We live in an era of constant opportunity and transformation, where innovations such as blockchain, artificial intelligence and cloud are revolutionizing the way people transact, work, travel and live. However, the fintech ecosystem is at the forefront of these transformative technologies, as evidenced by the exponential growth trajectory of the fintech industry, which is expected to reach a global market size of $200 billion by 2030, growing to $140 billion over a 10-year period. A significant portion of this growth will be driven by the Indian fintech market, which is the third largest in the world and also the fastest growing market. With a compound annual growth rate (CAGR) of 20%, India has the highest number of fintech companies that have emerged in the last three years.
The history of financial services is also closely linked to that of IT: from the introduction of technologies such as bank mainframes in the 1950s to the current development of blockchain. The fintech sector is home to many companies that have a long history of delivering value to their customers by being not only early movers, but also drivers of technological innovation. With advantages such as the first mover advantage and a long history of customer engagement, these fintech adults are therefore ideally placed to understand the key market challenges and propose intelligent solutions.
The growth of the fintech sector is driven by advancements in artificial intelligence, blockchain, cloud computing, and various other digital technologies. Together with environmental, social, and governance (ESG) initiatives, these elements form the pillars of progress in the fintech sector, or the ABCDE of fintech.
Financial organizations understand that next-gen technologies like the ones mentioned above are a slow-moving engine of transformation, efficiency, and industry disruption. A common myth is that disruption is where startups shine and conquer. Their ability to be agile, experiment and fail quickly, and be able to leverage cutting-edge technologies gives them a niche advantage. But fintech adults have some additional expertise to further leverage these technologies. Let me explain this with a few examples.
Take artificial intelligence, for example: machine learning models require significant amounts of training data to be successful. Fintech companies that have been in the market for a long time and have gained a first-mover advantage will be able to create more robust solutions, simply because they have rich data and are able to make more informed decisions. Creating data products that enable their customers to provide personalized insights and make the right decisions can be extremely effective.
Network effects are another advantage that fintech companies enjoy. Blockchain and smart contracts can be used to create solutions such as distributed ledger technologies (DLT) that can help streamline the market and trade of certain commodities. A distributed ledger repo (DLR) platform can pool disparate systems from separate financial institutions and offers many benefits, including the ability to execute intraday trades and benefit from flexible settlement times that can be agreed between counterparties, among others. But the success of DLT also depends on onboarding enough organizations and counterparties onto the platform. Fintech companies not only have an established customer base to expedite this process, but also the credibility and experience to do so in a way that is attractive to businesses.
The maturity of fintech companies like Broadridge plays a crucial role in their ability to thrive in the market and meet evolving customer demands. Several key aspects contribute to their success:
· Domain and technology expertise: Fintech adults possess deep domain knowledge and expertise in financial services and technology. They understand the intricacies of the industry and stay abreast of the latest technological advancements. While it is relatively easier to find expertise in one or the other domain, it is rare to find organizations with both. This expertise allows Fintech adults to develop solutions tailored to the specific needs of financial institutions and deliver tangible value.
· Designing and delivering the future: Fintech adults demonstrate a forward-thinking mindset, embracing innovation and change. They have a clear vision of the future and are willing to take calculated risks to drive industry transformation. Most importantly, Fintech adults are distinguished by their mindset. They understand that Fintech is as much about the new possibilities offered by niche technologies as it is about providing stable transaction processing to their customers. They have a unique ability to leverage their deep domain expertise, customer insights, and collective industry experience to evolve the industry mindset.
· A powerful and inclusive culture: The people of any organization are the backbone of innovation and transformation that lead to customer satisfaction and shareholder happiness. All companies must therefore invest in a culture of innovation, collaboration and agility, because employees who think creatively and experiment with new ideas are better placed to adapt quickly to market changes. This dynamic work culture attracts the best talent, ensures talent retention and thus facilitates the development of cutting-edge solutions. Fintech adults have the ability to create strong networks of people who foster and organically build a conducive culture.
· Resource availability: Fintech companies have access to a diverse set of resources, including technology and domain partnerships, industry experts, customers, investors, and board members. These enable them to invest with great clarity and strategy in research and development, acquire niche technology competencies, and forge strategic alliances, giving them a distinct competitive advantage.
The fintech sector has witnessed remarkable growth and transformation globally, with India emerging as a key player in the ecosystem. Fintech companies have played a vital role in this evolution by leveraging technology and domain expertise to solve market challenges. With a deep understanding of AI, blockchain, cloud computing, digital transformation, and ESG initiatives, fintech companies are well-positioned to shape the future of the financial sector.
As the pace of change accelerates, fintech adults will continue to lead the way in providing the perfect balance between providing stable products to their customers, ensuring all regulatory requirements are met, and creating innovative solutions that improve efficiency, security, and the customer experience.
This article is written by Sheenam Ohrie, Managing Director, Broadridge Financial Solutions, India.