CategoriesAnalytics Cloud Digital Banking IBSi Blogs IBSi Flagship Offerings Open Banking

Digital Disruption: How FinTechs Are Outpacing Traditional Banks in Trade Finance

Trade finance has always been pivotal for global trade, shoring up global supply chains and addressing liquidity concerns. However, there has been a significant shift in its landscape in recent years. While traditional banks once dominated trade finance, FinTechs are rapidly ascending due to several prevailing industry trends.

FinTechs: Pioneers of a Digital-First Era

As in many other industries, the COVID-19 pandemic expedited the digital transformation of the trade finance sector. Data from Statista highlights that the trade finance deficit recently rose to $2 trillion, up from $1.5 trillion before the pandemic.

As the world’s trade infrastructure felt the strain, it became clear that established systems and conventional bank services were lagging behind, enabling the growth of the trade finance gap. Many traditional banks struggled to adapt quickly enough, causing disruptions and delays in trade financing processes.

Enter FinTechs – with digital, cloud-centric solutions that boosted the accessibility of trade finance, which particularly benefited SMEs in emerging markets. In contrast to banks, burdened by paperwork and red tape, FinTechs harnessed innovations like open banking, digital data capture, and cloud-based storage.

By Oliver Carson, CEO and Co-Founder of Universal Partners

Oliver Carson, CEO and Co-Founder of Universal Partners

This gave way to a much more refined, agile process – introducing a modern approach that has effectively addressed the inefficiencies of traditional trade finance, heralding a new era for the industry.

Tailored Financial Solutions for SMEs

For decades, traditional banking practices, with their rigid criteria and legacy systems, have often disadvantaged SMEs. The innate nature of SMEs, characterised by limited credit histories and sporadic cash flows, has frequently resulted in declined trade finance applications.

However, FinTechs recognised an overlooked opportunity. Rather than viewing SMEs through the same lens as traditional banks, FinTechs delved deeper into understanding their unique needs, challenges, and potential.

FinTechs saw SMEs’ requirements and developed tailored financial solutions, such as non-recourse financing. This not only placed the responsibility of payment recovery squarely on the financiers but gave SMEs the crucial working capital they needed without the usual risks.

The success of this approach is evident in the numbers, with FinTechs able to offer a faster, more cost-effective digital service. According to Bain & Co’s projections, by serving these previously underserved SME sectors, FinTechs could earn an extra $2 billion annually in trade finance fees and potentially drive trade volumes up to a staggering $1 trillion by 2026.

A Battle of Agility and Reputation

Traditional banks, once dominant, are now facing challenges in the trade finance domain. Regulatory measures like the Basel III framework, designed to ensure financial stability, have inadvertently decreased the operational flexibility of banks, making it harder for them to adapt swiftly to changing market dynamics.

Compounding this is the banks’ cautionary approach toward SMEs, and this conservative stance has not only limited the growth potential of these enterprises but has also dented the banks’ image as holistic financial service providers.

In contrast, FinTechs have shown remarkable agility in adapting to the current market needs. Their strategies, inherently more favourable towards SMEs, have filled the void left by traditional banks. By leveraging the latest technological advancements, FinTechs have introduced enhanced security measures and streamlined operations, providing a more user-centric experience.

While banks recognise the evolving landscape and are making concerted efforts to innovate with platforms like ‘we.trade’ and ‘Trade Finance Gate’, there’s a palpable sense the institutions are trying to regain lost momentum. The challenge is not just about introducing new tools or platforms but fundamentally reshaping their approach to be more inclusive and adaptive, much like the FinTechs they now compete with.

In summary, FinTechs, with their proactive models and emphasis on customer needs, are continuously making their mark in the trade finance landscape. For traditional banks, the onus is now twofold: not only to innovate but to re-establish the trust of SMEs who now see FinTechs as more dependable allies. As the financial world moves ahead, agility, innovation, and customer-centricity will be at the heart of success, and at present, FinTechs are leading the charge and will find themselves the trusted partners of the global giants of the future.

CategoriesBanking as a Service (BaaS) Exclusive Finance IBSi Flagship Offerings venture capital

10 Reasons why your FinTech Needs the Transformative Power of Labs & Incubators

December 4, 2023

During the recent FinTech Happy Hour, hosted by Cedar-IBSi FinTech Lab and Cedar-IBSi Capital (SEBI AIF), founders, investors, and CXO executives from FinTech, BankTech, and BFSI institutions, came together to exchange ideas, network, and collaborate on Everything FinTech!

One topic that echoed in the room was the importance of labs and incubators in India and the role they can play for FinTech companies.

In the rapidly changing FinTech landscape, the demand for guidance, mentorship, and strategic connections is essential. The Cedar-IBSi FinTech Lab is one such powerful catalyst driving these ideas towards unrivalled success since 2018 when it was set up in Dubai’s Internet City. The Lab not only cultivates invaluable mentorship but also forges highly lucrative connections within the FinTech industry.

Talking about the potential of labs and incubators, Geeta Chauhan, Co-founder, and CEO, HiWi noted, “Incubation and lab programs are particularly useful for startups with no experience or who are starting from scratch. FinTech(s) can take advantage of mentorship programs, a set of contacts and funding that ensure they get the right foot in the door.”

Here’s how labs and incubators are revolutionizing FinTech in India.

  1. Mentorship and Guidance: Labs and incubators provide access to experienced mentors and industry experts who can offer valuable guidance and insights. This mentorship can help FinTech startups make informed decisions and navigate the complexities of the financial industry.
  2. Validation and Credibility: Being a part of an established incubator or accelerator program can add credibility to a FinTech startup. It validates the business idea and can make it easier to gain trust from potential partners, customers, and investors.
  3. Networking Opportunities: Accelerator programs like the Lab offer an extensive network of contacts in the FinTech and financial services sectors. Startups can connect with potential customers, partners, and investors, which is essential for growth and success in the FinTech industry.
  4. Product Development Support: Many FinTech startups need technical assistance and support for product development. Incubators, such as the Cedar-IBSi FinTech Lab can offer access to development teams, resources, and infrastructure to help in building and refining products.
  5. Market Research and Validation: Incubation programs often provide access to market research data and opportunities for market validation, enabling FinTech startups to fine-tune their offerings to meet customer needs.
  6. Fundraising Opportunities: Incubators and accelerators can introduce FinTech startups to potential investors, refine their pitch and business model, making them more attractive to investors. Many incubators and accelerators provide direct funding to early-stage startups in the form of grants, equity investments, or loans.
  7. Cost Savings: Shared office space, resources, and infrastructure can significantly reduce the operational costs for startups, allowing them to focus their financial resources on product development and growth.
  8. Skill Enhancement: These programs often offer training sessions and workshops that help FinTech entrepreneurs, and their teams enhance their skills in various areas, including marketing, sales, and leadership.
  9. Risk Mitigation: By providing a supportive ecosystem, labs and incubators can help FinTech startups identify and mitigate risks early in their development, improving their chances of long-term success.
  10. Market Entry Assistance: For FinTech startups, entering the Indian market can be challenging due to the diverse customer base and regulatory environment. Incubators can provide market entry strategies and assistance.

The Cedar-IBSi FinTech Lab is a dynamic entity propelling FinTech companies towards their target market. It has a proven track record in assisting 35+ FinTechs since 2018, offering market access and collaboration; product and market intelligence via the Cedar-IBSi Platform; visibility via exclusive in-house, global events, leadership interviews, coverage via the IBSi Podcasts and in the IBSi FinTech Journal; Acceleration and access to interesting co-investment opportunities via Cedar-IBSi Capital (SEBI AIF).

For FinTechs in the Middle East & India, the Cedar-IBSi FinTech Lab is not just a place for mentorship: it’s a hub. A hub that fosters a culture of creativity, facilitating FinTech startups to think outside the box and develop groundbreaking solutions.

Labs & incubators are thus the perfect partners in your FinTech journey to realize the true power of transformation, innovation, growth, and limitless possibilities.

CategoriesAnalytics Banking as a Service (BaaS) IBSi Blogs IBSi Flagship Offerings

What’s the difference between BaaS and embedded banking? Quite a lot

The problem with a loosely defined term is that its meaning can become stretched. Anyone who has described a stadium-filling act such as Ed Sheeran as “indie” because he plays a guitar is guilty of this.

Banking-as-a-Service (BaaS) is just such a loosely defined term.

Some providers have stretched the term to encompass services such as Open Banking, card platforms, and APIs. This confusion is further exacerbated when aggressive marketing campaigns overlap BaaS with another fast-growing term: embedded banking. Using one term to describe all of these disparate services makes about as much sense as using the same word to describe a multi-platinum-selling artist and the band playing to three people in the local pub.

By John Salter, Chief Customer Officer at ClearBank

John Salter, Chief Customer Officer at ClearBank

 

Confusion over these terms is already widespread. According to Aite, a third of fintech providers do not believe there is any difference between embedded banking and BaaS.

There are, however, important differences between BaaS and embedded banking. Businesses need to understand the differences between these two concepts if they are to understand their own responsibilities, especially around governance and compliance, and what it could mean for scaling up or adding new features in the future.

Breaking it down: What’s the difference?

Despite its name, BaaS does not necessarily mean working directly with the holder of a banking license or that the services provided require a license. Instead, providers offer banking-related services and infrastructure, sometimes on behalf of a licensed bank, to firms including fintech startups, e-commerce platforms, and even other financial institutions.

BaaS is a “push” model. A banking product is created and offered “as a service” to a potential user. BaaS is the distribution of banking products to financial institutions and non-financial institutions. For example, non-bank players like Uber or Lyft work with a BaaS provider that is responsible for payments, cards, accounts, and loans. However, who is responsible for compliance and governance can vary between providers and use cases.

On the other hand, embedded banking is on the “pull” side. This simply means that financial services and products are embedded into financial or non-financial platforms, such as e-commerce and mobile banking applications. Embedded banking is the provision of a banking service directly from the holder of a banking license and embedded directly into the user experience. A typical example would be the Buy Now Pay Later (BNPL) functionality online shops have included at the point of purchase for customers to access installment payment options.

Do businesses need to understand the difference?

Should anyone care about this? This is a good question as most businesses won’t start with the question of whether they want BaaS or embedded banking. In fact, they’re unlikely to ask this question at all. Instead, they will have specific requirements for banking or banking-like services, and approach the right provider with those needs in mind.

So, who cares? Aren’t we simply over-analysing the technicalities?

It may seem so, but there are important implications for regulation and who is responsible for compliance.

BaaS providers may have a banking licence, or they may hold an EMI licence. Embedded banking providers are, by definition, holders of a banking licence. It’s important when entering into any agreement that the customer-facing business understands the regulatory nature of the agreement—who is responsible for compliance and KYC, how funds are safeguarded, and whether they are protected by a full banking licence. There is already concern from regulators around where consumers’ money is held and how safe it is—is there enough transparency? Knowing the difference is important, especially when the “gold standard” is when funds are held by a bank in an embedded solution.

Businesses aiming to enhance their offerings with financial services have the potential to create differentiated services that set them apart from the competition. But working with the right partner is crucial to success. When evaluating a partner, businesses must consider the range of services on offer, technology implications, compliance, security, and more.

So, a clear understanding of the differences between BaaS and embedded banking will make it easier for any business to decide what is right for them and their customers.

CategoriesAnalytics IBSi Blogs IBSi Flagship Offerings Payments

Redefining the relationship between PSPs and merchants

The current relationship between merchants and Payment Service Providers (PSPs) is ripe for a reset. Merchants are grappling with consumer demand for greater payment flexibility whilst managing costs amid market turbulence and rocketing inflation.
Now acquiring has become a commodity, PSPs are struggling to justify higher margins and feel extreme pressure from players like Adyen, Stripe, and Checkout.com, who are aggressively going after the small-to-medium-sized SME merchant base. A race to the bottom on pricing is no longer working.
But this doesn’t mean there’s no hope for the future. If PSPs can expand the services for merchants to turn a pure acquiring relationship into a full banking one — innovation and growth opportunities are unlocked on both sides.

By Ivo Gueorguiev, Co-founder and Chairman of Paynetics

Ivo Gueorguiev, Co-founder and Chairman of Paynetics

The next level

Being a PSP in the current climate has become increasingly difficult. Pure acquiring services have become a commodity where client loyalty is short-lived, and margins are under pressure. Add increasing regulation, ever-changing card scheme policies and the growing redundancy of hardware Point of Sale (POS) — a pure acquiring relationship can feel like more pain than profit.

PSPs looking for longevity need to rethink their relationship with merchants, as they won’t win by continually under-pricing their competition and endlessly selling POS terminals. PSPs should instead consider how to compete with the big players, either banks or large acquirers, and add value to merchants.

Reducing merchant churn

An answer is moving from a pure acquiring relationship to a complete banking relationship. PSPs can offer bank accounts and corporate cards to bring down the acquiring cost and give immediate settlement to customers. The result? Increased margins and sped up transactions for merchants, enabling PSPs to draw in new customers, improve loyalty and reduce churn.

When a corporate card is issued within the same environment as card acquiring, merchants no longer have to wait three business days to move money from an acquiring account to a bank account. If a merchant can get a corporate card from their PSP, they can pay for their supplies and earn cashback, reducing the supply cost.

Another way PSPs can add value is by offering further lending facilitation through products like merchant cash advances reserved for banks and direct-to-merchant players like Viva Wallet. PSPs can leverage the transaction data to help lenders have a more precise underwriting of merchants, resulting in laser-sharp customisation of the loan profile and improved pricing.

Embedded finance to help PSPs step up

Fortunately, PSPs don’t need to figure out this new banking relationship alone. State-of-the-art instruments are available to providers wanting a deeper merchant relationship and additional revenue streams.

With the right financial services partner, PSPs can now offer fully functional International Bank Account Numbers (IBAN) accounts, open banking connectivity, and provide corporate cards. For instance, a fully functional IBAN account offers the same facilities as a regular bank account. Yet, with lower administrative costs and reduced complexity, making multi-currency, cross-border payments a breeze. Then there are the benefits of facilitating open banking. It enables merchants to embrace automation and leads to greater financial transparency by giving consumers more choice and control.

Another area of innovation is the latest software POS solutions, which only require a phone to accept card payments, leaving behind clunky, expensive hardware. Such features provide distinct advantages to merchants.

Benefits to both parties

Offering a suite of services enables PSPs to step up and compete with commercial banks and direct to merchant players so they do not get pushed out of an increasingly crowded field. In payments, doing one thing very well no longer cuts it — providers must offer more services to the same high standard.

Yet pursuing a complete banking relationship with PSPs is also in a merchant’s best interest. They gain a more user-friendly banking relationship, lower acquiring costs, immediate settlement and access to working capital.

Change is possible thanks to digital financial innovations and is desirable due to the significant economic benefits it could bring. A complete banking relationship benefits PSPs and merchants greatly, helping both maintain an edge in an increasingly competitive market.

CategoriesAnalytics ESG IBSi Blogs IBSi Flagship Offerings

A cleaner, greener future; Why fintech can lead the way to greater sustainability

With the Intergovernmental Panel on Climate Change (IPCC) delivering a “final warning” on the climate crisis earlier this year, we’ve reached a point where green changes are needed without further delay. The urgency for investments made to be directed by sustainable hands is urgent, as we are now at “a code red for humanity.” Historically, the finance sector has always been the principal driver for incorporating lower-carbon practices, so to safeguard a green transition and avert further damage from the current environmental practice, we must look to them to lead the way.

By Jeremy Baber, CEO of Lanistar

Jeremy Baber, CEO, Lanistar

The finance sector has invested in energy-efficient and work-efficient technologies that have completely revolutionised both their own sector and beyond. The rise of fintechs, alongside investments in the use of artificial intelligence (AI), the Internet of things (IoT) and machine learning (ML) are all ways in which finance has been ahead of the mainstream in adopting newer, cleaner technology. Even the rise of blockchain that we are seeing helps proliferate cleaner technology throughout their industry and beyond.

The time for sustainable net zero or even net negative global CO2 emissions is now to ensure a sustainable future before it is too late. With environmental consciousness currently at an all-time high, both from a governmental and consumer standpoint, we need fintechs to take the helm in mediating a smooth transition towards greater sustainability. The responsibility is upon fintechs to mediate this transition to greater sustainability.

Investing in sustainability is far and wide

Fintechs have always enabled innovation and contributed positively towards sustainability for a lower-carbon world, particularly as they aim to disrupt traditional finance operations in a customer-focused way. The rise of financial technology over the past decade has created a new era of potential for sustainable investing, particularly in ESG investing, green financing, and carbon neutrality.

Digital payment solutions can lead the charge toward sustainability and a low-carbon economy. The carbon footprint brought by physical currency – i.e., its creation, transportation, disposal, etc. – is minimised or eclipsed by digital cash transactions. Utilising digital removes the need for both plastic cards and paper transactions, streamlining transaction processes in an environmentally conscious way by reducing company waste.

Consumers want a cleaner conscience

Retail Week recently reported over half of UK consumers are more likely to buy from a retailer or brand with a strong ethical and sustainable ethos, with Millennials more likely to be eco-conscious and, by contrast, the Boomer generation less so than other generations. The new market is a more sustainably-conscious one, and fintechs should be looking to capitalise upon it. Gen Z and millennials want greater transparency regarding tracking and reducing their overall impact on the environment.

Recent research from the open banking platform Tink revealed that 40% of customers wish to track impact through services provided by their bank, and therefore holding their retail businesses of choice accountable is a big part of this, especially when many will stake green claims for consumer trust but not follow through. Consumers want a clear conscience when it comes to their personal impact, and that is reflected in the retailers they choose to shop with.

Currently, there is a significant gap in the market for innovative tracking solutions, with Tink’s research suggesting a significant number of customers would switch purely for access to tools to track their carbon footprint. Whilst 30% of surveyed banks have expressed interest in offering these tools, currently, these institutions have zero plans to actually do so. Fintechs can hold feet to the fire in this regard and act in the best interests of their consumers as an intermediary for directing businesses to change. It is easy to make green claims to gain customer support, but fintech’s pushing for responsibility for the sake of their customers helps motivate action.

A business incentive is still needed

No operational change can happen without the final say of the business CEO, and no CEO will consider investing in an operation that doesn’t have some business advantage to go with it. In highlighting the rising consumer demand, business leaders can feel more secure in adopting innovative yet lower-carbon alternative technology to gain customer rapport. As customers are more discerning than ever, they are more likely to scrutinise green credentials for authenticity before committing to a provider.

By contrast, change must be meaningful and not just surface-level support. It is no longer as simple as claiming to support green initiatives; real action is needed at every step. With every initiative to attract and secure interest from target consumers, businesses must follow through or their customers will quickly seek a stronger alternative elsewhere. And whilst many bigger fintechs have greater resources to allocate to sustainable initiatives, few are actually choosing to do so.

SME fintechs have greater mobility for impactful business moves

Where financial organisations with bigger pockets may have the power to push for greener tech across the board, they seldom have the mobility to enact changes across their operations. Yet the agility of smaller fintechs to deploy sustainable initiatives has meant that they can often overtake and lead the charge for greener decisions across operations. Smaller underdog competitors suddenly have an incredible advantage with this ability to outmanoeuvre their larger counterparts limited by traditional operations.

As the fintech sector continues to mature, business initiatives can continue to refocus the ecosystem away from short-term successes and instead towards long-term green practices. But without critical support from the UK government to support and protect green initiatives, we cannot make meaningful industry change. An updated policy is needed – without the demand for profit – to best help the finance sector to put pressure on change and secure a cleaner, greener future.

CategoriesAnalytics Big Data IBSi Blogs IBSi Flagship Offerings

Unlocking a digital future: how the finance industry can improve data quality

Deloitte’s recent predictions for the future of finance highlight the need for the finance industry to adopt the technology available to them in order to remain competitive. But for the finance sector to become truly digital, the quality of data is paramount.

By Baiju Panicker, Global CTO and Practice Head – Banking, Insurance and Financial Services at Altimetrik

Shifting to a truly digital mindset means adopting a digital business methodology that uses data to support and improve operations. However, if the data is low in quality, incomplete, or corrupted, this will make it near-impossible for the business to operate in an efficient and effective way.

Data quality critical in finance

Baiju Panicker, Global CTO and Practice Head – Banking, Insurance and Financial Services at Altimetrik
By Baiju Panicker, Global CTO and Practice Head – Banking, Insurance and Financial Services at Altimetrik

Low-quality or incomplete data can lead to poor lending, high-risk, flawed valuations and suboptimal trading. Ineffective targeting can also result from poor data, as can complaints, failures, and distorted insights.

In stark comparison, accurate data enables sound business decisions. High-quality data provides insight for analytics and efficient banking activities. It establishes greater integrity across operational analytics, fundamental to successful financial decisions and the overall success of the financial industry.

A great example of this is artificial intelligence (AI). AI is only as good as the data it accesses. It is crucial for financial firms to invest in data quality at the outset to enable successful digitisation, which in turn can boost competitiveness in the market and increase customer satisfaction.

Technology adoption critical

The adoption of technology is central to improving data quality. Leveraging various technologies to enhance data quality, such as automation tools for validation, AI for anomalies, and streaming analytics for real-time monitoring can ensure that only accurate and validated data is captured, improving the data quality immediately.

Data machine learning, blockchain, and natural language processing can help financial institutions improve their data quality and overall market performance by spotting inconsistencies, securing transactions, and extracting insights.

Without these building blocks, there is great potential for failure. Multiple client records can cause confusion, incorrect bills can damage trust, and customers and contracts may be lost.

Cleansing existing data is vital, but it is important to recognise that this cannot effectively be undertaken as a one-off project. Instead, it needs to be implemented as an ongoing activity to ensure overall business success. Alongside this ongoing process, businesses need to properly validate data as it comes in, such as automating data input and real-time monitoring to maintain a high standard of data throughout.

Utilising data stewards to monitor and address data quality issues gives a direct responsibility within the business to monitor data, clearly setting out the business’ intention to staff, customers and stakeholders that data quality is at the heart of the organisation and its operations.

Building a sustainable data quality framework

Undoubtedly, there will be lots of challenges that businesses face whilst undertaking this process. Focusing on a short-term goal – such as a single data cleanse – can be short-sighted and only create the same problems further down the line. Ensuring coordination across the business is key to success, which leads to greater accountability and removes silos from the process.

Machine learning and rule-based detection can support teams and help avoid any deviation from the prescribed style of data being captured. Text mining and natural language processing can help businesses analyse documents, call transcripts, and social media posts to identify semantic anomalies and outliers that indicate data quality issues. Alerts can then be set up to flag when issues emerge.

Ultimately, combining technology-driven detection with business-driven strategies for ongoing data quality improvement will enable businesses to be vigilant regarding poor quality or erroneous data being captured and utilised.

How to ensure quality

Proactive checking of data for errors and maintaining its quality is vital to the whole process of data quality, as early identification of problems helps to establish trust. Establishing a governance structure internally, where all parties are aware of and active in their roles, is fundamental both from a business perspective and also for stakeholders and customers.

Cross-functional data governance is important. It is not enough for each department to run its own checks and processes; it needs to be business-wide, with no silos or breaks in communication. This is where a Single Source of Truth (SSOT) is important. Rather than having multiple data locations that might not interact with other departments or processes, holding all the information centrally allows for better data accuracy and effective data cleansing across the whole business.

Overarching benefits of high-quality data

The potential benefits of improved quality of data to financial organisations are manifold. There is huge potential for increased revenue and cost savings through optimised data-driven decisions and operations. Data-driven activity is always more accurate, and data quality is central to this. The results are improved customer satisfaction and retention, with improved product offerings based on accurate findings.

From an operational perspective, management will see higher employee productivity with reliable data to work with, coupled with higher staff satisfaction. Through the integration of accurate, high-quality data there can be an increased use of automation and AI for more mundane tasks, enabling employees to work on more challenging and rewarding activity.

The finance industry is at a crucial juncture when it comes to digital adoption. Those who embrace digital adoption and intelligent ways of working through data and intelligent analytics will thrive, whilst those who lag behind will struggle to compete against competitors with a digital business mindset.

CategoriesAnalytics IBSi Blogs IBSi Flagship Offerings

Five ways to empower ‘Gig Workers’ with Digital Lending Solutions

The “Gig Economy” has emerged as an increasingly relevant phenomenon in today’s job market. The work model allows professionals to offer their services independently, especially through digital channels, without being tied to traditional job roles. This method offers flexibility and autonomy, simultaneously providing the opportunity to diversify incomes and explore different areas of expertise.

By Ranjan Kumar, Head of Finance & Accounts, RupeeRedee

Ranjan Kumar, RupeeRedee
By Ranjan Kumar, Head of Finance & Accounts, RupeeRedee

With the advancement of technology and the appearance of a myriad of digital platforms, the Gig Economy has attracted a significant number of professionals. Currently, it is expanding at a CAGR of 15% and fostering a robust network of workers ranging from delivery workers, drivers, designers, programmers, and many others.

However, regardless of the nature of work, the lack of financial stability remains a fundamental constant, placing Gig workers in need of robust financial services. The burgeoning potential of this economy space demonstrates the benefits fintech can avail by tapping into this new labour paradigm, offering tailored financial solutions based on the needs of freelancers.

Why Gig workers, specifically?

Gig workers, even though they comprise 85% of India’s workforce, have irregular cash flow and limited access to financial products like credit cards or pre-approved credit lines, and any sudden expenditure can upend their stability.

Income and Wealth Management

Unlike salaried workers, gig workers are subjected to an uncertain flow of income, regular payment delays, or no employee-sponsored retirement or insurance plan to fall back on. Thus, they need to be offered financial services that systematically analyse and offer insights into their income patterns, incorporate fractional savings in their spending patterns, and provide them with education and awareness for the same.

Unique Financing solutions

Due to the unique nature of income patterns, gig workers appear as less credible than salaried workers, which leads to financial products like loans and credit cards being underserved to this segment by financial service providers. Therefore, there is a huge unmet need for hassle-free, low-interest credit, which can be given by employing tools that can assess the creditworthiness of gig workers tailored to suit the nature of Gig work.

Fintechs catering to the financial needs of freelancers

Although the Gig Economy is growing, there is still limited competition in terms of financial services, which provides a unique opportunity for fintechs to position themselves as leaders in this rapidly growing market segment. By focusing on providing tailored financial solutions like specialised bank accounts, financial management tools, and flexible lending options, they can deliver exceptional customer experience earning the trust and loyalty of gig workers.

Data Analysis and Profiling

Fintechs use leading technologies like AI and data analytics to assess credit risk in a holistic manner and gather data that allows them to understand the financial needs of this segment and provide inclusive and equitable financial services to workers in the Gig Economy.

Fintech-powered Tailored Products or Services for Gig Economy Professionals

Considering the scenario of the gig economy, new-age digital lending platforms offer low-installment-based loans that allow borrowers to not worry about immediate repayment and can, in fact, enjoy the flexibility of splitting it over a few days, weeks, or even months. Hence, they still have access to liquidity. In addition, digital lenders leverage business process management systems to automate and optimise internal processes related to the care and support of gig workers by adopting machine learning algorithms that give insight into their financial behaviour.

Furthermore, by implementing ECM systems, digital lenders can easily store, access and organise relevant information, maximising operational efficiency and ensuring data security and confidentiality of gig employees. Apart from this, in order to save money or generate a financial surplus, they offer to store money in an investment instrument at minimum rates that can be liquidated on short notice. Thus, fintech can capture an expanding market and build strong relationships with this new segment.

Future Venture

The future of the Gig Economy holds limitless potential with the development of intuitive interfaces designed specifically for the needs of gig workers. This involves offering income and expense tracking tools, providing clear reports on transactions, and providing access to relevant financial resources, which poses an incredible venture for financial service providers to attract and retain Gig Workers.

CategoriesAnalytics IBSi Blogs IBSi Flagship Offerings

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
Mike Sleightholme, President, Broadridge International

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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Transforming financial lnclusion through AI and Machine Learning

Rajat Dayal, CEO, Yabx.
Rajat Dayal, CEO, Yabx

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.

CategoriesAnalytics IBSi Blogs IBSi Flagship Offerings

eCommerce is no longer possible without web scraping and big data

Gediminas Rickevičius, VP, Global Partnerships at Oxylabs
Gediminas Rickevičius, VP, Global Partnerships at Oxylabs

Studies have shown that companies that use data are almost 20 times more likely to be successful and have more than 50% better understanding of their customers. As a result, web intelligence is becoming increasingly important for businesses that rely on data, particularly for platforms that use publicly available data to analyze competitors, track customers, and generate leads.

By Gediminas Rickevičius, VP, Global Partnerships at Oxylabs

Web scraping and big data are essential for any eCommerce business allowing companies to glean insights from their competitors and provide the most up-to-date information on pricing, promotions, and market trends.

Changes in the retail landscape

In the US, the number of traditional retail stores dropped from over 450 thousand to nearly 350 thousand in 2021, with only a slight 2% increase in 2022. Although brick-and-mortar shops are slowly recovering after Covid, the increasing rent prices and cost of living are bringing new challenges to these businesses. It is estimated that over 50% of sales this year will be processed through digital platforms, ensuring the long-term viability of ecommerce.

The shift to online shopping revealed the need to get to know the growing number of customers better and faster. Competitiveness will only continue to grow, forcing companies to collect as much information as possible. Often it is understood that more data means a stronger business.

Big data – the driver of eCommerce competition

With the rise of accessible analytics tools and data-driven marketing strategies, eCommerce companies now have the advantage of tracking customer behavior more accurately. As a result, they are better able to tailor their services and products to meet customers’ exact needs and outplay their competitors in the process.

In the ecommerce world, big data is driving competition in a number of ways. By understanding customer behavior and preferences, retailers can better target their marketing efforts and personalize shopping experience to increase conversion rates. Additionally, companies can utilize advanced analytics to identify patterns and trends that can give them a competitive edge.

Data is also changing the landscape of pricing in eCommerce. Real-time data enables retailers to track competitors’ prices and adjust their own to stay competitive. Furthermore, dynamic pricing algorithms that take into account a variety of factors are becoming more common, further removing traditional price barriers.

Getting to big data with web scraping

Every day, approximately 2.5 quintillion bytes of data is created, and this deluge of information can be overwhelming for businesses, but it also presents a unique opportunity. Those who are able to harness this data and use it to their advantage will be well-positioned to succeed in the ecommerce competition.

Companies can make sense of this abundance of data and turn it into an advantage by creating a map of their competitor’s ecosystems. This involves not only identifying direct competitors but also analyzing their relationships with other players in the market.

Web scraping allows companies to quickly gather data about competitors’ assortments, observe what new products are appearing and disappearing, monitor price changes, and from that, observe their competitor’s strategy and learn. All this information can then be used to create a map of the competitive landscape, which can be valuable for a variety of purposes, such as:

Market trends analysis. Allows analyzing the introduction of new products and technologies, changes in market conditions, and shifts in customer preferences. By staying abreast of these changes, businesses can adjust their strategies to stay competitive and take advantage of new opportunities.

Competitive intelligence. A competitive ecosystem map can help a company to stay informed about its direct competitors, suppliers, as well as any other companies that might be vying for their customers’ attention.

Strategic planning. A competitor ecosystem map allows businesses to visualize the competitive landscape and better understand their competitors. This involves not only identifying direct competitors but also analyzing the relationships between competitors and other market players, such as suppliers, distributors, and customers. This can help businesses identify potential new partners, suppliers, and customers, as well as potential new threats.

By having a comprehensive understanding of the competitive landscape, companies can develop strategies to expand their market share.

Conclusion

eCommerce companies can no longer afford to operate without web intelligence and big data. These information sources are essential for staying competitive in today’s digital marketplace and for making data-driven decisions that will drive growth and profitability.

The competition relies heavily on the availability and utilization of data. A superior understanding of the information gives a permanent and comprehensive edge to a player. When one participant gains this advantage, the others must also adopt it to remain competitive. Otherwise, they will eventually be at a disadvantage in the long term.

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