The last few years have witnessed a rapid acceleration in FinTech adoption, with adoption doubling every two years, before the pandemic struck. When the world was struck by the pandemic, FinTech became a fundamental commodity for all businesses to stay afloat in these chaotic times. Advanced technologies coupled with need for financial market fluidity, enabled the swift migration towards FinTech solutions and when even the most sceptical businesses were compelled to embrace it. While 2020 and 2021 were the years of FinTech adoption, 2022 and beyond will be the years of innovation and transformation.
While the industry was already at the brim of disruption, the pandemic gave it a further nudge towards growth and development. The years 2015 to 2019 witnessed an incremental increase in FinTech adoption from 16% to 64%, the pandemic, however pushed it further with the value of Global FinTech Market reaching USD7301.78 billion in 2020. The year 2021, saw a rise in investments in FinTech solutions, supportive government policies and regulations, growing popularity of digital payments, higher collaborations between banks and FinTech s, which essentially led to the tremendous growth of the sector. The year witnessed FinTech funding of $8.02 billion with the funding spiralling to 183.39 per cent in 2021 vis-a-vis 2020. Lockdowns, social distancing and quarantine norms, inevitably pushed the people and business to fall back on contactless FinTech solution for survival.
With the upcoming explosion of technologies such as AI, IoT, Machine Learning, Blockhain, the industry is expected to expand at an unimaginable exponent with central focus on innovation and hyper personalisation. The Global FinTech industry is expected to grow at a rate of ~24.56% (CAGR) between 2021 and 2026 to reach ~INR 8.35 Trn by 2026. While today, the Indian FinTech industry stands at a valuation of $31Bn, it is expected grow to $84 Bn by 2025 and also achieve a of USD 150-160 billion, implying a USD 100 billion in incremental value creation potential. This transformation to online, reshaped the industry holistically and gave a huge lift to innovations, which will shape up the coming years.
With such immense adoption across the globe, there are few trends that will shape up the coming year and aid the growth of the sector.
Increased focus on customisation and hyper-personalisation
The last few years completely alerted our lifestyles in every aspect. This has modelled an environment of constantly changing habits and needs of the end consumers. With such evolving dimensions, the industry needs to stay abreast with their customer’s demands and provide a solution that is unique to them. FinTech solutions have now become a pre-requisite for us rather than a novelty. The new-age customers are looking for a highly personalised products and service that tailored to their specific needs across all the segments, be it payments, insurance, health, medical coverage or even loans.
Growing MSMEs as the next Big Bet for FinTech Sector
The Indian economy is driven largely by MSMEs with the sector contributing heavily towards GDP growth and employment generation. While MSMEs are at the peak of FinTech adoption and the digital transformation has further disrupted the market, MSME lending is one area where FinTech would flourish in the coming years. MSME lending would retain business continuity and help them stay ahead of the curve. In the coming years, FinTech innovators should address the challenges of predatory pricing, leaving to various MSMEs with the inability to procure the product they need because of affordability.
Rapid Adoption of Blockchain for Future Ready Businesses
Over the years, Blockchain has driven a coherent transformation of the financial industry. The technology has orchestrated an ecosystem of increased efficiency and agility with enhanced transparency and security. The technology will further scale the financial processes and operations with the use of data. The year will stand as a testimony of harnessing the power of Blockchain to revolutionize the methods of asset transfers, investments, and payments and eliminate errors and inefficiencies
Harnessing Data for Value Creation
The habits and need of the Gen-Z, Millennials and Gen-X clients in the industry are evolving at a rapid pace. While the organisations have access to a host of customer data, they need to build up on the technologies and tools harnesses actionable insights from this data. The coming year will witness a revolution in the FinTech industry with the true power of data being captured by the organisations.
Protecting the financial interest of Aging Population and Minors
While financial literacy comes as core life skill, it is up to the society to work towards safeguarding the financial interest of Aging Population and Minors. Studies suggested that we form our financial habits by the age of 7, thus, in the coming year, institutions should work towards higher financial inclusion of minors, helping them to be financially sound from a young age. On the other side of the coin, along with minors, the aging population also need to be well aware of their financial standings to become more financially independent. Our elders have a disposal income at their helm, however their needs and challenges of financial services need to be met. The more longevity people enjoy, the more financial inclusion and planning they require.
All these indications point towards a bright future for the FinTech in the coming year with the industry building intelligent, intuitive and sharper solutions that find higher resonance in the market place.
Views expressed in this article are the personal opinion of Tanul Mishra, CEO, Afthonia.