Financial Services as a business has evolved significantly over the last 2 decades. The onset of COVID-19 has, however, accelerated the pace of evolution for the business. The digital journey for the sector has gathered pace over the last 12 months, and to make matters interesting, the customers have not only accepted the technological changes, but have started demanding more from the companies.
The ability to digitally engage with the customer has become a key differentiator now. Needless to say, all companies have gone full throttle on the technology initiatives, and this should help propel the financial service business into a new tech-orbit.
The payment system has seen the biggest disruption in the last 2-3 years. We believe that this disruption would continue for the good. Transformation in the contactless / cardless payment space would be way forward.
Digital lending would see the next phase of changes. Digital lending has seen a meteoric rise due to cumulative effects of rising mobile and internet penetration in India. Online payments picked up pace during demonetisation and since then it has witnessed an increasing uptake. Industry has been striving to find out ways to secure, fast and easy to use access infrastructure and digitising the process of loan application. While the small ticket loans have made headway, we believe that larger ticket transactions would also move the digital way.
In our endeavour to reach the last mile, large NBFCs/HFCs and banks would engage with start-ups and tech-platforms who would have better micro-knowledge of their user base. This may lead to rise of micro lending start-ups, as they will become platforms for banks to be in front of the end client, backed by banks financial muscle power. The processing will be quick on digital platforms to help businesses get back on track quickly. Also, would help create a rich database of clientele and easy monitoring and tracking.
Further, with the low interest rate regime continuing for the near future, the demand for high value loans, especially on the housing side, would continue to exist. The tech changes here with respect to information exchange with customer, is an area which would continue to witness changes. There are already initiatives being taken in that direction with e-kyc, video personal discussions with customers, online credit assessment etc.
Government interventions would continue to dominate the lending schematics. PMAY is one such initiative which has made a significant impact on the home loan business in India. Any other such government scheme of similar scale would continue to be a dominant force driving the lending business.
Finally, we believe that the end of pandemic would see a significant surge in consumer spending, especially on the travel & consumer experiences side. The ability to have one touch finance to facilitate this would dominate the lending business for the next few quarters.