FINTECH FIRMS EXTEND THIER BOUQUET OF OFFERINGS

FINTECH FIRMS EXTEND THIER BOUQUET OF OFFERINGS

Articles

Published
February 27,2019

In today’s world, Fintech firms are raising funds, tying up with banks, and expanding beyond just banking-related activities. Loan aggregators are also creating their own niche in this ever expanding market which is termed by none other than the Government of India as a “FINANCIAL INCLUSION” for each and every Indian. 

Before we delve deep into this, let us understand what a fintech company is or what does a loan aggregator does.

Financial technology, or fintech, is a financial services sector that emerged in the 21st century. Essentially, fintech is any technological innovation in the financial sector. This can include advances in financial education, retail banking, investment and crypto-currencies. Examples of fintech include: Stock trading apps and websites, Peer-to-peer lending sites that open competition for loans, thereby reducing rates, Robo-advisor services that provide online, algorithm-based portfolio management, All-in-one online personal finance management, and Budgeting tools. Fintech has four categories of users: Business-to-business for banks, Business-to-business for banks’ clients, Business-to-client for small businesses, and Business-to-client for consumers. The fintech industry is growing rapidly, and its growth is expected to continue. 

A loan aggregator is a middleman – a company that collects your personal and financial information on a loan application and shops it around to lenders who might offer you a loan. Loan aggregators, also called lead generators, sell the information you include on your loan application. They can see, store and sell your name, address, phone number, birth date, Social Security number, bank or credit card account number, and annual income. In Indian context this still is a nascent idea as many people don’t have their basic information online.

Fintech Companies: The following are some of the Indian Fintech Companies and the sectors in which they operate. It’s important to note here that these companies have raised capital very quickly from foreign and home-grown investors and are creating an own unique niche for themselves in the sectors which they operate be it financial lending, travel advisory, Payment banks, Digital wallets, etc.

Company

Type

Amount raised ( In $)

Investors

Paytm

Digital Wallet

1.4 bn.

Softbank

Capital Float

Online Lending

4.80 mn

IMFR Capital, M& M

Financial Services

Lendingkart

Online Lending

4.60 mn

Anicut Capital LLP

Incred Finance

Online Lending

3.75 mn

Paragon Partners

Fintech Aggregators These companies typically worked as aggregators for banking products such as loans, credit cards and savings accounts. They are now also looking at investment and financial products such as mutual funds, insurance and personal finance apps. The common Indian Fintech Aggregators who have also become Fintech companies on their own include Bankbazaar. om, Rubique, PaisaBazaar.com, Deal4loans (Later renamed as Wishfin)

SME-Focused Fintech and Last Mile participation of banks: What is means for the customer ? Unlike loan portals, fintech companies are targeting the SME segment and looking at expanding their base. Indifi, a loan provider that targets the SME segment, continues to focus on providing small-ticket credit in the unorganized sector, using alternate credit scores and data. Such companies are thriving and increasing their footprint only die to the fact that regular banks and NBFCs are unable to fulfil the gaps in the booming Indian financial marketplace teeming with millennial—young impatient aspirants seeking everything instantly- from travel to treadmill and from Hotels to Homes; everything these young Indians buy is on a digital platform. Millennials spend an average 17 hours online every week, finds a February 2018 study. Marketers are aware of this shift in medium. According to a January 2017 report by advertising firm Dentsu Aegis Network, the digital advertising industry in India will reach ? 18,986 crore by 2020, growing at a compounded annual rate of 32%, from ? 8,202 crore in 2016. By 2020, companies will spend more than 24% of annual advertisement spend on digital media, up from around 15% in 2016, the report added. As more companies expand products and services, customers will have more options to fulfil their needs. Soon you may go to just one portal for all your financial requirements. The next time you go to your bank, it is likely that you will use a fintech company’s services. Typically, all fintech companies ask permission to access your information. So, use these products only if you are comfortable sharing details. There is no harm in trying out new technologies, if that leads to greater convenience. The table below gives us an idea of how Finetch companies are different in performing from our quintessential banks or money lenders.

Criteria

New age Fintech

PSU Banks

Private banks

Traditional NBFCs

Money Lenders

Time to get funds

< 1 week

4-6 weeks

1-2 weeks

1-2 weeks

<5 days

Apply anywhere,

anytime

Yes

No

No

No

No

Hassle-free

Documentation &

processing

10minute application

1 month

1 week

Doc intensive

Unregulated

However as these new-age fintech companies are stuck up as far as their reach to consumers are concerned vis-a-vis a private bank or an NBFC, they have ramped up their volumes and their reach by partnering with new-age technology banks who have also tremendously benefited with these tie-ups as this partnership will address the needs of borrowers who have no access to organized bank credit, with limited or no documentation and without existing credit history. It is thus expected to bring more small businesses into the organized financial space.

Prominent examples of these strategic tie-ups are Capital Float tying up with IDFC Bank. IDFC Bank has partnered with Bangalore-based online lending platform, Capital Float, to provide digital lending to small businesses across India. It will provide the Bank access to Capital Float’s digital network of borrowers, thereby enabling it to diversify its portfolio of small ticket loans and grow its customer base. Similarly RBL Bank has partnered with start-ups such as MoneyTap and BookMyShow to help the bank acquire customers for its credit products, even as its tie-up with Bajaj Finserv is helping the bank to get customers who were never eligible for a credit card previously. Having launched the product with Bajaj Finserv in March 2017, the bank currently operates out of 60 cities and within a year and a half they plan to double their footprint. With MoneyTap, they are getting into both salaried as well as self-employed customers, further the line of credit is being made available on a credit card which can be used the way consumers want.  

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