By Bhagvan Kommadi, Founder of Quantica Computacao
In 2018, the total market cap of the fintech industry grew to nearly $170 billion in U.S. In 2019, these companies are expected to continue to have double-digit growth. The companies which are expected to get into double-digit territory in 2019 are card issuers like Visa and Mastercard due to the growth of fintech payment companies like Square and PayPal. Financial technology companies are offering salary-linked products. Salary linked products are related to salary processing, loan payments and transfers.
The analytics related to how long an individual has been with their employer is used by the employer for performance metrics. The other key performance areas are stable employment, credit history, ratings and current loans. Fintech companies are coming up products such as loan transfers, balance transfers which help the employees to consolidate the high interest loans to lower interest loans. These products help them in savings and making them on track with their investment strategies.
Fintech companies are providing services using open banking and conversational AI. These services help the customers who are in real debt trap. Automated and mobile-first services are helping customers to understand the budget planning and manageable repayment planning.
These services are helping the customers to find a path to financial recovery. Financial Technology companies are taking on big problems and building new solutions. There is scope for handling and coming out with new products in less grand issues. For instance, Home Owners are worried by impenetrable language. Long Terms and conditions in the mortgage industry scare them. Financial technology companies are doing great in disrupting old incumbents.
Old incumbents are benefiting from customer loyalty. Many of the customers are loyal due to inertia instead of experimenting with competitive offerings. There are many companies which are looking at money management and savings planning areas. Tech Savvy early adopters are trying out new products. The most vulnerable and excluded members in the cities are not subscribing to the new products. Online price comparison is being tried by digitally excluded.
Digitally excluded are not able to utilize financial comparison tools. They end up paying a greater price for products. Financial Technology companies are competing with banks in many areas in financial sector. These companies are selling financial services and solutions. Regulatory reasons and the internal structures have put pressure on banks to compete with startups. Startups are performing great in terms of innovation speed.
Tech companies have realized that financial services of all kinds will be integrated in the daily lives of the customers. Customers are increasingly becoming digital. The different financial services that they are using are money transfer, lending, investing, payments, loans, credit cards, wallets and trading.
Financial inclusion is an emerging and popular topic in the financial services industry. It is related to questioning about whether startups or top players in financial space are serving the underbanked or unbanked. Innovation has increased the number of applications that customer use to manage their finances and investments.
Financial emerging technologies such as AI, Blockchain, ML, IOT and others has helped challenger banks to transform the banking experience for customers. To start with, they are planning to replace the branches by having better customer experience on multiple digital channels.
Bhagvan Kommadi is the Founder of Quantica Computacao & has around 18 years’ experience in the industry, ranging from large scale enterprise development to helping incubate software product start-ups. He has done Masters in Industrial Systems Engineering at Georgia Institute of Technology (1997) and Bachelors in Aerospace Engineering from Indian Institute of Technology, Madras (1993). He is member of IFX forum,Oracle JCP and participant in Java Community Process.
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