In last few years Fintech has seen an unprecedented growth and is now one of the hottest in the startup and investment categories. But the question remains what is the reason for such a growth? Maybe because of multiple factors that have merged together to create a powerful financial service. As Jamie Dimon, CEO of JP Morgan Chase said ‘Silicon Valley is coming. There are hundreds of startups with a lot of brains and money working on various alternatives to traditional banking’ But what are the reasons that the Fintech will become the big player in the industry of finance, startups, and investment? Here are the top eight factors:
The revenue model is clear in Fintech
It does not matter whether it is in term credit, transaction fees, SaaS subscription revenue, interchange and other payment fees or AUM and float fees the revenue model in Fintech is clear. Hence it has the capacity to provide stability and predictability and for any capital investor, nothing is more attractive than predictability with high business growth rate.
New Technology in Use
The traditional financial firms are still holding on the technologies like could computing and mobile. Fintech whereas is using most developed and latest technologies like micro-sized card readers, advanced machine learning software, blockchain technology and distributed smart ledgers. This helps them to grow in rapid speed.
Big Data and Cloud
The new generation, the millennials no longer is satisfied with customer service that is not one-on-one and personalised. The internet has made it possible for the financial sectors to know their clients. The advanced analytics used from the data to know their customer by the Fintech is what keeps them ahead of the traditional banking sectors.
Consumers choosing Fintech has to pay 1/100th acquisition costs compared to that of community or national banking. Also, a Fintech is omnichannel from the beginning and has the ability to bring in the latest and best quantitative digital marketing tools and use it to their best. Combine this with low friction and on-boarding sites.
Outstanding Service at a Low cost
Despite providing better service their servicing cost is low like their acquisition cost. This is possible because most of the Fintech companies use fully automatic or human-in-the-loop computing system instead of the call centres that cost quite a lot.
Growth is Fast
Fintech companies that have direct interaction with consumers are the fastest growing ones like Uber, AirBinB, Amazon, Paypal etc. This is because the Fintech companies are using high tech features like big data, machine learning, and smart automation to give better customer experience.
Also read: Challenges Ahead Of Fintech In India
A significant portion of the consumers for the Fintech is the Gen Y or the millennials followed the marginalised and workers who operate on cash-basis. This un/under-baked population has quite a growing economic clout and they are being helped by the Fintech in the consumer world.
SMEs and Fintech
No longer huge corporation or manpower is needed to run a company. SMEs and Fintech help each other out, a two-person enterprise can have a sophisticated supply chain worldwide, eg. Alibaba, Yelp, eBay etc.
With Fintech cutting across the regulations and faster is on the rise worldwide and it is no different in India. Fintech is the next big player in the market.