6 min read

Changing Dynamics of Fintech Industry & Change in Consumer Behaviour (Part 2)

Digitization has changed user expectations considerably. Younger generations are growing up in a world of abundant connectivity and older generations are also heavily affected. Thanks to the ubiquity of smartphones and the increasingly easy availability of the internet, more and more users are familiar with digital financial platforms. But the main hindrances in wider user adoption of Fintech platforms are the issues of data privacy, cybersecurity, regulation difficulty, and lack of financial inclusion.

Ease of Learning

Due to the high penetration of smartphones and the internet in even small markets, India is home to a growing young population who will readily accept new technologies. There is a growing demand for e-learning from the youth which includes financial literacy.

Some broader Insights

  1. There is ample Fintech opportunity in India present in its large unbanked population which is yet to be tapped. So far Fintech startups have focused on the population that was already involved in the financial services market. But there are millions of users who reside in smaller cities and villages and have been overlooked by the financial sector for decades. There is a vast potential customer base waiting to be tapped and Fintech is better suited than traditional banking for reaching them since it is digital. 
  2. IndiaStack which aimed at putting a digital infrastructure based on open APIs in place to promote public and private digital initiatives has been a huge success. Its two most successful innovations, Aadhar and UPI, are garnering international interest. IndiaStack proved that financial services can be presence less, paperless, cashless, and consent-based and empowered banks, financial institutions, and startups to design ground-breaking digital financial products for the masses.
  3. There are many Fintech sectors where innovation is taking place. The most prominent is the emergence of Neobanks. These are banks that aim to redefine customer-centricity by including fully digitized account opening, free debit cards, instant payments, personal finance advisory, cash flow analysis & projections, GST-compliant invoicing, and accounting integration. Others include AgriTech (agricultural technology), HealthTech (healthcare technology), and PropTech (real estate technology) startups which are disrupting traditional ways of doing business in three industries that facilitate the nation’s most vital necessities—food, healthcare, and shelter. These startups can ease the process of trade and the movement of money for market participants.
  4. Large tech companies including international players are entering the Fintech market in India. These include Google, Apple, Facebook, Amazon, Microsoft, Flipkart, Truecaller, and Reliance. They have deep financial muscle and distribution at their disposal and it will be interesting to see how they try to solve the financial inclusion problem.

Challenges in Fintech industry

Low finance education

As stated before, the biggest entry barrier for users into the Fintech space is the lack of financial education. The more people in India are educated about different financial products that are available, the more they will become users of these financial products. A big chunk of funds for a lot of Fintech websites like Zerodha, TickerTape and Small Case is spent on building a sizeable financial education course catalog.

Fear of cyberattacks and endangered privacy

Due to lesser regulation present around Fintech, as compared to brick and mortar banks, there is a lack of trust on the part of the users. Good design has to find a way to increase user trust in the platform by assuring users that all possible steps to keep them safe are being taken.

Cost of entry

One thing that the innovations in the Fintech sector can easily achieve is making financial services that have traditionally been too expensive for most Indians to enter more easily accessible. Technologies like video-based KYC and DigiLocker have already reduced onboarding costs and augmented financial inclusion. With lowering costs of transactions and providing smaller investment and insurance portfolios – sometimes as low as INR 10 – Fintech companies can further make their products more accessible.

One size doesn’t fit all

In the past, most investment opportunities and insurance plans offered by companies lacked creativity and were the same for all users. They didn’t accurately reflect the user’s individual needs. Innovating platforms around personalized services and designing them to be tailored to the user can greatly increase user adoption.

Solutions That Can Improve Business’s ROI

Incorporating Financial Education

India has a vast untapped market that is underbanked and underserved because of low financial literacy. This includes women and people in rural settings. Although digital payments and other Fintech activities are becoming increasingly popular, there is still a lot of potential for growth in these markets that is being ignored.

Millennials are increasingly turning towards stock market investing and nascent investment avenues like ETFs and are looking to improve their financial literacy. Traditionally planning for retirement or other financial life goals and insurance has been dull and complicated and has alienated many young people who could be potential customers.

A great way to get potential customers to adopt your platform is to incorporate financial e-learning into it. Courses can be structured around the products you offer and also a broader financial perspective of the Indian market and global economy. Making upcoming trends easy to discover will whet the appetite of your audience who might be looking to invest in the next big thing. Presenting information in as easy to understand terms or, even better, videos, is key to capturing your audience’s interest. 

These courses can be offered for free but they will add value to your site and convert a vast majority into paying customers if done right. An engaging, well-designed e-learning component will drive visits and engagements as well.

Highlight Transparency and Security

The major fears Indian customers have towards going digital with their finances involve cybersecurity and data privacy. A large swath of the population erroneously believes that Fintech platforms are unsafe. To allay their fears, the security measures used and transparency practices employed should be highlighted on the platform. The fact that all transactions are encrypted and that sensitive financial data is not stored or shared by the platform should be reiterated to the users at every step. The various mechanisms that have been put in place to prevent cyberattacks should also be stated clearly on the website. Wherever possible, use symbols and language that will work on earning the trust of the end-users and encouraging them to use the platform more.

Ease of Use

The reason why Fintech platforms are increasing in popularity is that they are much more convenient to use than traditional methods. Keeping this in mind, the design and experience of using the platform should be as smooth and hassle-free as possible. The reason people want to use an online investment platform is that it reduces the number of difficult choices to be made, phone calls to be conducted and paperwork to be filled out. So a Fintech platform should reduce human contact as much as possible and use innovations like video-based KYC and DigiLocker to upload and store documents provided by the customers.

The experience of using the platform should also be similar across devices and not change drastically from OS to OS so that one can transition easily. In order to not alienate users who might not be comfortable with English, especially those in smaller cities across the country, as far as possible the communication should be symbol-based rather than language-based. Too much text on a simple operation like transferring money from one bank account to another might turn some potential customers off from using the app, but tech like QR codes, fingerprint scanners, and voice recognition can provide an inclusive experience for users across the board.

Peer-to-Peer Communication

Globally the most popular digital payment apps that allow users to transfer money to each other, like Venmo and Cash App, incorporate some form of peer-to-peer communication. This is usually in the form of messaging within the app. Incorporating a social component into your platform is a powerful acquisition and retention tool because it builds an experience around the platform. Apps that have a social component where users can interact with each other tend to have higher engagement than apps that don’t. Baking peer-to-peer social engagement into your product and allowing users to talk to each other, whether it is to split a bill after a dinner out with friends or to ask your parents for money, will drive authentic expansion.

Personalized Service with New Tech

When it comes to insurance or investment advice, most companies offer the same generic portfolios as options to all their users. When designing platforms, work to understand the goals and aspirations of each user and provide them with personalized service including automated plans and goals-based asset allocation. 

Companies can employ deep data insights learned through Artificial Intelligence and Machine Learning to do this. These plans can be based on the user’s time, usage and activity. In fact, some insurance companies are using deep data to move from reactive insurance, where the claim settlement is done after an event occurs, to proactive insurance, where the insurer defines the probability of an event happening and automatically compensates the customer if it happens, thereby eliminating the exhaustive insurance process completely.

Other exciting innovation that can be used includes wearables to provide near-real-time-data to insurers, biometric and soundwave-based payments and universal and technology agnostic QR codes.

Focus on niche segments

Targeting niche markets is another good way to increase the user base. These niche markets can be based on the industry or sector the user works in. For example, targeting nurses, students, gym instructors, or restaurant owners for personalized insurance schemes or targeting events like weddings for insurance. Think outside the box and come up with different products for different niches. Then create content revolving around your niche to attract users.

Published by Venky Hariharan

Lead UX Designer


Venky Hariharan Lead UX Designer