“Cash is king, but digital is divine.” -- The Reserve Bank of India
Fintech is among the fastest growing sectors in India today. According to the EY Global Fintech Adoption Index 2019, India has the highest fintech adoption rate globally of 87% which is significantly higher than the global average rate of 64%.
Largely contributing to this rapid growth is the Indian digital payments industry, which is expected to touch $10.07 trillion by 2026, as per KPMG. The Reserve Bank of India (RBI) is also focussed on promoting digital payment adoption in its Vision 2021 for payment and settlement systems in India. Aimed at building a 'cash-lite' society, the RBI has turned the spotlight on fintechs to ensure uninterrupted availability of safe, secure, accessible and affordable e-payment systems.
While fintechs can make the most of this opportunity to provide digital products & services with a new spin, the key to success lies in leveraging this spotlight to further boost customer engagement and build trust.
In a market dominated by legacy players, innovation in digital payments has helped fintechs create a growing customer base for themselves. Fintechs need to build on this and foster trust further by addressing pain-points, such as customer service, experience and transparency.
Banks continue to remain the most trusted providers of financial services. Engaging in strategic bank partnerships can help fintechs build their credibility and leverage the trust from these incumbents to establish stronger customer relationships. These partnerships are also an effective way for fintechs to build visibility and get access to a large customer base. Banks in turn, can exploit these collaborations to digitise their own offerings and use technology to better engage with their customers.
With RBI bringing in strict norms to address the cyber security concerns around digital payments, fintech companies need to further strengthen security around payment products. Along with the convenience of digital payments, fintechs need to proactively educate their customers on how to protect their sensitive information. Creating awareness on best-practices to safeguard their personal data & transactions can also be a good engagement tactic and help fintechs build credibility & trust among customers.
API-based platforms developed by tech providers have built ready-to-use solutions that include the latest security features like interceptors, tokenisation, risk-based authentication and more. Fintech companies can make use of these robust solutions and ensure greater security of sensitive customer information and transaction data.
Digital payments in India have been growing at an unprecedented rate, owing to the increasing internet penetration in the last few years.
Despite the increasing internet penetration, cash is the preferred mode of payment in rural and semi-urban India. A few major challenges responsible for this are:
Customers in these areas primarily rely on regional banks and co-operatives for their financial needs. Fintechs can partner with such entities to revamp their current legacy infrastructure to support digital payment technologies. This collaboration is key for fintechs to build trust with the local communities. With their in-depth knowledge of the local customer base, these banks can in turn help fintechs, to educate users about digital payments and aid them in customer acquisition. Co-operatives can also facilitate merchant onboarding initiatives to improve digital payment acceptance in such areas. Offline solutions like dynamic PIN, QR code payments can also help address authentication challenges in areas with poor connectivity.
The RBI is focussed on enabling the payments ecosystem and infrastructure, and is putting in place forward-looking regulations. Setting up of a regulatory sandbox for fintechs, and Self-Regulatory Organisation (SRO) for payment systems, are some of the key measures by RBI to improve security & customer protection. Having proven their potential to reshape the financial landscape, fintechs will play a critical role in achieving RBI's goal of 'Empowering exceptional e-payment experiences'.
The ability to identify and solve specific pain-points faster than their peers, along with a transparent and robust customer service has helped fintechs gain increasing acceptance. Fintechs can leverage insights from customer data and use technology to deliver highly personalised offerings with advanced security. Forging a one-to-one connect using personalisation will help fintechs improve customer engagement and foster trust to accelerate this growth momentum for their next phase of expansion.