Indian fintechs adapted to the post-pandemic business environment much better than their global counterparts in terms of easing customer on-boarding norms, building new products and passing on regulatory benefits to customers, according to global comparative study by Cambridge University’s Centre for Alternative Finance. Indian fintech firms are overall punching above their global counterparts on average, and in particular fintechs in the payments, banking and lending space were the most flexible to adapt to the changing conditions caused by the pandemic, the study found.
The study, covering 1,400 fintechs, saw participation of 142 firms operating in India, 87% of whom are retail facing fintech. Around 39% of the Indian respondents were involved in digital lending, 18% from digital capital raising platforms and 17% were involved in digital payments, the study said. MediaNama has seen a copy of the study.
“Overall, the global fintech market has grown over the last year across 12 of 13 verticals. Digital payments saw a 21% in transaction volumes, but we saw an overall decrease in digital lending volumes by around 8% overall. India ranks among countries with high stringency COVID-19 lockdown measures. We found that the largest increase in transaction numbers and volumes took place in markets with greater lockdown measures; the higher the COVID-19 stringency, the higher the adoption of financial technology services. The increased adoption is not necessarily caused by the pandemic, but there is certainly a correlation between stricter lockdowns and adoption fintech services,” said Tania Ziegler, lead of global benchmarking at the Cambridge Centre for Alternative Finance. She presented her findings at BW Business World’s Festival of Fintech 2021 last week. [emphasis supplied]
“We saw differences in the transaction volume, new customer on-boarding and retention rates between emerging markets and advanced economies. Emerging economies have higher transaction volumes and greater instances of customer acquisition as well as greater instances of retention of existing customers. A little over 2/3 of the 1400 firms made more than 2 changes to their products and operations, while 30% are implementing at least one change. Among retail facing fintechs digital payments firms, lending firms and digital banking firms are some of the most nimble when it comes to making changes to their offerings. Around 78% of these firms are in the process making changes,” Ziegler said. She added that the Cambridge Centre for Alternative Finance is currently conducting another survey focused on digital lending and capital raising firms, with an emphasis to understand country specific trends and issues.
“Among Indian fintechs, 50% of firms have made changes to their on-boarding practices. There is a big emphasis to make it more accessible to existing and potential customers. It is wonderful to see fintechs are making adjustments to their portfolios, but it is also interesting to see their reaction to the pandemic. Around 60% of all fintechs are introducing new services or products, in particular for payments and lending firms. They are introducing information based services with an emphasis on financial value-added services.” — Tania Ziegler, lead of global benchmarking at the Cambridge Centre for Alternative Finance. [emphasis supplied]
- Changes to On-boarding criteria: Around 50% of Indian firms implemented changes vs 29% globally
- Fee Reduction: Around 33% firms in India have implemented changes vs 29% globally
- Easing Payments: Around 42% firms in India implemented changes vs 25% globally
- Reducing Interest Rates: Around 23% Indian fintechs vs 20% globally
- Introduced Value-Added Services: Around 21% Indian fintechs vs 31% globally
- Extended COVID-19 Relief Measures: Around 45% Indian fintechs vs 18% globally
- Introduced COVID-19 Insurance: Around 43% Indian fintechs vs 7% globally
- Introduced Credit or Micro-Credit Facility: Around 33% have implemented changes vs 14% globally
“We see an increase in insurance related products for COVID-19 and reliefs being provided by payments and fintech lending firms. We see a big emphasis on supporting micro-small-medium enterprises as they go through their funding journey. More than a third of firms were willing to deliver COVID-19 relief measures globally, whereas in India it is much higher. Fewer than 10% of fintechs globally were actually able to deliver relief measures,” Ziegler said.
Around 46% of the fintech firms in India said there was more regulatory support required to ease Know-Your-Customer norms, while 44% said regulators needed to ease customer due-diligence requirements, the study said. Further, around 46% of Indian fintechs wanted regulators to reduce the burden on reporting requirements and 39% wanted easier licensing processes to enter new activities, the study said.
“Globally and in India there is an enhanced emphasis on cyber security practices. Just below 30% of fintechs have enhanced their cyber security features during the last year and around 12% are in the process of upgrading their security. In India, cyber security is lower priority with only 8% of firms having made a change while only 4% are in the process of upgrading security practices,” Ziegler said.