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India's fintech journey
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Fintech and payments
Ever since the introduction of digital payments in India, the entire industry has been undergoing a constant transformation. For the most part, the transformation has been fuelled by fintech companies. Thanks to the integration of technology, the payments industry has been doing so well in the past few years that many fintech payments companies have been exceptionally successful when it comes to raising funds.
They’re finding it extremely easy to raise millions of dollars in multiple rounds of funding, which is not an easy feat. Many fintech companies operating in the payments space have even gone on to become unicorns. So, what’s driving the growth of fintech payments firms?
The answer has to do with the way fintech is changing the payments industry. In this chapter of Smart Money, we’re going to be taking a look at just that. So, without any further ado, let’s jump right in.
The many ways in which fintech is transforming the payments industry
Fintech and payments together is completely revolutionizing the industry. Not only is it making the payments landscape more efficient, but is also making it more transparent too. Here’s a quick glimpse at the different ways through which fintech is changing the payments space for the better.
This is by far one of the biggest advantages that the combination of fintech and payments has given consumers. Although digital payments are considered to be extremely fast compared to traditional payment methods like cheques and demand drafts, there still was a slight delay. For instance, with respect to NEFT transfers, the funds would be credited only after an hour or two, depending on the window of clearance.
This delay prevented merchants from adopting digital payment systems. However, thanks to the penetration of fintech in the payments space, consumers can now send and receive money in real-time through payment methods such as UPI, for instance. This has led to merchants embracing digital payments since they now get to receive confirmation of payment instantly.
Real-time fraud detection
Fraud has been one of the major talking points against the adoption of digital payments ever since they were first introduced. Considering that fraud, especially when it comes to payments, is a serious issue that can impact both consumers, merchants, and other organizations, it is natural for individuals to be apprehensive.
That said, many fintech payments solutions providers have intelligently incorporated technology that’s designed to automatically detect frauds in real-time. These solutions look for suspicious payment activities like repeated fund transfers in quick succession and large fund transfer requests towards newly added payee accounts. Upon detection of such suspicious activities, the payment can be blocked until properly authenticated by the consumer.
Reduced transaction fees
Consumers making payments through traditional methods often had to bear transaction fees. These fees are generally levied by banks and financial institutions in exchange for providing payment services. However, with the introduction of fintech in the payments landscape, the transaction fees have either reduced significantly or been eliminated completely.
For instance, the fees charged by banks for RTGS and NEFT are anywhere from Rs. 5 to Rs. 15 per transaction, depending on the amount of funds being transferred. In the case of UPI, there are absolutely zero transaction charges involved.
Transparency in payments
With traditional payment methods, there were very few ways to track the movement of funds. And even if you could do it, it wasn’t in real-time. The lack of transparency in payments posed a huge challenge especially when the transfers involved moving funds across the country or across multiple countries.
However, that’s not the case anymore. Thanks to the introduction of technology in payments, both the payee and the payer can quickly and easily track the movement of funds as soon as the transaction is initiated. The entire flow of money can be traced in a transparent manner.
Multiple banks under one platform
The introduction of UPI, Unified Payment Interface, disrupted the entire payments industry in India. The platform supported almost all kinds of banks, both private and public. This allowed individuals to bring multiple accounts from a wide range of banks under just one single platform. This was something that was completely unheard of till the introduction of the UPI.
Increased penetration of digital payments
With the internet population in India all set to touch 900 million by the year 2025, with smartphone usage being the primary driving factor, the volume of digital payments is likely to only go up. As smartphone use in tier 2 and tier 3 cities increase every year, it will become easier for people in these areas to make and receive payments digitally. Fintech has been the biggest contributing factor for the growth of digital payments in India.
We’ve finally come to the end of yet another chapter of Smart Money. You should now be aware of how the combined contributions of fintech and payments has transformed the entire payments landscape in India. In the forthcoming chapter, we’ll look into asset management and how fintech has managed to make an impact on that industry as well.
A quick recap
- Fintech and payments together is completely revolutionizing the industry by making the payments landscape more efficient and more transparent.
- Thanks to the penetration of fintech in the payments space, consumers can now send and receive money in real-time through payment methods such as UPI, for instance.
- Fintech has also revolutionized other areas of payments such as improved transparency, increased penetration in previous underserved areas and real-time fraud detection.
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