Expectations vs. reality is always a difficult one to deal with, especially when we try to relate this with Deo ads (girls never come running in reality ;-)). Banking is another area where you never get what they promise in ads. I realized it, when I recently applied for a bank loan, I had to exhaust three weeks of my time running around to get the paperwork finished, but still, there was an uncertainty looming over my head on whether I will get the loan or not.
Then after getting a little (read ‘a lot’) irritated with the lousy banking procedure, I approached Kabbage, a Fintech startup that claims to get you a loan in seven minutes. What a stark difference? There’s a loan pending even after three weeks of paperwork and there are rolls of green bucks residing safely in my account. That’s just one of the many ways how Fintech is transforming the customer experience.
That’s the reason Fintech is growing like crazy, from $1.5 billion in 2013 to $4.7 trillion in 2015 to a monstrous $7.6 billion in 2015 and to again a mind-boggling number this year. In 2016, many Fintech moonshot ideas turn into a business reality, redefining the way we deal with payments and investments. As a leading Fintech consultant, we have identified a few key trends, which will drive new products and services, and scribe the new rules of customer engagement in Fintech.
Banking without banks, cashless payments
Over two billion people in this world don’t have a bank account, but a majority of them own a smartphone. Users in the developing countries are getting hold of a smartphone much faster than they can open a bank account. This is where Fintech companies are diving in, offering them mobile phone-based money transfer and a variety of finance services on a smartphone without even opening an account.
Facebook, Apple, Samsung, and Google are only a few of the names that are leading a pack of companies moving aggressively in transforming the payment systems. Mobile wallets have become an indispensable tool to pay for services and products. The next generation of payment systems will play a huge role in processing salary, direct debits, remittances, electronic funds transfer to cheque imaging without even holding a bank account.
M-Pesa, launched in Africa in 2007, where Vodafone customers can do mobile payments, transfers and much more all through money loaded on mobile phones. This concept becomes more innovative where a London based startup, DoPay rolled a mobile payroll service for people without a bank account in India, the Middle East and parts of Africa, allowing employers to electronically remit salaries to their staff’s DoPay debit card.
Your personal finance manager
Investment management is another emerging segment, which has witnessed a lot of innovation, where chatbots or robo advisors leveraging the power of big data to provide efficient investment management plans. This involves sifting through data, combining macroeconomic factors, browsing through latest happening around the world and consumer’s social profile to provide them the specific solutions matching their needs. This is more trustable as it takes care of market anomalies and takes preventive actions to minimize risk in the investment portfolio.
Microfinance, alternative lending
Microfinance is an awesome idea, but the growth was always hampered by infrastructure issues and distribution challenges. Costs again increase as the loan officers take numerous trips to far-flung locations to provide the loan to clients. Fintech has revolutionized this arena with the electronic loan application and borrowers and lenders gathering on the digital channels ensuring quick credit decisions and loan disbursal with more people taking care of the finance services than before.
Credit score checking
Credit history is a big roadblock for people who never dealt with a financial institution before. The same fate applies to people with bad credit history looking for loan or opting for any other financial services with the traditional institutions. Skip home loan installments for a few times and you have no support from banks if you want to start or expand your business. But Fintech focuses on harnessing data from many other sources, including your other online accounts, mobile bill payment history or even social networking activity to create a different credit score that will ease the online loan decision.
Ask a startup entrepreneur how difficult it is to raise funds, it involves a lot of running behind the angel investors and VCs. But crowdfunding Fintechs are set to change that where hundreds of startups are trying to turn their smart ideas into intelligent products by getting contributions from the public. Fintechs are providing a platform to mobilize small contributions from the public to achieve a larger goal of raising a bigger amount. Crowdfunding is serving an alternative stage to raise money for next radical business idea to a social cause.
Adding value to customers using big data, AI, and personalization
Like other institutions, banks have a lot of data, much more than any other institution actually. They have an ocean of information about their customers, how much they earn, how much they save, where do they shop and how much for, what are their investments, loyalty cards, social presence, browsing habits and blah blah blah. But banks have never taken full advantage of this information, however, Fintechs are doing an awesome job of sifting through information and changing the way risk is priced.
Modern consumers are looking for personalized services in all the spaces. Fintech startups are grabbing this opportunity to combine historical transaction data and external information such as their social media information to cater specific services to the audience to increase the conversation rate, cross-selling and up-selling opportunities, card-linked offers, customized reward solutions, understanding customer requirements and provide customized packaging of plans.
Bitcoin is emerging as a new alternative mode of currency called cryptocurrency. It’s nothing but a digital currency that uses encryption to generate money and to verify transactions. It’s evolving as a decentralized alternative to traditional flat currencies such as Dollar, Euros, Pounds or Rupees. Cryptocurrencies offer anonymity and unregulated low-cost payment model.
Fintech is grabbing this alternate money opportunity by providing a platform or a digital wallet to store the cryptocurrency and using the public address to transfer funds in and out of your wallet. For example, BitPesa is a remittance startup successfully processing payments in the UK’s African diaspora. Same is the case with Hong Kong based startup BitSpark, Latin America based payments startup BitPago.
What you need is a good fintech consultant?
Every trend has its own uniqueness and it’s hard to decide which one will reap more benefits to your business. That’s where FINTECH CONSULTANTS are playing a major role in guiding the companies who want to move aggressively in the FINTECH space. They’re suggesting companies to pick the right trend to go for OR innovating a new one if required.
Consultants will introduce legacy institutions with the modern knowledge and techniques of finance industry with their strong internal fintech research. Consultants will help startups in strategizing new monetization models and also implementing their existing strategy in a smooth way.