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How Tier 2 and Tier 3 cities are set to lead the FinTech space in the next 5 years

FinTech Companies can achieve customer satisfaction and loyalty, by focusing on technologies such as blockchain.

ET Spotlight|
Jan 14, 2020, 08.00 AM IST
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ET Spotlight
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Thanks to technological innovation, global banking has undergone colossal changes in its structure and practices. The youthful and aspirational population of India is seeking a rapid economic transformation, capable of delivering double-digit growth, jobs, and prosperity for all.

Potential areas for FinTechs
Apart from the area of payment, there are other potential areas in the Indian context, where Fintechs can focus to drive major business from Tier 2 and Tier 3 cities. It isn’t surprising that a staggering number of Indians still need to be added to the modern banking and financial sector. And without digitization, it will sound like the wildest dream. Due to the lack of digitization in banking associations, a large number of people do not have access to real-time loans in the market place and this is why the loan rejection rate is still a challenge. Establishing modern banking, therefore, is the need of the day and an exciting proposition to tap potential customers residing in Tier 2 and Tier 3 cities.

Digital payments gaining ground in India
Innovation in technology is a blessing in the financial sector and it is opening opportunity windows to newly introduced payments and small finance banks to reach out to unbanked sections of the country. Fintech is all about digitizing money. The increasing penetration of the Internet and the extensive use of smartphones by people irrespective of their age, class, gender, and educational background are making technology inclusion a reality. If technology is appropriately harnessed, a large segment of masses can be connected to the modern banking scenario, currently unserviced or underserviced.

According to current estimates, investment companies increased their funding to Fintech startups from $1.8 billion in 2010 to $19 billion in 2015. It is forecasted that the Indian Fintech software market is likely to touch $2.4 billion from the current $1.2 billion, as per a NASSCOM study. Thus, there lies a major opportunity for Fintech players in providing lower-cost services to underbanked and unbanked masses in India. FinTechs have a major role in realizing the Government of India’s vision to make banking services available to every household in India by 2020.

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Hassle-Free, transparent and faster borrowing for users
India is being considered as the fastest-growing major economy in the world, creating an architectural framework for newer players in the loan portfolio segment. In the forefront of it is technology that has seamlessly connected the dots between borrowers and lenders, offering credit in more convenient ways. Fintech players are creating innovative ways to offer better value to consumers, leaving them spoilt for choice- be it a personal loan, home loan, auto loan or loan for consumer products. Affordable interest rates, faster processing, transaction innovations are working in favour of borrowers.

Technology being the forefront of the digital eco-system
Economic growth in India has been broadly on an accelerating path, which is likely to be the fastest-growing major economy in the world. Most of the FinTechs are startups by young innovative minds, willing to make risky choices. Application Program Interface(API) enable Fintechs to develop value-added applications. The role of Fintech Platforms in the nation's growth is driven by Automation, Data Science and Artificial Intelligence. Leveraging the technology-driven modern financial ecosystem, Fintech players can cater to the large underbanked masses, that traditionally remained unserved.

FinTech Companies can achieve customer satisfaction and loyalty, by focusing on technologies such as blockchain. Most of the innovation is taking place towards the speed of service delivery, reduced interest rates and easy application for the consumers. There is a manifold increase in the traffic coming from Tier 2 and Tier 3 cities over the past years to the digital aggregator sites, contributing to the rise in the market.

Industry Insights
Based on a study, 46% of Indian Fintechs are focused on payment and trade processing. Fintechs have a great role in redefining the future of payment systems in India with the recently launched Unified Payment Interface by NPCI. It will remarkably assist in making the country a cashless society. Banks and NBFCs have adopted the digital eco-system, automating the backend process to reap the short term and long-term benefits. Artificial intelligence, big data analytics, robotics, blockchain, are some of the technological innovations which the financial institutions are leveraging to help in real-time decisions, reaching the last mile customer.

It is logical to expect that in the future years, Tier 2 and Tier 3 cities are going to lead the FinTech space coupled with the solid strength of conventional banking. Both traditional and non-traditional financial institutions are forging partnerships in their specific areas. Banks that collaborate with the benefits of FinTech startups will work jointly to innovate customized digital offering while ensuring maximum benefit to the consumers, thereby tapping the potential masses.

(This article is written by Rachna Suneja, CEO Afinoz.com)
(This article is generated and published by ET Spotlight team. You can get in touch with them on etspotlight@timesinternet.in)
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