Into the Indian fintech endgame

Financial services and technology when locked in a firm embrace, result in disruption and synergies. Fintech is transforming the financial services space and will continue to do so as the industry makes the shift towards fostering innovation and delivery. Moreover, the greater flexibility provided by the application programming interface (API) technology means banks can provide the kind of product customisation and experiences customers now expect. Here are the top four trends that are set to revolutionise the industry:

Interoperability in payments: The Unified Payments Interface (UPI) brings together a larger number of people under the umbrella of financial inclusion. While traditional banks have seen moderate success with their mobile wallets, UPI has seen a turbo boost, allowing for interoperable payments. A strong environment of interoperability in the payments system benefits all the participants in the ecosystem; it can produce cost efficiencies and enable superior risk management. Providers to these end-users, including banks, networks, and processors gain revenue from payments in the interoperable systems that they may not be able to achieve with closed-loop (or non-interoperable) systems. The end-users, including consumers, merchants, and governments now find it easier to make and accept payments.

The financial ecosystem in India is undergoing a transformation with changing trends in services and emerging business models, helping re-shape financial services delivery. Furthermore, India will see the adoption of ISO 20022 as a standard practice in the near future. ISO 20022 is an international messaging standard that facilitates electronic data exchange between financial institutions and their customers, users, market infrastructures, and regulatory bodies. It will not only move India towards a global common language for financial communication, but it will also increase interoperability, enable message data richness for enhanced regulatory reporting, more extensive remittance information, and usher in a new era of data handling.

SaaS platform: Software as a Service (SaaS) removes the need for organisations to install and run applications on their own computers or own data centres. There are now SaaS applications for fundamental business technologies such as email, sales and financial management, HR management, billing, and collaboration. SaaS makes even sophisticated enterprise applications such as enterprise resource planning and customer relationship management affordable for firms which lack resources to buy, deploy and manage the required infrastructure and software for themselves. This eliminates the expense of hardware acquisition, provisioning, and maintenance, as well as software licencing, installation, and support.

SaaS is one of the three main categories of cloud computing, alongside Infrastructure as a Service and Platform as a Service. It is a software distribution model that allows a third-party provider to host applications and make them available to customers over the Internet. SaaS entered India a few years ago, where it catered to only a few players. It wasn’t until recently that many companies realised the benefits of the software in business functions. Soon, companies with large teams began installing it for their business operations.

Customer experience and user experience: A seamless customer experience can be worth as much as a superior product or efficient process—helping build customer loyalty, reduce costs, making employees happier, and boosting revenue significantly. Today’s digital customers have higher expectations than ever before. And to be successful, companies need innovative approaches to attract and retain customers. Many leading banks are pouring a tremendous amount of resources into transforming the customer experience. Though customers now have the freedom to switch banks quicker than ever, it’s the job of the banks to unlock added services and ultimately put the customers at the centre of what they do. Having great online services designed for users is a positive step towards this goal.

Technology debt: It is more than just the sunk costs of hardware, software, and code; it is the inefficiencies, duplicate processes, and extra work created by an outdated or out of control technology architecture. Unmanaged debt will increase organisational costs and reduce agility over time. Technology debt can—and should— be measured and tracked the same way as any other liability to the business. Recognising the full scope of technology debt allows organisations to address it.

An increase in financial inclusion globally means growth in the number of people actively contributing to transfer and movement of money around the globe. It also means there are more opportunities for financially inclusive individuals and businesses to improve their situations, build and leverage credit for growth opportunities, and more. Hence, organisations must be very selective in deploying capital as we approach the possible endgame in this wave of technology change. With large technology companies knocking at their doors, incumbent financial institutions need to proactively engage with fintech disruption by building their own capabilities.

Views are personal.

The author is executive vice president of FIS Global Banking and Payments.

This column was originally published in the June, 2019 issue of the magazine.