Until a few years ago, technology used
to be a support function for the back office of most financial
organizations. Today, it is defining industry for bankers and traders.
With the help of Artificial Intelligence, Neural Network, Big Data
Analytics, Robotics, etc., Fintech has found its place in the
innovation economy. The
Role of Artificial Intelligence in Fintech sheds
light on how Artificial Intelligence has become a core element in Fintech.
The dynamicity of Fintech has led to digitization in the financial
world. It has enabled impact and customer-centric services while
simultaneously widening its reach to rural India as well. The given
stats showcase the growth of financial inclusiveness and fall of
unbanked population in rural areas driven by adoption of Fintech
plethora of scope for further innovation and penetration, Fintech are
slowly unboxing more opportunities. On the flip side, Fintech face
various threats too that come with technology. Stated are a few
significant opportunities and threats integrated Fintechs face-
Rural Market- Owing to its geographical
size and dispersion coupled with weak unit economics of the
brick-and-mortar branch model, rural areas create a huge
white space for rural centric neobanks.
|Credit Risk & Collection- While Credit
Risk is intrinsic to any lending proposition, rural markets
come with their complications of limited collections infrastructure.|
Expansion of distribution network- Fintech can
create a unique distribution network access that offers
cost-efficient market access and enables it to provide
Distribution Risk- To a large extent,
distribution depends on financially weak partners, i.e.,
Kirana stores and this distribution channel largely depends
on customer investment and hence, have a possibility to
collapse without a robust customer base.
|Financial Inclusion- With addition of new
products at every level of the IndiaStack, the digital
infrastructure becomes more solid paving way to more seamless
services and product innovation.|
Risk- Outdated technology, platform downtime, data leaks,
and information theft have been widespread to the extent
where financial institutions bore an expense of $ 16.9
billion in Identity Theft in 2019.
|Innovative use of Data- Fintech can devise
innovative methods to leverage artificial intelligence more
efficiently to generate a more detailed analysis of
creditworthiness, preferences, behaviour
etc.||Competition- At present, there are more than
2,100 Fintech in India with overlapping products and services.
While Covid-19 proved unfavourable to several businesses, it
opened new opportunities and markets for Fintech.|
Despite the pandemic, the Fintech domain has boomed. According to a
Boston Consulting Group report
released March 2021, India’s Fintech market is now valued at US$31
billion, projected to grow to US$84 billion by 2025. By providing
hyperlocal solutions, Fintech have only begun powering the financial inclusion.