The branches of fintech making your life easier today
Fintech has rapidly taken over the banking and finance industry and is a huge driver of economic transformation across strata. Players are increasingly unraveling ways to leverage tech to make the customer experience even more advanced and seamless across the length and breadth of India (read our blog on fintechs’ customer centricity) overcoming geographic and distribution challenges with which the banking industry has long grappled.
Besides solutions to long-standing challenges, the fintech universe can be broken down into several branches, serving the diverse needs of the modern-day consumer. This blog will take you through all you need to know about these branches.
Buy now pay later
The pandemic accelerated the growth of the digital payments industry. Buy Now Pay Later (BNPL) is one of the payment modes rapidly rising in terms of popularity. Through this, big-ticket purchases are broken down into low-cost or no-cost EMIs. It is particularly gaining steam among millennials and Gen Z consumers. One of the reasons why it’s becoming popular fast among the younger generation is because they value fast-paced and seamless experiences and can also be categorized as card-averse.
Other factors that have contributed to the rise of BNPL are job losses and salary cuts owing to the pandemic. It has helped increase the affordability of essential purchases, while also bringing aspirational buys within reach.
Insuretech – tailored insurance products
The young generation is more aware and recognizes the importance of insurance. Their fast-paced, fleeting lifestyles are driving the demand for specialized products. While leading players are investing in digital channels and enabling hassle-free insurance applications online, fintech companies are changing the game by creating bespoke products for niche segments.
Instant digital loans
What the fintech players operating in the instant loan segment are enabling is the creation of a digital lending ecosystem, which can bring formal credit access to people without credit histories. In India where lack of credit disallows the pursuit of aspirations, such platforms have proven to be a boon.
The usual model is the co-origination of loans involving banks and NBFCs entering into partnerships with fintech to jointly finance loans and share credit risk. The RBI has advocated this model as a solution to address the credit gap in the priority sector. Several institutions have adopted co-lending practices to finance small-ticket consumer loans. Such fintech platforms like SmartCoin are using advanced algorithms to analyze data from disparate sources to widen the umbrella of borrower eligibility.
These platforms rely instead on alternative data sources such as utility bill payments, rent, and cell phone bill payments, social media profiles, purchase histories, bank account transaction histories, etc., for a holistic view of an individual’s ability to repay loans. In contrast to traditional systems, fintech products don’t require long-drawn approval processes or collateral, enabling simplified access to credit for salaried and self-employed individuals.