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October 21, 2023December 18, 2023 byJeet Vasa

What’s next in digital transformation in Europe

In Broadridge’s third annual Digital Transformation and Next-Gen Technology Study, 500 C-level executives and their direct reports across the buy side and sell side from 18 countries were surveyed

Mike Sleightholme, President, Broadridge International

On average, respondents’ firms control estimated assets of $121 billion. More than half agreed that digital transformation is currently the most important strategic initiative for their company, and the proportion of IT budgets allocated to digital transformation has increased to 27% on average, up from 11% last year. A further 71% of global respondents also say AI is now significantly changing the way they work.

The biggest increase in technology investment from European firms in the next 2 years will be allocated to cybersecurity – with respondents saying they plan to increase spending by 29% by 2025. This level of backing is followed closely by investments into cloud platforms and applications. Firms are ‘lifting and shifting’ legacy systems in favour of cost-effective, cloud-based infrastructure with microservices and APIs at the core.

Spending on data analysis and visualisation tools is planned to increase by 26% in the next 2 years. As it stands, too many firms are relying on fragmented data sets that could offer valuable insights if they were brought together and combined with powerful analytics solutions. The top driver for these investments is improved customer acquisition and retention. As market competition increases, the benefits that next-gen technologies can bring to the end-consumer are one of the most significant ways that firms may differentiate themselves from one another.

The second biggest factor in the decision-making process are cost savings and efficiencies. As next-gen technologies mature, the financial benefits become more tangible, making it easier to define a business case for investment.

Finally, speeding up the time it takes to bring new products to market is a priority for European firms and ranks as the third biggest driver for investments. This agility allows firms to take advantage of short-lived opportunities to gain market share in new asset classes or client segments as the pace of change accelerates.

The biggest challenge cited by European firms is insufficient budget for innovation. Particularly against today’s economic backdrop, firms are feeling hesitant to invest money into new projects. The second biggest challenge is staff resistance to constant change. Gaining buy-in from the teams that will be using the technology can be as important as buy-in from the C-suite approving investments. Education is important – firms must ensure their teams properly understand why these technologies are necessary, the efficiencies they can create, and how they will help the team, the business, and clients. The third most prevalent challenge for European firms is ongoing market and economic disruption. Against a backdrop of geopolitical tensions, recession fears and persistent inflation, it can be difficult for business leaders to focus their attention on technology investments.

Digital transformation is still at the top of the C-suite agenda, but it is also entering a new phase driven by more powerful technology. Widescale adoption of generative AI, as well as growing maturity in blockchain and DLT, will drive a new wave of exponential change. Other nascent technologies such as quantum computing and the metaverse are on the horizon.

When asked about the longer-term future, 65% of European firms believe that blockchain and DLT will become the core of financial markets infrastructure in 10 years’ time. Nearly a third believe that the metaverse will become a key channel for client interaction within the next 10 years. However, firms said they only plan to increase investment in the metaverse by 4% over the next 2 years, indicating a wait and see approach.

This is an exciting time for the financial services industry, adapting to the rapid pace of change may pose huge challenges for business and society, senior leaders should keep a firm eye on the opportunities created by digital and next-gen technologies as they evolve.

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October 21, 2023December 18, 2023 byJeet Vasa

Transforming financial lnclusion through AI and Machine Learning

The financial industry is undergoing a profound transformation, largely driven by the growing influence of Artificial Intelligence (AI) and Machine Learning (ML). Within this dynamic landscape, the FinTech sector has emerged as a trendsetter, spearheading the adoption of AI and ML technologies.

By Rajat Dayal, CEO, Yabx

These advancements are redefining sustainable finance, particularly in terms of financial inclusion, by breaking down barriers that have traditionally hindered access to banking services, such as loans and investment opportunities for the unbanked population.

Credit Scoring and Risk Assessment

Yabx’s innovative use of AI/ML algorithms on raw data has led to the creation of 15,000 features for comprehensive financial profiles of borrowers, highlighting their commitment to data-driven lending. This transformation is pivotal, with credit scoring and risk assessment at its core. These systems leverage a diverse range of data to assess an individual’s financial reliability, effectively reducing one of the key risks associated with lending. Machine learning models have elevated the standards of evaluating an individual’s creditworthiness. This innovative approach empowers banks to expand their portfolios without compromising their risk tolerance, offering loans with a more refined risk management strategy.

Recommendation Engines

In a world where choice is paramount, AI-driven recommendation engines come to the forefront. These engines utilise customer behaviour patterns to provide tailored suggestions for financial products and services, especially loan products that align with the unique needs of each consumer. This bespoke process significantly increases the likelihood of successful loan applications, offering a more personalised and user-friendly experience.

Enhancing Customer Segmentation and Personalisation

AI and ML algorithms are now increasingly employed to enhance customer segmentation and personalisation. The ability to categorise consumers based on their financial behaviours and preferences allows for the provision of tailored loan products with unparalleled precision. This level of personalisation is particularly valuable for microbusiness owners, as it reduces the traditional financial bureaucracy, making borrowing more accessible.

Customer Insights and Market Research

AI and ML technologies offer analytical power, enabling organisations to gain deep insights into market trends and customer behaviour. This foresight equips businesses with the ability to adapt to market shifts and cater to the evolving financial needs of their diverse customer base, ensuring they remain competitive.

Automated Customer Onboarding

Efficiency and customer accessibility are at the forefront of the FinTech process. AI-driven solutions automate identity verification and Know Your Customer (KYC) procedures, streamlining the customer onboarding process. This automation ensures that borrowers can promptly access the financial support they need, free from cumbersome administrative delays.

In Action

An exciting example of AI and ML in action is Zed-Fin Loans, powered by Yabx, a pioneering sustainable banking initiative in Zambia driven by a powerful tri-party LAAS partnership. This partnership allows parties from three adjacent industries to work together to bring micro loans to the market in Zambia. Zed-Fin Loans is a testament to the transformative power of collaboration, technology, and innovation. Their success is a resounding endorsement of AI and ML algorithms, displaying their positive impact on Zambia’s financial landscape.

In conclusion, AI and ML are revolutionising the financial sector, making it more inclusive, efficient, and customer centric. These technologies are breaking down barriers and setting new standards, as demonstrated by the success of initiatives like Zed-Fin Loans in Zambia. The future of finance in Zambia and around the world looks to be very promising, thanks to the collaborative power of technology and innovation.

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October 21, 2023December 18, 2023 byJeet Vasa

Cyberattacks: 2023’s Greatest Risk to Financial Services

New year, same big problem. Without doubt, cyberattacks have posed and continue to pose the single biggest threat to the UK’s financial services industry

by Miguel Traquina, Chief Information Officer at iProov

Three in four industry execs in the UK deem a cyberattack to be their highest risk factor and, as the economy enters choppier waters, this threat is rising, with those expecting a high-impact cyberattack in the next three years rising by 26% in the second half of 2022 versus the first.

2022 has been another year of seismic change in the cybercrime space. Types of attacks are evolving rapidly, and consumer awareness is growing. Now, more than ever, we’re starting to see huge end-user demand for greater online protection from identity theft and other online threats.

Public and private sector organisations around the world are responding by exto increase digital trust and enables with the goal of increasing digital trust and enabling their customers to prove they are who they claim to be securely and easily.

The pace of advancements in digital identity verification will only accelerate more in the coming year, especially in a high-value and highly sensitive industry like financial services, with more innovation and regulation on the horizon. As we welcome 2023, here are my top four predictions for the year ahead.

Biometrics + device will overtake password + device for 2FA

Calling out the ineffectiveness of passwords as an authentication method isn’t new, but what will be new next year is that finally this stubborn, outdated mode of authentication will be overtaken by the use of biometrics in twThroughout-factor (2FA and MFA) use cases.

Over the course of 2023, password + device will be replaced by biometric + device.

The uptake of MFA has been steadily rising in recent years, especially since the enactment of PSD2 for electronic payment services in Europe. While passwords are technically compliant as a strong authentication factor, they and other knowledge-based techniques leave a lot to be desired when it comes to security and user-friendliness. Biometrics and other inherence-based security hit the perfect balance between providing the necessary protection to make 2FA and MFA truly secure while also delivering an effortless user experience.

Liveness checks become mandatory for online identity verification in financial services

Speaking of regulation, 2023 will also see the European Banking Authority mandate all regulated financial service providers in the EU complete biometric liveness checks when remotely enrolling customers. These new guidelines will help ease new account of theft, and money laundering. What we’ll also see is consumers feeling more comfortable with, and demanding more, biometric verification at other points of their user journey.

As this becomes mandatory for financial services in Europe, attackers will turn their attention elsewhere – which will require the UK and other regions to follow suit.

Synthetic identity fraud will break records

Synthetic identity fraud exploded in many regions in 2022, even becoming its own industry. That is set to continue in 2023, with Aite Group estimating $2.43bn of losses from synthetic identity fraud this year. Nearly every organisation is at risk of onboarding a fake person and the implications that come with that: financial loss, data theft, regulatory penalties, and more. Organisations throughout the financial services world will need to ramp up their online security to identify synthetic identity crime attacks.

Deepfakes become ubiquitous as the next generation of digital attacks

The technology to create convincing deepfakes is now so readily available that even the novice cyberattacker can do serious damage.

Any financial services organisation that isn’t protecting its systems against deepfakes will need to do so as a matter of urgency. More sophisticated bad actors have already moved on to advanced methods, and in 2023 we’ll see a proliferation of face swaps and 3-D deepfakes being used to find security vulnerabilities and bypass the protocols of organisations around the world.

Privacy-enhancing government-backed digital identity programs will pick up pace – and they’ll be interoperable

Consumers globally are realising they don’t want to give their addresses and other personal data to every website or car rental firm or door-person outside a bar. As demand for secure identity services grows, more state and federal governments will begin to roll out interoperable digital ID programs that use verifiable credentials to enable citizens to cryptographically confirm details about themselves.

Device spoofing will grow exponentially

The increase in reliance on devices as a security factor has attracted the attention of cybercriminals, who are exploiting vulnerabilities for theft and other harm. In 2023, we will see an increase in the sophistication of criminals spoofing metadata to conceal their attract top made to appear like a mobile device) to circumvent enterprise security protocols. In 2023, organizations – especially those that rely on mobile web – will recognize the limitations of once-trusted device data and move verification services to the cloud.

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October 21, 2023December 18, 2023 byJeet Vasa

How Embedded Banking is transforming customer loyalty

The impact of loyalty programmes for brands looking to foster lasting relationships with their customers has been well-established for years. Research from Nielsen, for example, found that the vast majority (84%) of consumers are more inclined to remain faithful to brands with loyalty programmes. However, 79% of consumers are no longer interested in simply earning points for their loyalty.

By Kim Van Esbroeck, Country Head for Aion Bank Belgium & Chief Revenue Officer for Vodeno/Aion

Today, the loyalty ecosystem is shifting. In the age of eCommerce, competition for the customer is more fierce than ever, and brands are turning to embedded finance to differentiate themselves and drive engagement.

To find out more about changing loyalty preferences, Vodeno commissioned a survey of more than 3,000 European consumers in the UK, Belgium, and Germany to understand how embedded finance is innovating brands’ customer loyalty strategies.

How is embedded finance being integrated into loyalty programmes?

Embedded finance is a broad term that covers a wide variety of banking products – from payments to lending to savings. According to the Vodeno/Aion research, branded debit cards and digital wallets are popular embedded finance solutions, with 48% of respondents having used a branded debit card and 40% a branded credit card.

Today, early adopters are seeing how embedded finance can supercharge their existing loyalty schemes by providing customers with financial products that add convenience and tangible financial benefits. For instance, the Starbucks loyalty app, which enables customers to earn rewards and pre-order coffee with their smartphone, holds more than $1.2 billion in deposits as customers load cash onto their Starbucks Cards and app. In context, this is more than 85% of US banks have total assets, making embedded finance a clear route to profitability. Another powerful example of embedded finance in action is Target’s REDcard, which offers customers 5% cash back on purchases, contributing over $8.9 billion in volume annually and 12.1% of all Target sales.

How are consumers responding to embedded finance?

In today’s eCommerce landscape, consumers expect a frictionless customer journey, and financial solutions that make their lives genuinely easier – like flexible payment solutions and Buy Now, Pay Later (BNPL) – are key.

When it comes to their loyalty, just under half (46%) are more likely to use a brand’s loyalty card to make purchases if it includes BNPL. This figure was highest amongst the youngest consumers surveyed, increasing to 53% for those aged 16-24 and higher still (65%) in the 25-34 demographic.

Vodeno’s research went further, revealing a strong consumer appetite for embedded financial products, citing that over a third (37%) of respondents are actively seeking out brands offering BNPL as a result of rising costs, while 40% are only loyal to brands providing financial benefits such as BNPL and cashback, rising to 50% among those aged 25-34.

The benefits of loyalty

Embedded finance has a direct impact on conversion and repeat visits, with respondents claiming they shop with brands offering embedded financial solutions more frequently. According to the findings, 36% visit the brand’s app or website three to five times a month, with this figure rising to 43% among the 25-34 age group. Additionally, more than a fifth (22%) of respondents say they are likely to make more purchases with brands offering embedded banking, while 23% are more likely to spend more money with them over competitors.

Building bonds that last

Embedded banking has already revolutionised the customer journey and now it is changing the loyalty game. Our findings indicate that consumers are already actively recognising the benefits of financial solutions offered at the point of need, which is incentivising bigger shopping baskets and repeat visits. In a fiercely competitive market, brands stand to gain from new revenue-building opportunities and stronger customer relationships, powered by embedded banking.

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October 21, 2023December 18, 2023 byJeet Vasa

Small Finance Banks – The quest for technology-led differentiation

Since their inception, Small Finance Banks (SFBs) have been primed as a vital cog for the last mile credit and service delivery for the MSMEs, farmers, and unorganized sector units, helping to bridge the $240 billion credit gap for the underserved segment.

By Naveen Gupta, Senior Product Owner, Tagit

These Small Finance Banks have a robust base of borrowers with small credit needs. The banks so far have been reasonably successful in serving their priority segment and are now looking to establish their presence in the commercial banking space by evolving beyond a credit-only institution to a diversified financial institution.

In today’s environment, SFBs are facing twin challenges. Where, from one end, the FinTechs are grabbing their market share using innovation and new technologies and at the other end incumbents’ banks are blocking their market access with their size.

To compete with them, SFBs must step up their game. They need to look beyond rate strategy (providing higher interest rates on CASA and deposits as compared to the incumbent banks) and build a robust, sustainable differentiation built around their primarily intended high-technology, low-cost model.

Born on the cusp of the digital era, Small Finance Banks do not come with the baggage of legacy technology. Though they don’t have the capital to match the technology spends of their incumbent peers, the unbundling of the banking technology stack and ecosystem driven collaborative innovation – courtesy API economy and open systems – presents a great opportunity for them to undertake a phased, yet fast leap towards digital transformation, all the while keeping IT spends under control.

SFBs must focus on:

Implementing digital channels for banking services: Banks can use digital platforms such as mobile apps, online banking portals, and social media to provide customers with convenient and secure access to their accounts, transactions, and other banking services.
Enhancing security: Banks can use advanced security measures such as biometrics, encryption, and multi-factor authentication to protect customer data and prevent fraud.
Partnering with fintech: Banks can collaborate with fintech companies to access new technologies and innovative products and services to enhance their digital capabilities.
Investing in digital infrastructure: Banks can invest in modernizing their IT infrastructure to enable better data management, improved scalability, and enhanced security.
Providing digital financial education: Banks can use digital platforms to educate customers about financial literacy and digital banking services.
Improving data management: Banks can use big data and analytics to gain insights from customer data and use it to improve product offerings, target marketing, and personalize the customer experience.

With the right technology transformation strategy powered by smart investments and careful roadmap considerations, Small Finance Banks can grow their business and achieve sustainable differentiation while keeping costs under check.

Banks need to ensure that they have the right partners for their digital transformation. Partners having plenty of digital transformation experience in the Indian market can help transform SFBs with the right speed and scale without impacting existing business and thereby enabling the SFBs in their journey of expanding market share and revenue.

Banks should collaborate with Digital transformation partners like Tagit who have platform-led solutions, provide more value in the long term, ensure that solutions are future-ready, and services delivered are secured and scalable.

With the right mix of products, SFB can successfully transform to a universal bank, increasing their market presence fending competition from new age fintechs and other banks and bringing more value to their stockholders. Tagit can help Small Finance Banks in increasing their customer base and revenue and enhancing customer loyalty with new and innovative features.

Tagit has been helping banks in India in their digital initiatives by providing best-in-class digital solutions alongside a holistic digital roadmap.

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October 21, 2023December 18, 2023 byJeet Vasa

The gateway to success: Why businesses shouldn’t underestimate the importance of payment gateways

It can be very easy for businesses to assume that payment gateways come as standard and that one will do the job as well as the next, but nothing could be further from the truth. It shouldn’t be underestimated how important this juncture in the customer’s journey is, with many getting all the way to this point and then abandoning their cart because the process isn’t intuitive enough or, in some cases, downright confusing.

By Bob Kaufman CEO of ConnexPay

In this article, I’ll explore specifically what payment gateways are and what businesses should be on the lookout for to ensure they are using the best one possible.

What are payment gateways?

Payment gateways are the virtual equivalent of a point-of-sale system, allowing customers to pay for goods and services online from anywhere in the world, using a variety of payment methods. When done right, the end product makes it straightforward and convenient for customers to purchase goods, helping a business to grow its sales figures.

The best payment gateways are flexible and user-friendly, offering a variety of payment methods. They should be easy to integrate with any website and offer strong security features to protect customers’ financial information. When choosing a payment gateway, it is important to consider a business’s specific needs. If a business sells physical goods, it will need a gateway that supports credit cards and debit cards. If it sells digital goods, it may also need a gateway that supports PayPal or other digital wallets. Regardless of whether you sell physical goods or electronic goods, you need to offer multiple payment options.

The experience should be intuitive for the customer

If a customer in a store needs to wait for an extended period of time because the cashier doesn’t know how the cash register works, there is every chance the store will lose that sale. The intuitiveness of payment gateways is just as important. The interface should be user-friendly and the process of accepting payments should be simple and straightforward.

Equally, the process needs to work smoothly internally. A business’s finance team needs to be able to navigate its payment gateway’s user portal without any hassle to access financial information and customer purchase data. Information on customers’ payment processing fees, chargebacks and transaction are all included in this. A merchant being able to access this data and make meaningful sense of it is dependent on the payment gateway being easy to use, with intuitive navigation.

Actionable reporting and analysis

In addition to a user-friendly experience, another important feature to look for in a payment gateway is comprehensive reporting and analytics capabilities. A good payment gateway will provide a business with a payment management dashboard that gives them easy access to payment data. This data can be used to generate reports and insights that can help a business improve sales and marketing efforts.

For example, a robust payment gateway can use reporting and analytics to track sales and purchases, identify trends, and see which products or services are most popular with customers. A business can also use this data to improve its customer service by identifying areas where it can enhance the checkout process or provide better support. By taking advantage of reporting and analytics, businesses can make better decisions and improve its bottom line.

Better safe than sorry

Security is an essential aspect of the payment process. Customers need to feel confident that their purchases are safe, and businesses need to protect themselves from fraud, theft, and cyberattacks. As security technology evolves, so do the methods of cybercriminals. Therefore, payment gateways must be modern, sophisticated, and compliant with industry standards. They must be able to mitigate risks, reduce fraud, and accept legitimate transactions while flagging risky ones.

An integrated solution

Traditional payment systems are often siloed, which means that merchants must use multiple systems to manage their payments. This can be inefficient and time-consuming, and it can also lead to issues with data accuracy. A payment gateway that integrates with other business software can help to solve these problems. By integrating its payment gateway with its accounting software, inventory management system, and CRM, a business can get a single view of all payments. This will save time, improve data accuracy, and make it easier to track financial performance.

Enhancing customer support

Success depends on a business making sales, and sales rely on customers making payments. For payments to be made as easily and conveniently as possible, a business’s payment gateway needs to be reliable and efficient. If any technical issues or other problems arise, they need to be resolved quickly so that payments can continue to be made to the business without delay.

Effective customer support is essential for ensuring that a payment gateway is always up and running. Businesses need to be able to get help when they need it, quickly and easily. Look for a payment gateway that offers superb customer support, with clear instructions on how to contact support staff.

Making the right choice

Choosing the right payment gateway is an important decision for any business. Each of these factors is as important as the last. By prioritising all of them and seeking out a solution that facilitates them, a business can achieve their online payment goals and grow their business.

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October 21, 2023December 18, 2023 byJeet Vasa

Identity Verification for FinTechs: Ensuring Security and Compliance

Vivek Sridhar, Neokred — Vivek Sridhar, Chief Business Officer at Neokred

For Neo banks in the financial industry, digital onboarding is becoming more crucial. Neo banking is the name given to a new breed of digital-only banks that provide a broad variety of financial services via online and mobile platforms.

By – Vivek Sridhar, Chief Business Officer at Neokred

These financial institutions frequently build on top of the already-existing infrastructure, and they significantly rely on technology to give customers a smooth and effective experience. The procedure for signing up for and creating a new account with a neo bank is known as digital onboarding. It is a crucial part of the customer experience and has the power to build or break a person’s relationship with a new bank.

For modern banks, identity verification is a vital step in the customer onboarding procedure. Since it serves as the first point of interaction between the bank and the customer, digital onboarding is crucial for neo banks. It establishes the tone for the customer’s entire banking experience. A quick and easy digital onboarding procedure can provide consumers with a good first impression and persuade them to keep using the bank’s services. On the other hand, a lengthy and onerous onboarding procedure can deter clients from joining up or even cause them to give up completely.

Digital onboarding is essential for neo banks because it enables them to gather vital data about their clients, such as their details, income, and financial objectives. Initially, it is vital to prevent fraud and safeguard the bank and its clients from financial losses. Identity verification is the first line of security against attacks when criminals try to open phoney accounts using stolen identities.

Second, regulations seek identification verification. Anti-money laundering (AML) and know-your-customer (KYC) guidelines oblige financial institutions to verify their customers’ identities. Compliance with these standards is crucial if you want to avoid large fines and reputational harm.

Furthermore, identity verification is key for neobanks because it allows them to collect critical information about the consumer, such as personal information, income, and financial goals. A major use of this data is for offering specialized financial products and services.

Who Needs Technology for Identity Verification?

Financial institutions are a popular target for criminals attempting to conceal the proceeds of their illegal activities, Insurance companies, gaming organizations, and cryptocurrency dealers are just a few of the other industries that run the risk of moving money from and to online accounts.

Large amounts of personal data are transferred, processed, and stored by healthcare organisations. As a result, they are a prime target for cybercriminals looking for this valuable data and may also consider using identity verification software to protect their business and customers.

Given the harmful effect, any association with money laundering and financial crime can have on an institution, groups that engage with customers online rather than in person require a KYC plan to protect their clients, build trust and protect their business from fraud and data breaches.

As part of the onboarding process, these organisations must identify and verify users. But it does not end there. They must continuously repeat the process throughout the customer relationship to ensure that they do not pose any risk to the organisation at any time. The verification process should not impede providing an excellent customer experience, but rather should efficiently and securely connect a user’s physical and digital identities.

Identity verification software will be of interest to the teams and individuals responsible for designing, deploying, and managing the efforts required to protect the organisation from the risk of financial crime.

How to Find the Best Identity Verification Software in 3 Easy Steps:

Identity verification is critical for ensuring that the financial institution only deals with legitimate customers and follows compliance regulations. When selecting identity verification software for business, several factors must be considered to ensure that the organization’s decision is the best one.

Step 1: Analyze the Requirements

The decision must also be motivated by the specific needs of the business. The industry, customer profile, nature of online engagements, and user experience all impacts the role of identity verification as well as its correct function.

Step 2: Gauging the Features and Functionality

With a definite knowledge of the necessities for identity verification software, the emphasis moved to what providers choose to offer. Some features are critical to a solution and knowing what they are and how they are presented are critical to deciding on it with knowledge.

Step 3: Gauging Fit

As suggested solutions are considered, the choice of the safest alternative for the organisation should remain focused on meeting the needs of the business. Although there may be cost savings, some solutions require the vendor or in-house engineers to modify systems and do not give the team the flexibility to tailor the solution to the organization’s need

Using Neokred’s ProfileX Product by organizations to eliminate fraud. Organizations that use ProfileX automate the validation, screening, and decision-making processes required to approve good customers faster, stay compliant and reduce the risk of fraud.

AML teams can manage identity and document verification, including non-documentary verifications (name, address, DOB, SSN), watchlist screening, and monitoring using independent and reliable data sources — scanning against different lists and databases to validate identity and checking against known or suspected criminals to defend against fraud with better data.

The no-code flag and review platform provided by ProfileX enables teams to create workflows tailored to their specific use cases. These include synthetic checks that use spoofed or falsified personal information to identify entities.

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October 21, 2023December 18, 2023 byJeet Vasa

Surviving and Thriving: How Indian FinTech start-ups can insulate against funding winter

A funding winter is a period of reduced venture capital funding during which investors become cautious and risk-averse, resulting in a lack of funds for new businesses. The global economic meltdown has had some knock-off effect on the Indian FinTech industry as well. But the rate of adoption of Indian FinTech is still rising and shining. As per the Economic Survey 2022-23, Indian FinTech companies witnessed a staggering adoption rate of 87% across various sects of users including the underserved and those who belong to the bottom most stratum.

By Rahul Tandon, Chief Product Officer, Safexpay

This beats the global average by 23%. With over 2100+ FinTech companies, India is the third-largest FinTech ecosystem in the world. Despite the challenges, Indian FinTech start-ups attracted investments worth $1.2 billion in Q1 2023, a sharp jump of 126% compared with $523 million raised in Q4 of 2022, according to a report compiled by market intelligence platform Tracxn.

However, the total funds raised were 55% lower than $2.6 billion raised in Q1 2022. The number of funding rounds in Q1 2023 also experienced a drop of 77% and 39% against Q4 2022 and Q1 2022, respectively. The ecosystem has remained resilient, promoting innovation, improving operational efficiency, and prioritising regulatory compliance to succeed.

FinTechs Modifying Business Model

In the Indian financial services industry, partnerships have played a vital role in sustaining operations and generating cash flow. To adapt, businesses have adjusted their models, forming alliances and collaborations. FinTech companies often collaborate with banks, NBFCs, and insurance firms, leveraging their customer base and accessing resources. Such collaborations enable them to expand their offerings, such as digital lending platforms and payment solutions. FinTechs have also taken steps to conserve cash by scaling back on activities like marketing, prioritising cost-effective approaches. By aligning expenses with revenue streams, start-ups aim for sustainable growth and attracting investor interest.

Innovation is not only in products and services but also in business models. The reason being that entrepreneurs often get funding in a 12-18 month period, those who have not secured consecutive rounds of funding may have a limited runway. As a result, it is critical for FinTechs to run a business, which is sustainable and open to adaptation. Overspending on client acquisition and other unnecessary areas could be fatal for the growth and sustenance of the business. Focus should be on improving unit economics and being conservative with the initial funding. Start-ups, especially in FinTech, can boost their prospects of long-term success by implementing these actions.

Fostering Innovation

Innovation has been a driving force for Indian FinTech start-ups to attract investors and differentiate themselves in a highly competitive landscape. These start-ups have embraced cutting-edge technologies and developed innovative solutions to address the evolving needs of consumers. For instance, they have leveraged artificial intelligence, machine learning, and blockchain to create secure and efficient financial services platforms.

Government support has played a crucial role in fostering a culture of innovation and securing funding during challenging times. The Indian government has introduced initiatives like the “Digital India” campaign and the “Start-up India” program, which provide support and incentives for FinTech start-ups. Such government initiatives have encouraged entrepreneurs to develop innovative solutions, attract investors, and contribute to the growth of the FinTech ecosystem. Furthermore, ongoing innovations such as differentiated banking and insurance licenses, the introduction of Central Bank Digital Currency (CBDC), the implementation of Account Aggregator, the emergence of the Open Credit Enablement Network (OCEN), the integration of Digilocker, and the establishment of the Open Network for Digital Commerce (ONDC) are fuelling continuous progress in the sector.

Enhancing Operational Efficiency

Indian FinTech startups recognise the importance of optimising their operations to save money and exhibit profitability potential. Leveraging technology to increase operational efficiency is a key strategy for fintech companies. By automating manual processes, implementing artificial intelligence and machine learning algorithms, and utilizing big data analytics, FinTech firms can streamline their operations and reduce costs. For example, digital on boarding processes can significantly reduce the time it takes to open an account or process a money transfer. Additionally, chatbots can provide customer service around the clock, freeing up staff time for more complex tasks. These innovations not only lower operational expenses but also improve consumer experience, attracting a wider user base.

Credibility and Regulatory Compliance

FinTech and payment companies in India face a complex and evolving regulatory environment. Compliance requirements include obtaining licenses, adhering to data protection rules, complying with AML and KYC regulations, ensuring secure technology infrastructure, maintaining accurate records, submitting reports to regulators, and undergoing audits.

For FinTech start-ups to receive finance, trust and regulatory compliance are critical. They realise the need of preserving clients’ data, employing effective security measures, and adhering to relevant regulations. With data breaches and privacy concerns on the rise, start-ups have prioritised data security measure while maintaining transparency and responsibility in their operations.

Furthermore, forging solid alliances with banks, financial institutions, and regulatory agencies boosts the legitimacy of the whole ecosystem. Collaborative efforts to build regulatory frameworks, encourage responsible lending practises, and defend consumer interests foster a trust and confidence ecosystem.

The future of regulatory compliance in Indian FinTech and payments looks promising with the government’s push towards digitisation and financial inclusion. The apex bank has been working towards creating a more robust regulatory framework to ensure that the growing FinTech industry remains compliant with regulations. One of the key initiatives taken by RBI is the creation of a regulatory sandbox, which allows FinTech companies to test their products in a controlled environment before launching them in the market.

Way forward

The future of Indian FinTech industry is in position for growth and resilience, overcoming the challenges posed by the funding winter. To attract investor interest, FinTech companies should adapt their business models, forge strategic partnerships, and prioritise sustainable growth. Innovation will remain a crucial factor in setting them apart from competitors, with a focus on building scalable and profitable enterprises while optimising operational efficiency through technology integration.

Upholding credibility and regulatory compliance become paramount, encompassing data security, transparency, and responsible practices. By collaborating with banks, financial institutions, and regulatory bodies, FinTech firms can foster a reliable ecosystem. With government support and regulatory initiatives, the future looks promising for the Indian FinTech and payments industry, as it continues to drive financial inclusion and digital transformation across the nation.

Analytics IBSi Blogs

October 21, 2023December 18, 2023 byJeet Vasa

Future of women Leaders in the Indian financial industry

Recent data from Centre for Monitoring India Economy (CMIE) shows that the labour force participation rate for women in India has been declining and currently stands at approx. 20%. While some of the decrease could be attributed to more women staying in education, however, the rate still remains below global averages.

By Amrita Divay, Head of Sales – India at Apex Group

Closing the employment gap can contribute immensely to India’s GDP. Women-friendly and women-centric work policies would serve to enhance and improve India’s female labour participation rate.

This month, March 8^th marks International Women’s Day, celebrated by millions globally. It acts as a key focus point on inequity of career opportunities and barriers to progression for women working in the technology and financial services industries. We still have a long way to go to truly achieve gender equity in our industries.

Finance has been held up as one of the relative success stories when it comes to gender equity. For example in financial services, a report from Deloitte found that globally, the proportion of women in leadership roles within financial services firms has risen to 24% with projections for this to rise to 28% by 2030. According to a 2022 press release from Deloitte, women also hold 17.1% of boardroom seats in India, up from 9.4% in 2014. Of course, this is far from a truly equal 50:50 balance, but is on the way to ensuring that future generations of women in the workforce are given the opportunities they deserve to succeed and lead.

But other industries are lagging behind. The fintech sector is still dominated, at all levels, by men. So, what can we learn from financial services’ success? And what initiatives and ideas could we borrow and emulate in the tech industry? Here, I draw on experience from my career and share insights from where Apex Group has made significant strides to drive positive change.

“See it, to be it”

Over the course of my career, I have worked across multiple sectors and in some, it was very obvious that women are often under-represented in sales. It is for this reason that I believe that one of the best ways to redress the gender imbalance in the fintech world is by having more, visible female leadership. There is a clear multiplier effect – Deloitte’s research shows that for every woman added to the C-suite in an organization, three women rise to senior leadership roles. Indra Nooyi, Arundhati Bhattacharya of Salesforce India and Kiran Mazumdar Shaw of Biocon are often cited examples of positive female role models in the Indian business community and diaspora.

Apex Group’s Shadow ExCo initiative was designed to help address this. A diverse team of leaders from across the global business were given the experience of being involved in C-suite discussions and business strategies. By bringing new perspectives, they were able to challenge received wisdom and showed how diversity of thought can help improve business decisions and fuel innovation. As a result of this program, two women were promoted to join our Executive Committee.

Attracting top female FinTech talent…

One result of the pandemic is the proliferation of hybrid working and flexibility – which perhaps supports women seeking to balance their professional and domestic commitments.

Apex Group’s approach to return to office has included adaptable working policies to help colleagues of all genders to balance their personal responsibilities while still excelling professionally and delivering exceptional service to our clients. Apex Group has been able to differentiate itself in the Indian market by understanding that proximity and travel time to office are extremely important for our employees. Our peers only have one or two hub offices in India, in contrast to our strategy of creating six offices (with more to come) in Indian cities, closer to where our current and future employees live.

Global fintech businesses can set themselves apart by emphasizing the development and promotion opportunities they can offer female employees. One special initiative which Apex Group has introduced is the JUMP global mobility program which enables employees to explore new countries and cultures through short-term assignments and long-term secondments to various global locations.

…and keeping them

Attracting the top female talent in the industry is only the first step. Ensuring they stay and can reach their full potential is the next stage. In a fast-growth ever-changing environment such as fintech, the retention of your people through continued recognition, both financial and non-financial, is extremely important to ensure they feel happy and empowered in their careers and roles. At Apex Group, we’ve introduced employee recognition initiatives to thank our people for their hard work, to ensure they know it is appreciated and to reward them for their loyalty, dedication and achievements.

In addition, earlier this year, we launched the Women’s Accelerator Program, a global initiative with participants from across our offices globally, to help elevate female talent, and give participants the tools and skills to advance professionally and reach their full potential. The goal is to elevate already high performing female talent we have in our business and over half participants secured a job progression or promotion following the program.

Outlook for the Indian market

Over the last challenging years, India has shown itself to be a resilient and adaptable technology and finance market. Indeed, it remains hot bed for innovation and there is substantial amount of capital being directed into the FinTech sector. We see huge opportunity for growth both domestically in India created by a thriving and expanding private equity and venture capital sector, and in connecting Indian capital to other international financial hubs.

Growth businesses in the fintech industry must take seriously their responsibility to set an example and to drive greater equity, diversity and inclusion. It is thought that the global pandemic has disproportionately impacted women in the workforce, but the future looks bright for the next generation of female leaders in financial services and technology. To regain traction and improve gender equity, International Women’s Day is the time for businesses to commit to driving positive change.

Analytics IBSi Blogs Payments

October 21, 2023December 18, 2023 byJeet Vasa

How to be a disruptor in the payment card market

True disruption is hard to achieve and rarer than you think, but when a company addresses a real consumer problem and rides the wave of consumer change, you see the birth of a major market player.

By Jeremy Baber, CEO of virtual payment card provider Lanistar

We often see the biggest disruptors thrive in times of change, very often as a result of economic challenges. It will come as no surprise, therefore, that the likes of Netflix, Uber, and even Airbnb all rose to prominence after the financial crisis in 2010 simply because they all provided solutions for consumers facing very real problems in a time of change.

Each brand delivered convenience and financial savings, using the very latest technology and a shared economy model that created new, exciting, and inherently better experiences for consumers. This is exactly what consumers wanted, and it helped spawn a host of new markets.

It is this model that is powering a revolution in the card payment market today- one that has so often been at the forefront of change and innovation in its own right. Today’s consumers – banked or unbanked – are demanding more from their suppliers, forcing them to reinvent themselves and their product offerings. This is happening while the financial services industry as a whole is facing increased regulation.

The Disruptive Consumer

Historically, brands and service providers have always relied on consumers basing their purchasing decisions on basics such as service levels and fair pricing. But the modern consumer has developed far higher expectations based on a host of new metrics such as personalised interactions, proactivity, and even whether a company can offer a connected digital experience.

Today’s consumers are disrupting traditional buying patterns and businesses, demanding elements such as cloud, mobile, social media, and AI to deliver an immediate, valuable, and personalised experience. They have learned from Netflix and Uber, and any business that fails to address this will fall by the wayside.

But the disruptive consumer does not stop there. According to research from Capita, over half (56%) of all consumers said it was important to them that their bank or building society acted sustainably and/or ethically. This does appear to be a direct result of the pandemic and increased awareness of the climate crisis, with consumers taking time to reappraise what’s important to them.

Put bluntly, these views have been extended to those businesses where they wish to spend their money. Millennials are leading the charge in this ethics revolution, with 60% claiming it’s important, followed by Boomers (57%) and Gen X (39-53 years old) 55%.

Democratisation Of Financial Products

Financial inclusion matters and is the cornerstone of economic development. When people have a bank account, it enables them to take advantage of other financial services like saving, making payments, and accessing credit.

According to The World Bank, 71% of people have a bank account in developing countries today, up from 42% a decade ago, while globally, 76% of adults around the world have an account today, up from 51% a decade ago. These tremendous gains are also now more evenly distributed and come from a greater number of countries than ever before.

But this still means some 1.4 billion people remain outside of the traditional banking sector. These tend to be the hardest people to reach – very often women, the poor, the less educated, and, very often, those living in rural areas.

While digitising payments is the way to go, much more is needed. Governments, private employers, and financial service providers – including FinTechs – should work together to lower barriers to access and improve physical, financial, and data infrastructure. This means FinTechs need to build trust and confidence in using financial products, develop innovative new products, and implement a strong and enforceable consumer protection framework that will include these aforementioned individuals.

After all, the unbanked and the underserviced sector is today the greatest untapped market opportunity for many fintechs.

The Integration Of People And Technology

The evolution of technology is at the heart of efforts to better serve customers. Adopting new technology is, therefore, critical for financial services organisations to thrive.

Progressive financial services companies are on the lookout for new technologies to improve efficiency and speed of service, as well as provide a better customer experience. This is without doubt a direct result of the competition faced from consumer brands like Amazon, Facebook, and Google.

Even before the pandemic, customers increasingly expected easily accessible and fully personalised digital products and services. As a result, financial institutions were already rethinking processes, expanding tech investments, and testing new applications.

Incumbents have traditionally looked for technologies to increase efficiency and lower costs. FinTechs, by contrast, start with a customer problem, identifying ways to address it with digital tools, then build new business models around digital solutions.

The digitisation of financial services is ongoing. Enterprises have a choice: make innovation the focus of a stand-alone organisation, or integrate it throughout the business. The winners in this race will be the ones that marry technological innovation with the expectations of today’s consumer.

The Progressive Consumer

Over the last few years, some of the most influential global financial institutions have committed to reducing emissions attributable to their operations. They have also pledged to reshape their lending and investment portfolios to produce a net zero carbon footprint by 2050.

ESG is big business. Banks are restructuring to adopt green pledges, and fintech is developing new solutions to address climate-related consumers and issues, all as part of detailed, overarching ESG strategies. ESG-focused FinTechs in particular have a unique ability to achieve rapid growth, deliver sustainability-focused innovation, and attract investment capital to support their efforts to improve the environment and society, all while generating substantial returns. All of this is being done due to the requirements of an ever-evolving and demanding consumer.

The climate-centric FinTechs in the payments sector driving the biggest change are the ones focusing on influencing the spending behaviours of sustainability-minded consumers. By engaging with this demographic, FinTechs can sustain their revenues by aligning financial transactions with ESG goals.

Over the past decade, new digital FinTechs have begun to transform and disrupt the financial services sector. Technological advances in finance are not new, but progress has arguably accelerated in the digital age due to improvements in mobile communications, AI, machine learning, and information collection and processing technologies. This revolution was matched by an extraordinary increase in consumer expectations.

The payments market in particular has experienced a rapid proliferation of digital innovations that make payments faster and cashless. Consumers in advanced and emerging markets have increasingly adopted fintech services because of their convenience and lower cost. The challenge for both new and existing firms is to create and deliver new financial products and services as they strive to compete.

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