Is FinTech a replacement for traditional banking!

Recently, there has been a significant, prominent and obvious change in the demand for financial services.

Apparently, it has happened as a result of the population being mainly young and the remaining generation increasingly adopting technology. Improved and fast technology-based services are what the younger generation wants. Indian FinTech startups are rapidly changing established banking models. But still, most people see banks as the safest option, especially when it comes to depositing their hard-earned savings. Therefore, despite the challenges caused by legacy infrastructure that prevent banks from implementing changes quickly, they have a strong, established clientele in the long run.

In 2019, India had a FinTech consumer adoption rate of 87%, higher than the global average of 64%. Even after the outbreak of the pandemic, there was no decline in consumer demand and the industry grew dramatically until 2020. According to a statistical survey from April 2020, 33% of respondents still use the digital mode for a variety of financial services, including paying brokerage fees and make regular payments. For example, according to statistical values, the volume of UPI transactions increased year-on-year by 70% in February 2021, and the value of these transactions increased even more.

With more than 2,100 start-ups, India is a significant FinTech sector and one of the fastest growing in the world, second only to the US. In India, the industry has seen significant expansion, with two-thirds of start-ups emerging in the past five years and operating in a variety of sub-sectors, including peer-to-peer (P2P) transactions, lending, insurance and mobile point-of-sale (POS), among others. With the India Stack consisting of four different technology layers, the biometric identity system Aadhaar and the cashless payment system Unified Payment Interface (UPI), India has developed a top-tier FinTech infrastructure over the past ten years. India Stack has been a significant growth enabler in the business thanks to its open APIs.

The ever-fast pace of FinTech does not signal the end of traditional banking systems as routine transactions such as withdrawals, deposits and bill payments happen through this channel, traditional banking is essential to any economy. They give lenders the opportunity to earn interest. Aditya Puri, a former MD and CEO of HDFC Bank, made the statement on the fifth day of the Business Standard BFSI Insight Summit. He added that banks and fintech companies would co-exist in the future and grow through collaboration, and there would be room for everyone.

Numerous FinTech start-ups can easily succeed because there is little regulation of the industry.

They are more responsive to customer needs and operate faster, but the lack of laws and regulations makes it a risky sector for consumers. As a result, most private and young investors feel comfortable choosing traditional banks because these institutions are held accountable by a regulatory authority in the background.

On the other hand, the introduction of FinTech into the market has been positively received by conventional financial service providers. The majority of banks have now introduced an extended FinTech version of the banking system via online banking websites and applications, allowing customers to use online banking features including mobile payments, peer-to-peer lending and digital security. FinTech and traditional banking can improve the quality of their services and functions and have a greater impact if they work together in the long run. Deposits are held in huge amounts by banks, compared to very small sums by FinTech. Banks and FinTech can work together to improve financial systems to make the most of this, and FinTech will also benefit from the significant funding.

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