SUMMARY
Open banking has proven its efficiency after entering India in 2013 with YES Bank and RBL bank rolling out APIs even before the standards were out.
There are a variety of new-age software offered by fintech companies that make connectivity between consumers and banks easier, and there is less need for banks to develop it on their own solutions.
Even though biometric measures have been there to authenticate users for a long time, they have never been used in the mainstream or have been supported by any kind of central banking guidelines.
After the big eventful year we have already had where digitisation has clearly taken over, the financial technology or fintech industry looks to be entering an even higher dynamic growth phase due to continued innovation and changing consumer behavior.
Fintech helps banks, financial institutions, and their clients avail a smoother process that makes old banking solutions smoother and more efficient. At its core, fintech enables consumers to manage their finances and navigate risks in a more sophisticated and safer manner. To that end, listed below are some of the top trends that the fintech industry might witness in 2021.
Digital-Only Banking
The Covid-19 outbreak had given rise to a trend of contactless transactions in a bid to contain transmission of the virus. Now, the need of safely navigating daily life will be a challenge to continue to solve. Digital-only banking comes with a high level of convenience as it does away with the need to physically visit any bank, which means no tedious paperwork and no queues too. Some other convenient benefits also include cost-effective management, speedy bill payment, resetting of pins from home, real-time analytics, and expeditious balance review.
Even though we understand that India still has a long way to go in terms of majority transactions being digital, with the increased efforts of well regulated fintech companies, more and more customers are adopting digital banking everyday.
Open Banking
Open banking has proven its efficiency after entering India in 2013 with Yes bank and RBL bank rolling out APIs even before the standards were out. Other banks followed suit. RBI realised that it was necessary to standardize and regulate the process so credit can be made available easily to the unbanked and underbanked population in India.
As the pandemic recedes and social activity explodes, new platforms will put groups, not individuals, at the center. These groups can be multiple businesses and multiple players in the market coming together. We predict more banks to get on board with many fintech solutions to get better reach, and use technology to increase the simplicity of operations. We see an increased level of trust building with consumers especially in India where Account Aggregation is just being implemented.
And organisations like the Sahamati though slowed down during the Covid period, wil pick up steam once again. As it promotes the entire financial ecosystem in its enabling of sharing financial data from both ‘Financial Information Providers’ with ‘Financial Information Users’, with due customer consent. There is an industry collective hope that the cycle of open banking in India will start to grow rapidly in 2021 just like other initiatives like Aadhaar, UPI, eKYC, E-Nach, etc.
These kinds of open banking partnerships can offer customers a 360 view of their financial accounts so that they can be accessed and handled more conveniently. This new wave looks to benefit customers and fintech employees, banking service providers, API industry figures, and even underserved communities in the future. With Open Banking in place, there will be a new class of reconstructed banking services and products that can help lower debt, enable better financial decision making, and increase long-term wealth generation.
Banking Infrastructure Plays
There are a variety of new-age software offered by fintech companies that make connectivity between consumers and banks easier, and there is less need for banks to develop it on their own solutions.
In 2021, it is expected that this trend will gain traction and provide banking facilities to the unbanked, and underserved sections of the society. This will enhance the financial inclusion of these sections by making access to financial services easy, fast and convenient.
India’s Unified Payment Interface (UPI) is also expected to witness waves of innovation such as credit being made available through UPI through multiple players offering this service on the UPI platform.
At a larger level, there will be a variety of infrastructure plays in this space such as
- Development of risk models
- Loan Origination System and Loan Management System
- Standing instructions for transactions on UPI
- Buy Now Pay Later through underwriting using digital footprint analysis
- Electronic Know Your Customer (e-KYC)
- ENach – Auto-debit of funds through digital authorisation (without wet signatures)
Biometric Security Systems
Mobile banking and other digital financial services open new doors to ease and efficiency. While this is a welcome change, it gives birth to a new challenge in the form of security, and the biometric system is the answer to this problem.
Even though biometric measures have been there to authenticate users for a long time, they have never been used in the mainstream or have been supported by any kind of central banking guidelines. There are also voice recognition capabilities which help validate the users’ identity. Though biometrics have been used in limited fashion so far, a lot more can be done. There are banks that use voice to identify customers. Most of the mobile banking apps use fingerprints to authenticate the users. However, they have not evolved for full fledged financial transactions.
While being a sophisticated technical solution, it gives users the confidence that their information is safeguarded and given top priority. What is even more assuring is that this innovation will further undergo a facelift as contact-based biometric sensors are on the path of waning popularity. It appears that due to the rise of contactless solutions, biometric technology will also go contactless.
Meanwhile, India’s Aadhar (Unique Identification Authority) has a database of biometric information, which happens to be the world’s largest biometric repository. Aadhaar has launched a program called Aadhaar-based Payments. So, the use of biometrics are expected to be leveraged much more in the banking space in the future.
Along with rapid growth due to advances in technology — which gives us the feeling that this, clearly, is an ongoing fintech revolution we are in. Consumers look forward to greater financial services that enable enhanced financial data availability, faster transactions, enhanced transparency, and better assistance towards client lifecycle, and robust security.
People are now looking at getting loans processed within minutes, customers having also the power to choose the extent to which their data can be shared, definite reduction in the risks of false documents and information being provided to them, further organisation and discipline in the credit market and lending in general, an increase to access to various options of financial services products like loans, credit lines, to different segments of the market. Finally, what has been talked about for decades, but which 2021 might see: empowerment for the consumer.
