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As consumers increasingly turn to alternative, digital methods of managing their finances, tech-savvy startups and traditional financial institutions (FIs) alike are diving into the fintech industry. And investors would be wise to take note of this digital shift.
Out of the many FinTech players in India, a small number of players will emerge as winners, creating sustainable business models that withstand the ups and downs of economic cycles. These business models will focus on retaining customer loyalty,among evolving customer expectations; strengthening IT infrastructure, in an environment of exponential technology
advancements; using data-points to their advantage; seeking appropriate funding; lowering cost of operations; and offering value-added offerings.
6 Key Factors leading to success of FinTech companies
The most important element for FinTech companies to concentrate on is customers. They must find innovative and cost effective ways to acquire and retain customer loyalty in an environment where the impediments to churn are lower. For e.g. gaining customer trust, providing a seamless experience by reducing friction in digital transactions. Within payments interoperability between players will improve customer convenience.
Technology and IT infrastructure is the foundation of FinTech. The FinTech infrastructure backbone has been strengthened tremendously with the host of options available to market participants such as BBPS, Bharat QR, India Stack, UPI.
Big Data and analytics offer tremendous potential to understand the needs of customer and offer personalized products & services and drive operational cost efficiencies that give rise to altered business models.
Availability of Funding through VC and PE firms is imperative for FinTech companies to grow. In the past three years Indian FinTech has witnessed more than 120 deals worth $2.0 Bn.(n3)
Most FinTech companies began by focusing on segments where customers are most receptive. They understand the pain points of customers, and address them to build a sustainable business that creates value. Across FinTech, three segments i.e. Millennials (440 Mn), small business, and underbanked, offer most opportunities to FinTech businesses
Most FinTech companies have a cost advantage over incumbents. They leverage technology to
E.g. Payments Bank leverage technology to expand customer base while limiting physical presence