Innovations in Digital Financial Services by Fintechs

Finance is undergoing a tremendous and rapid transformation. Digital technologies are reshaping the way consumers shop, make payments, borrow, manage wealth and do banking. A combination of digital-savvy consumers, availability of various digital capabilities and continuous tech innovation is making financial services in many economies more diverse, competitive, efficient, and inclusive. This transformation is forcing leaders to revisit the way they look at business goals.

Digital innovation could drive a range of industrial organization outcomes. On one hand, digital technologies enable businesses to discover niches and unique ways to approach these consumer segments with some unparalleled & targeted marketing campaigns delivering great value. On the other hand; cross-industrial developments are forcing financial services to keep abreast with the consumers' demands.

Fintech plays a vital role in the way the digital financial services domain is constructed or defined. Fintech companies approach financial services in a modular and microform enabling them to swiftly turn around services reducing their time to market many folds compared to larger incumbent and traditional players. The competitive landscape, meanwhile, is becoming more challenging as digital technology lowers the barriers for new entrants who offer unique services. With Fintechs attracting millions of new customers in fresh markets, incumbents are forced into boardroom discussions on product strategy and market share retention.

Over the past decade, we have seen unprecedented growth in the digital financial service domain, both in services offered and in the number of service providers. Fintechs have encroached into incumbents’ domain in segments ranging from Payments, Lending, eCommerce, connected Commerce, Cryptocurrencies & or even specialized services such as Trade Finance & SMB Financing.

Source: Statista

With an overwhelming emphasis on connected commerce, user experience, cloud computing, and a colossal amount of digital data available for analytics, the fragmented financial services industry has seen a demand for integration amongst the players to not only meet but also exceed customer expectations. This is also leading to consolidation amongst players in this industry as it adapts to accommodate new players who offer unique propositions at a fraction of the cost of incumbents.

Trends to watch out for in Digital Finance Services

As the pace of change has accelerated, the FI domain and its landscape have also expanded beyond just payments via mobile apps. As the industry boundaries have stretched, the mindset of FI’s has been realigned, services offered are now more personalized to micro-segments and a key emphasis has been placed on User Experience & security.

Over the past decade, we have seen a massive influx of interest and funding into the Digital Financial Service (DFS) landscape. The digital financial services ecosystem is well poised to deliver some unique and personalized, seamless digital experiences leading to further penetration & success of Digital Fintech Services.

Exploiting Data!

With unparalleled volumes and variety of data available at the disposal of FI’s and service providers, they are heavily using Data Analytics & AI to entice customers with unique propositions at the moment of truth. BNPL is a classic illustration, where the FI’s proactively induce customers with an offer, running real-time analytics in the background to create personalized offers.

Increased Demand for Instantaneous Cross Border Remittance

With 70% + smartphone penetration globally; technology companies are exploring avenues to seize the enormous potential & penetrate into the large global cross-border remittance business. From Card Schemes players, SWIFT alliance, remittance houses, tech giants (GAAFA) to traditional remittance companies, all are co-creating remittance products to improve efficiencies & speed, and rationalize costs; digitalizing of transactions is also helping regulators more effectively enforce Anti Money Laundering (AML), Know Your Customers (KYC) and Countering Financing of Terrorism (CFT) rules. We can also see a glimpse of platform economy traits being adopted by remittance businesses, where Fintechs are creating mediation platforms to integrate & aggregate various players onto a single-window platform for more effective transaction processing & faster settlement.

Instantaneous is the New Mantra

Whilst customers expect a seamless user experience, they also expect the completion of the transaction instantaneously. This instantaneous service needs a plethora of service integrations with multiple global platforms and 3rd party service providers. We have observed tremendous investments into SuperApps by both tech giants, telecoms, and FI’s. SuperApps enable platform owners to target customer stickiness and loyalty towards their brand, due to the inherent “One Stop for All” experience as SuperApps have been able to collate an array of services into one platform, enabling their users to avail products and services instantaneously from one App.

As Digital customers lift their expectations, FI’s too are realigning their business models & modus operandi to meet these customer expectations. With Over 60B connected devices in the world by 2030, customers expect FI’s to keep abreast with innovations and lift both the quality & spread of their services. Fintechs will surely play a mighty role to help the FI’s become relevant in this digital acceleration journey.

Written By: Ajith Thadani, AVP-Global Sales and Business Development, Estel Technologies - Passionate Business Development Specialist with closer to 20 years experience in designing and implementing business growth strategies for Strategic Business Units (SBU's), Start-Ups, and Product verticals in BFSI, Fintechs, IoT & Telco domains

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