Get All Access for $5/mo

Digitalization-A Boon Or Bane For The Financial Services As Banking and Financial Services Sector in India undergo rapid Digitalization, let's take a bird's eye view of where we stand, what Digitalization promises and at what cost.

By Vipul Sharma

Opinions expressed by Entrepreneur contributors are their own.

You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

Shutterstock.com

In the grand schemes of things, our time has been indelibly marked by the digital revolution. This technological step has been nothing less than an evolutionary leap, affecting numerous fields, sectors, and industries, including Finance Services. This has been aptly named the Financial Technology or "FinTech'.

A number of start-ups have emerged in this new space, while the traditional players are arming themselves to keep relevant in the ever emerging new market spaces. From Banking to payments, from lending to Personal Finance, Digitalization has not only changed the look of the industry but has created a paradigm shift of the Business Models. Has it been a positive force, or are there unforeseen pitfalls and forces that have not been accounted for?

Digitalization is an essential technology that must be adopted by the banks for one crucial reason—Automation. Financial Services are facing an ever increasing volume of transactions and number of customers. Like all industries, Finance needs a robust model where the quick turnaround time for any Financial Service is quickly becoming the highest priority. The obvious answer to this rapid scaling is Automation through Digitalization.

However, the Financial Digitalization movement hasn't been without its critics and has faced at best, mixed responses from various Industry stakeholders. Broadly, there are three quantifiable criticisms that seem to have some merit. They are -

1. Disruption

In the traditional financial sector, where there exist more than a hundred Banks and over a thousand NBFCs, the conventional players are struggling to catch up with the evolving trends. Disruptive digital technologies are paving the way to quick, automated processes that are leaving the traditional financial sector behind.

2. Regulatory Oversight

The technology enabled Disruptors in the financial industry do not face the similar level of regulations that their traditional counterparts do. This indeed provides them with a slight edge, but the disruptors already face myriads of other obstacles, the most prominent of which is the strong relationship of customers to their existing Brick-&-Mortar Banking institutions.

3. Incomplete Digital Penetration in Tier-2 and Tier-3 cities

In India, despite the prominence of the digital movement, we still lag behind when it comes to the infrastructure. Digitalization of Financial Services needs a parallel development in infrastructure to achieve the envisioned goals. For example, in India, the total number of internet users were predicted to reach over 400 mils by the year 2015. That was about 33% of the total population of the country. Two-third of the national population, remained as the untapped market due to lack of infrastructure.

There are marked indicators that point to a definite shift in trends. Following are some of the interesting trends and I am hopeful will result in some exciting opportunities.

a. Evolving the Consumer Behavior towards Digitalization

The disruptive digital services in the Indian market is gradually but definitely changing client preference from traditional banking to its digitalized ones. The Indian demographic is ideally suited to make the digital switch, as the median age of an Indian citizen is expected to reach 29 years by the end of 2020. And by the year 2025, over 900 million people from the population will make the age group of 15-60 years. People have already actively started adopting digital technology for banking transactions, the idea of more Financial Services such as Digital Loan Disbursements is set to become popular soon.

b. The Untapped Areas and Government Initiatives

Today close to 50% of the non-banked population is targeted. Government Initiatives such as Pradhan Mantri Jan Dhan Yojna (PMJDY) is helping improve the financial inclusion. This has favorably played with the Digitalization of the Financial Services, providing banks with both a tremendous technological infrastructure to cater the increasing volumes as well as access to fresh, previously untapped market.

c. Leveraging the Smartphone surge and Mobile penetration

Mobile phones, especially Smartphones are the tip of the spearhead in driving digital growth in India.

The expanding reach of the smartphones in India will provide a low-cost medium to disrupt the market and in turn extend the reach of banking and financial services. We must leverage this part of the technology as much as possible.

Path Ahead – The Silver Lining

The formal financial institutions will sooner or later, come to terms with the Digital boom in India. Digitalization is the way forward, not only for the new, technologically enabled businesses but for traditional financial institutions as well.

There is a huge potential of digital financial services in our country, but there is also a need for the industry stakeholders to take a holistic approach when attempting Digitalization. Digital is not a temporary fad, but a Paradigm shift in how business models and strategy is molded. The aim is to create a remarkable customer experience. And Digitalization might be the answer we seek.

Vipul Sharma

Founder & CEO- Chqbook

Vipul has 14+ yrs of P&L, product & sales management experience at ICICI Prudential Life Insurance, Citibank, HDFC Bank & Indusind Bank. Previously, Product Head – Loan Against Property at IndusInd Bank & part of Management team at Bankbazaar - Built and led high ROA teams.

News and Trends

Tech Burner's Anarc Smartwatch Achieves INR 3 Cr Sales with USD 1 Mn Investment

Anarc features a patented octagonal design by Thought Over Design and Seymourpowell, with a medical-grade stainless steel body. It includes advanced technology like a Hisilicon chipset, AMOLED display, and seven-day battery life.

Starting a Business

He Started a Business That Surpassed $100 Million in Under 3 Years: 'Consistent Revenue Right Out of the Gate'

Ryan Close, founder and CEO of Bartesian, had run a few small businesses on the side — but none of them excited him as much as the idea for a home cocktail machine.

Diversity

5 Ways You Can Create a More Inclusive Workplace Immediately -- and Why You Should

The more diversity you bring to your team, the greater your chances of finding groundbreaking insights and solutions.

Marketing

4 Neuromarketing Hacks to Reach More People and Maximize Results

You don't need to be a neuroscientist or have a big budget to start upping your conversions immediately.

News and Trends

Insurtech Player Zopper Raises $25M in Series D Funding

With 40 insurance companies and 2500+ ecosystem players, Zopper will utilize the fresh capital to ramp up digital infrastructure, by strengthening its Insurance Distribution platform

Business News

'Do You Sell Cars?': Tesla CEO Elon Musk Trolls Jaguar Rebrand on X

The team running Jaguar's X account was working hard on social media this week.