Unlisted private internet companies in India have raised over $2 billion in the first quarter of 2017. Out of this over $100 million has been raised by fintech companies alone. There has been a sharp rise in investment attracted by startups compared to the $2.7 billion, which they raised in the year 2016. Majority of this amount was raised y Flipkart and Ola who took steep cuts in their valuations. Snapdeal is also on track to raise another round of funding which can easily push this figure to over $2.5 to $3 billion.
The fintech companies which raised funding were – Freecharge, Ccavenues, Truebalance and Credit Mantri. The Govt’s step to demonetize old notes of Rs 500 and Rs 1,000 proved to be a blessing for many fintech companies which provide payment solutions. This move has pushed crores of new customers towards these fintech companies, which eventually increased their revenue. To handle the high number of transactions and customers, more employees were hired by these fintech companies. Not only these fintech companies, even other companies like PayTM Mall, Shopclues, Amazon that are online first too saw an uptick in business and stepped up their hiring. Internet companies had to hire much in advance to what they had anticipated and hence the flurry of funding rounds that happened in the first quarter.
Prime Minister Narendra Modi’s various policies are creating lot of employment for various startups and with a focus on a digital and a cashless economy, many young graduates and post graduates trained in this field are benefitting and shall continue to benefit.
Indian fintech companies that offer online payment gateways and mobile wallets have had a wonderful new year. Due to the Government’s plan to demonetize old Rs 500 and Rs 1,000 notes, which formed 85% of all the cash in circulation, led to a lot of people using digital payments for all their needs. Even small shops and grocers now accept online payments over the phone through payment gateways like PayTM, Mobikwik and Freecharge. A sudden surge of customers is what most of these fintech companies did not anticipate and they were clearly not ready to manage so many customers and transactions all of a sudden. The most common occurence when a financial institution is ill prepared is a fraud!!
In anticipation to this, fintech companies have spent over $100 million (approx Rs 680 crores) on hiring cybersecurity experts from countries like Israel, US and Russia! The question is why would they need to go abroad for this? Why not hire a consultant in India? Cybersecurity firms in these three countries are considered to be the best in the World. However, experts from the industry have said that it is high time that startups come up in India to tackle this problem. India has some huge banks and financial institutions and with a sharp uptick in the adoption and usage of digital services they all will need strong cybersecurity apparatus which can withstand cyber-attacks of high magnitude.
If fintech startups can spend $100 million in the six short months since demonetization, one can only imagine the spending that will be done by established banks and financial institutions which migrate to a digital only platform. The industry can easily be over $2 billion. Cybersecurity is turning out to be another sunrise sector that will soon create thousands of jobs for those thoroughly trained in it.
Raj Anandan, Google VP for South East Asia & India and Aruna Sundaraja of the Ministry of Electronics and Informtion Technology (MEIT) recently launched a Digital Payments Security Alliance (DPSA) to promote financial technology that promotes a digital economy and financial inclusion for the crores of Indians who are yet to take full advantage of the digital and banking infrastructure that our country offers.
The aim is to promote tech startups that can provide a secure and a safe access to digital and financial services to people residing in distant corners of the country. This is in line with Prime Minister Narendra Modi’s push for a digital and a cashless economy. The DPSA will work with the Data Security Council of India (DSCI) to bring the Govt, banks, tech companies and fintech startups on board to increase the usage of digital banking services. They will be conducting campaigns to create awareness about best practices while offering and using online banking and financial services. The Govt has also tied up with Google to increase the usage of Govt facilities online on phones. Google plans to train over 2 million developers for all these activites.
One can only imagine the opportunities this creates for professionals who are well trained and qualified in the field of fintech. Apart from the numbers quoted above a lot of positions will soon open up in other tech companies, banks and fintech startups for individuals who are trained and capable in promoting fintech.
Usually, it is technology that creatively destroys any old method of doing a task. With blockchains, it is technology that has disrupted technology! Everyday we hear news about hackers based in far off countries, who steal data, money, financial information, identities and anything else that is valuable and online. These hackers just need to be successful once in order to make a few hundred million and retire for life. However, this hack could potentially spell doom for an organization and its employees due to its liabilities to its consumers. Blockchains are changing the way the networks and organizations are protected.
Blockchains are primarily a peer to peer system which allows people to share valuable information and data. This data is not controlled by any single person or authority as is the case with traditional servers and data centres. This data cannot be changed without the permission of all the people connected or related to the database. In short, one would need to hack into every single system in order to steal information as opposed to one server which hackers do these days. Bitcoins, which are based on blockchain networks, are yet to be hacked into!
Blockchains can function smoothly as a peer to peer network without any need to have a central server. This system, depending on the number of users, is sometimes much stronger than a system with a central server.
Blockchains are of immense importance for India as we move towards becoming a cashless and a digital economy. With an emphasis on growing our economy digitally, we also need to keep an eye on securing it and we need to do that fast. Blockchains, with a comparatively low cost of setting up and better security support can surely help us become an advanced economy. We currently do not have a lot of infrastructure and trained human capital for the same and the need for it is growing exponentially.
Snapdeal, one of India’s successful online retail startup has financial technology to thank for saving over Rs 3 crores a day. Cyber security technology, applications and analytics allows Snapdeal to track and detect bogus sellers. It has used advanced analytics and predictive algorithms for the same.
The online retailer has said that its alogrithms have allowed it to monitor consumer data and trends that lets it identify any suspicious activity and prevent frauds and financial losses. Any organization that does any transaction online has to be ready to face any cyber attack that could harm its or its customer’s interests. This includes online retailers, banks, financial institutions and even NGOs who accept payments online. Cyber security helps organizations predict and protect their systems and information from hackers. This becomes very important in today’s world where hackers are able to steal identities and steal money other securities which are digitized.
Being proactive is very important for any organization as a single instance fraud or any lapse in security can jepardize the data of millions of people. And, once a consumer feels that he is not safe on your portal, it is effectively the death knell for your business. With the advent of technology, unsocial elements are always looking to exploit loopholes to make a quick buck. However, with financial technology, any organization can predict and avoid any untoward incident. Being able to guide any individual or organization with cyber security is a valuable skill to know.
Blockchain is a financial technology that is achieved with a combination of maths, economics and cryptography, which creates records and maintains databases of financial transactions of people banking with any financial institution. The advantage of this technology is that third party checks are not needed like in the case of a normal bank.
Blockchain is primarily an electronic ledger of all transactions that holds records of all transactions done by any two individuals and entities. Blockchains complete various complicated transactions like book keeping, storing, moving, lending, trading, guaranteeing and reconciling money with its consensus ledger system. This signifies the rise of permissionless platforms that allows trade and commerce to flourish without too many regulations. Alternative currencies like Bitcoins are also responsible for the rise of such platforms.
Now, people can take loans easily and quickly using property that is digitally signed. The time taken to disburse loans will now be less as banks can easily verify all required documents for disbursing loans and other financial activites quickly. Although blockchains are still in a nascent stage in India, many institutions are investing and betting on this technology. This technology needs trained professionals to handle the infrastructure that is being built. The financial sector today needs to build a strong infrastructure and a bench of qualified employees who can manage the industry and attract more investment to our country.
Robo adviosry servies and technologies are witnessing a boom in the investments that they are getting. They are pegged to manage assets of over $5 Trillion by the year 2025. That is a compounded annual growth rate (CAGR) of a staggering 68%!
Robo advisors are bound to supplement and strengthen the traditional banking industry due to the low cost of innovation, implementation and scalability. Many fintech companies and banks are eager to adopt these and are early adopters. Even investment banks are today using robo advisors for wealth management, asset management and for lending services. Robo advisors have been able to provide banking services to a large section of the population that has traditionally been underbanked and has never been able to take full advantage of banking facilities and services by using applications and technologies like UPI.
These technologies have also ensured that investments have gone to allied industries like cyber security and biometrics. Banks are today increasingly collaborating with established and startup fintech companies that allow more people to use their services in the same amount of time, enhance customer acquisition, provide better services and do all this in a way that does not encourage frauds. Robo advisors are today not just providing better facilities, but also attracting more investments and jobs to the banking and fintech sectors.
The Govt of Andhra Pradesh has allocated $75 million for a fintech fund, which aims to promote employment, financial technology and fintech startups in the newly created startup state of India. The coastal city of Vizag, which is fast emerging as a hub for fintech in the Indian subcontinent wil soon be home to Lattice80, a fintech hub based in Singapore. The AP Govt has signed an MOU with Marvelstone, the PE group which funds Lattice80 to start a fintech hub in Vizag. This shall be in line with the Govt’s policy to work and collaborate with more fintech startup’s to provide better governance and services to investors and citizens.
Indian Govt officials believe that the protectionist policies and visa curbs in the west will prompt fintech majors and investors to look east to meet all their tech requirements. India is said to have one of the most conducive environment to innovate and to do business. The AP Govt has signed MOUs with global coorporations to start academies in fintech sectors like blockchain, analytics and security. Their goal is to bring together the Govt, corporates and academia in order to build a sate of the art fintech system.
As a part of this arrangement more than a 1000 professionals will be trained in fintech applications like big data, mobile payments and blockchain. The center in Vizag shall be ready by the 3rd quarter of 2017.
Anyone who follows markets and global finance knows that the biggest blow to global finance was the British voting to leave the European Union in 2016. The vote, named as Brexit, separated the UK from the EU (one of the largest markets in the World), was dubbed as a catastrophe and was belived to start a flight of capital from London to other major financial centres of the EU, namely Paris, Dublin and Frankfurt. Most commentators said that investors would want to keep their money in a bigger, borderless market. However, no such thing has happened till now.
The reason is Fintech. There are many large financial behemoths headquartered in London who deal in insurance, investment banking and high frequency trading. Financial companies deal with millions, if not billions of transactions every month. How does one keep track of all these transactions? How does one ensure that you are complying with all Govt regulations? Most importantly, how does one ensure that you have enough trained employees in the desired country of relocation?
This must be the first time in the history of the World, that a financial decision was dictated by technology. Financial technology firms are very very strong in the UK and are located very close to the offices of the major finance companies. No other country apart from the USA has a comparable fintech infrastructure in the World. Thus, the city of London has ensured that it will continue to remain a doyen in the World of Global Finance due to its fintech infrastructure and the ready availability of skilled professionals.
The Indian Fintech sector is currently in its nascent stages. It has made significant progress towards making itself a sought after destination for Global Investors. Prime Minister Narendra Modi recently inaugrated the International Financial Services Centre (IFSC) in Gujarat International Financial Tech City (GIFT) , Gandhinagar. The exchange which will work for 22 hours a day, is said to have a turnaround time of 4 micro seconds and is one of the most advanced exchange of the World. Its advanced technology and global standards have made it a sought after exchange for NRIs and Global Investors. Such technology is bound to make India a global hub for fintech and a sought after destination for investors looking to multiply their money.
Banking, an industry that earlier used to evoke an image of babus sitting in offices and customers waiting in long lines is getting a major image makeover. Fintech has ensured that majority of bankers today work simultaneously on multiple devices, systems and softwares which is ensuring that more people get access to the same facilities at the same time.
They can thank the Elon Musk and Peter Thiel who inspired new age entrepreneurs like Vijay Shekhar Sharma of PayTM and Kunal Shah of Freecharge to start fintech companies that are now changing the way we manage our money. These entrepreneurs didn’t just start companies, their companies gave birth to new industries that are providing employment to people in the IT, retail sector and the banking sector. Today, India needs a few thousand trained professionals in each state to handle the infrastructure that runs this new financial tech.
Everything right from broking, share trading, banking and every basic function of the financial markets now needs financial tech that gives people access to their money and other services much faster than they used to. This is changing the image of a banking industry for good and one can only imagine it becoming better with more technological advances.