respond more quickly to
the changing needs of customers. The lesson here is not to lose focus on our core
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mission objectives as we grow and expand. We should never forget why the
company was created in the first place.

While some incumbent players may be late to respond to the rise of fintech,
others are starting to create their own services or partnering with established
fintech players. The effects of fintech reach widely across the finance industry. I
see the optimal equilibrium to be one where instead of engaging in costly price
wars, incumbent players collaborate with fintech players to produce better
products and services. This form of cooperative competition or “coopetition” will
move the industry from a zero-sum game to an environment in which the end
result benefits the whole and makes all players more profitable.

Fintech Market Challenges:

Concerns Regarding Data Privacy

The biggest challenge with technology adoption in fintech is the sensitive issue of
data privacy and security, which most fintech companies are facing. The fintech
sector is governed by strict compliance to regulations and governance since any
data breach or security failure could be disastrous. Privacy concerns are cropping
up as companies feed more and more consumer and vendor data into advanced
technologies whether it is analytics, AI or blockchain to create new bits of
sensitive information, unbeknownst to affected consumers and employees. This is
especially prevalent in the retail banking sector, where consumer data collection
has been at the forefront in terms of big data challenges. These data privacy
concerns will hinder the adoption of AI especially in banking sector.

Fintech Market Landscape

Product launches, acquisitions, and R&D activities are key strategies adopted by
players in the Fintech Market. Microsoft, Google, IBM, Intel, Affirm, Upstart,
Sigmoidal, Zest Finance and Amazon are considered to be the key players of the
Fintech Market.

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 Acquisitions/Technology Launches/Partnerships

 In May 2021, Healthcare Fintech Cedar announced a $425 million acquisition of

San Francisco-based OODA Health for a mix of cash and equity. The move was
fueled by a $200 million Series D cash injection in March led by Tiger Global
Management
 In May 2021, Corporate finance software provider Bill.com LLC has signed a $2.5
billion deal to acquire DivvyPay Inc., better known as Divvy, whose cloud service
enables companies to issue business credit cards to their employees.

Impact of covid-19

The year 2019 was a big year for the Indian fintech space. It was the first time
when Indian financial technology companies surpassed their global counterparts
in raising funds. With UPI becoming an increasingly dominant force in facilitating
digital payments, investor interest was largely focused on consumers facing
mobile payment applications. We did see the first set of neobanks coming into
the play and further digitising the customer experience presenting an alternate
option to other financial incumbents. Even in general insurance space, we saw a
tech-driven insurance company that could offer insurance at lower rates, thanks
to their asset-light business model.

NBFCs also featured prominently with the rise of many tech-driven firms
promising to provide quick and hassle-free access to finance by leveraging the
power of technology. Other areas of disruption were personalised finance, point-
of-sale (PoS) systems, stock broking and so on.

The Covid-19 pandemic served as the ultimate catalyst for the nascent fintech
industry. With consumers shifting towards e-commerce and digital platforms, we
believe that 2021 would feature many of the fintech companies truly coming into
their own.

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A staggering 52% of the adult Indian population comprises digitally active
consumers who use fintech. With such a huge number, we are bound to see some
truly exceptional trends in this space as firms experiment with multiple ways of
employing technology to woo consumers.

The survey of 70 founders and top executives of fintech firms, including PhonePe
chief executive Sameer Nigam, Razorpay CEO Harshil Mathur, ZestMoney CEO
Lizzie Chapman and Jupiter CEO Jitendra Gupta, showed that they are more
bullish on some segments than others.

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The survey was conducted in two parts – by recording responses through a
questionnaire and then through fireside sessions – to capture the overarching
trends that are shaping the sector in the post-pandemic world.

Digital Payments

Most respondents said they were witnessing a second spurt in growth after
demonetisation, driven by digitisation of traditionally offline channels such as
FMCG, govt payments and growth of new online segments such as gaming,
edtech and OTT. While the short-term confidence in payments is neutral, 100% of
respondents are bullish about long-term outlook

 30% of respondents had achieved pre-Covid volumes by July.

 60% expect to reach those by September.

Five Effects of COVID-19 on the Fintech Industry

While on one hand the Covid-19 outbreak has blurred lines between banks and
fintechs and accelerated digital adoption, it has led to decline in number of
alternate lenders

Financial technology (fintech) sector has been developing fast in Asia in the last
few years. But, like most other sectors, it has been hit hard by the COVID-19
outbreak. Here is the good and bad that has come out from the pandemic for the
fintech industry.

The Momentum for Survivors

According to market intelligence platform CB Insights, investor appetite for

fintech in Asia has been the lowest in the first and second quarters this year since
the end of 2016. It is a direct consequence of the Covid-19 pandemic, which has
raised uncertainty on the future of the industry.

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Limited access to capital will force several players to shut down, leaving the
industry to larger and stronger companies. It is evident that startups are
struggling as Sequoia Capital sent out a warning that it would need at least three
or four quarters to recover from the Covid-19 crisis.

Prolonged uncertainty will decrease the number of fintech startups and in turn
give momentum to the companies able to cope up with the challenges. New
players will find it even more difficult to catch up. However, there is still a chance
for them, as even large players will nevertheless grow weaker amid the pandemic
outbreak.

Reduction in the Number of Alternative Lenders

Agile scoring approach towards assessment of the underserved segments and

focus on smaller loan amounts should make a strong case for alternative lenders
in the ongoing situation. But, the real picture is different. There has been a
notable decline in incomes across small and big businesses and retail customers.
This has not only decreased consumption but also raised defaults. Robocash
Group research has found that about 54 per cent borrowers will loan only after
lockdown restrictions are lifted. Also, repayment holidays have reduced the
revenue streams for lenders. As a result, lower demand and tightened
requirements have caused a drop in issuance and, in some cases, forced
companies to cease operations.

Then, insolvency of borrowers and economic uncertainty have led to an outflow

of investors’ funds from P2P lending. In Europe, during March and April this year,
P2P lending dropped to one third of the cumulative volume of previous months
and forced several platforms to collapse. Although some reports are hinting at
potential recovery this summer, the longer the uncertainty lasts, the fewer
players will stay afloat in the market.

Expansion of Digital Finance

Quarantine restrictions have raised the use of remote services—from online

shopping to delivery, to entertainment, streaming services and mobile payments.
People accustomed to the advantages of the digital world are likely to keep using
it actively in the post-COVID-19 period.
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Cashless payments are a perfect example. Thus, the United Kingdom, Germany,
Ireland, Poland, Norway, Egypt and other countries have raised limits on the size
of contactless payments. In some cases, it has more than doubled.

Another outcome is the regulatory progress. Thus, coronavirus has pushed the
adoption of fintech and regulatory technology (regtech) in China. In South Korea,
it facilitated introduction of cryptocurrency law.

Therefore, although the pandemic has been tough to the industry, it has provided
a grace period for fintech, helping it to succeed.

Blurring Borderlines Between Banks and Fintechs

Traditional banking is increasingly looking at fintech. The inevitable digitization is

not the only reason. The industry has been facing a decline in financial
performance since last year. Bloomberg Intelligence stated that the average cost-
to-income ratio at the top European banks amounted to 67 per cent in 2019, the
highest rate since 2008. Return on equity fell to the lowest level in three years at -
8.7 per cent.

The global recession in 2020 has aggravated the situation. Lower incomes of the
population, swelling unemployment and the financial uncertainty decrease the
number and size of bank deposits and purpose loans, such as mortgages, car loans
and others. Berenberg Bank predicted that the decline in revenues of the
European and American banks in 2020 would amount to 8.5 per cent, while profit
would be 30 per cent lower than it predicted a year ago. In Asia, the situation is
similar—banks in Singapore are also expecting a significant revenue drop.

Changes in the operating model and digital transformation are the means for
banks to overcome difficulties. It may also stipulate banks to provide smaller
loans and assess customers less formally, as well as start acquiring fintech firms.
Remarkably, fintechs are quite active in this regard themselves, as they seek
opportunities to strengthen the performance.

The recent acquisition of Asia Kredit by the financial supermarket GoBear and the
takeover of Africa's largest platform MPESA by Vodacom and Safaricom serve as
an example. Additionally, talks about Metro Bank's potential acquisition of
RateSetter, one of the largest P2P lending platforms in the UK, takeover of the IT

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vendor TSX in Spain by Santander, as well as Western Union's potential
acquisition of MoneyGram, confirm the trend.

Shifting Toward Higher Personalization

The surge of interest in telemedicine amid the COVID-19 has the potential to grow
into a large-scale phenomenon. Potentially, it may boost commercial interest in
biological data, such as body temperature, blood pressure and others. It will allow
companies and governments to improve assessment and forecast, and influence
the way people think and act.

Although it is a long-term trend, with the massive 5G adoption, it promises to

shift the consumer paradigm dramatically. These changes will affect fintech
services foremost—software, targeting and customer acquisition, credit scoring
procedures, etc.

It will be one of the steps toward more individual customer offers and
comprehensive IT solutions automated to the highest possible extent. Within a
single frame, they might combine solutions from different fintech segments, as
well as serve diverse audiences.

Reaching material scale and impact of COVID-19

However, with the exception of leading players of the likes of Paytm, PolicyBazaar
and Zerodha, few Indian fintechs have actually achieved notable scale and

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profitability. In payments, Matrix Partners India estimates that only 25-35% of
companies are profitable, while in insurtech and wealthtech, the figure drops
below 20%.

Indian fintechs scale and profitability, State of India’s ‘Fin+Tech’ Union, by Matrix
Partners India and McKinsey & Company

When compared to their global peers, Indian fintechs lag behind, the VC said.

Indian fintechs scale and profitability compared to global peers, State of India’s
‘Fin+Tech’ Union, by Matrix Partners India and McKinsey & Company

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The COVID-19 pandemic has further accentuated this challenge, it said, noting
that fintechs operating in lending have been the most impacted with a drop of 80-
90% in disbursal volume.

In payments, disruption has been moderate. Though transaction volumes

dropped by 20-50% in the early periods of the lockdown, payments startups have
recorded a 10%+ rise in average transaction size. And as economic activity begins
to pick up, payments players are already seeing a recovery of volumes.

Impact of COVID-19 on India’s fintech players, State of India’s ‘Fin+Tech’ Union,

by Matrix Partners India and McKinsey & Company

Conclusion:

Innovation in financial services has been growing across the value chain – from
product development, packaging, and delivery, to services. Technological
advancement coupled with commoditization trends has led to the development
of a new crop of nimble firms providing services in each segment of financial
institutions offerings. Fintech startups are redrawing the traditional approach to
banking services. However, the ability of these startups to match and – in many
cases – surpass the offerings and trust the consumer has built with a bank will be
a KPI in the long term.

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The increasing economic power coupled with the sheer number of end-users in
the APAC region make an attractive case for Fintech. India, the fastest-growing
economy of the world is also home to the second-largest number of Fintech
startups in APAC with China leading the pack. The growth in Fintech solutions has
seen huge uptick in the last couple of years. This is further expected to grow with
the renewed interest from banks and regulatory bodies. Banks have started to
actively participate in the Fintech boom by looking for partnerships and
investments with startups while the government and regulators are drawing new
frameworks and policies that incentivize innovation and entrepreneurship.

Swiss startups have ample opportunities to extend their offerings and establish
their presence in India. Below are few key pointers to consider:

o India provides a vast user base to startups as the population is rapidly

adopting digital technology and hence, the scope for digital services
is set to increase.
o India, being the home for outsourcing and captive services for
decades, offers a huge number of fresh talent and installed talent
which Swiss startups can capitalize on.
o Indian banks and majority of the large global firms have opened their
Fintech innovation hubs and accelerator programs in India. This is
further set to increase as this trend has started only in 2016.
o Government and regulatory bodies have developed a strong financial
infrastructure that is being leveraged for Fintech innovation. Also,
there have been multiple policies and initiatives aimed at promoting
financial inclusion and innovative banking services.
o The challenges discussed in the report remain. The need for
consumer education, building trust, and getting the right licenses
would be the major building blocks to starting up in India.

Overall, India offers a huge market for Fintech that is ripe for disruption. With
rising financial awareness, any startup that comes to India would need to strike

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the right balance between their product and the market, invest in customer
education, develop innovative business models and build Fintech in India.

Resources

 https://www.analyticsinsight.net/fintech-in-india-paving-the-way-to-a-
billion-dollar-economy/
 https://economictimes.indiatimes.com/corporate/covid-19-impact-
fintech-leaders-cautiously-optimistic-about-growth-
prospects/articleshow/78417709.cms
 https://www.outlookindia.com/outlookmoney/fintech/beginning-of-a-
phenomenal-growth-in-fintech-market-6197
 https://fintechnews.sg/44527/india/indias-fintech-industry-growing-
strong-despite-covid-19/
 https://www.spglobal.com/marketintelligence/en/documents/an-
introduction-to-fintech
 https://www2.deloitte.com/content/dam/Deloitte/nl/Documents/finan
cial-services/deloitte-nl-fsi-fintech-report-1.pdf

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