Banks And Fintech Startups Functioning Together To Enable End-users
By leveraging a smart combination of cutting-edge technologies, fintech startups and companies can deliver instantaneous, hassle-free, paperless and presence-less financial services.
Any discussion involving the modern financial ecosystem must revolve around fintech or financial technology, such is its significance. The fintech revolution, as it is veritably called, comprises the range of innovations that have occurred in the past decade and continue to advance global economies towards a more inclusive future. How? By optimizing the incumbent banking services and bridging the need-gaps within the financial ecosystem.
Some of the typical services offered by the banks include personal financing, lending, remittance of funds, and credit/debit cards, among others. However, by virtue of the size of banks and the money they deal with, they are only able to focus on big-ticket transactions. This leaves a large segment of the population - people and organisations alike - unbanked, underserved. This is precisely where fintech steps into the picture.
By leveraging a smart combination of cutting-edge technologies, fintech startups and companies can deliver instantaneous, hassle-free, paperless and presence-less financial services customized for individual users. To achieve this, fintech platforms – be it NBFCs, account aggregators, eWallets partner with established banking institutions to not only enhance the range as well as the quality of financial services but also to drive financial inclusion the world over. And India is no exception. In fact, according to EY Global FinTech Adoption Index 2019, India’s fintech adoption rate is 87% as compared to the global rate of 64%.
Interestingly, the advantages of this association have never before been thrown in sharp relief as strongly as during the ongoing COVID-19 crisis. Let’s take a look how.
A matter of trust: How fintech comprise the key to unlocking a secure financial future
In the wake of the viral outbreak and the subsequent lockdown, people are actively practising physical distancing to prevent the spread of the contagion. Hence, even though the banking sector is maintaining business as usual, people cannot physically access financial services amid the mandated strangulation of mobility. Moreover, cash-based transactions are being discouraged since physical currency can act as a potential vector for the virus.
Against this backdrop, the presence-less, hassle-free, and trustworthy fintech services are enabling Indians to meet their financial obligations while simultaneously complying with social distancing protocols. Currently, customers can seamlessly leverage digital currencies and secure payment modes such as UPI to purchase essential goods and online services, pay EMIs, drive rental transactions and wealth management, etc - despite the lockdown.
Fintech companies have also come to the rescue of MSMEs that need to meet their working capital requirements to tide over the crisis amid strangulated business and trade activities. Considering the increasing reliance of the financial ecosystem on digital services, it only stands to reason that the role of fintech will become even more important in the post-pandemic world for revitalising and advancing global economies.
The fintech revolution, therefore, will unleash the next stage of evolution of the financial landscape of the future. This ecosystem will be built upon the foundations of unbreachable trust, optimum efficiency, and maximum accessibility. And escrow-based financial solutions comprise one such set of services within this evolved scheme of things.
How escrow accounts can mend the trust-deficit in the post-COVID-19 landscape
Escrow account services have historically been associated with big-ticket transactions such as M&As. It is an arrangement where a third party holds an asset or escrow money on behalf of the transacting parties, releasing it only when all the terms and conditions of the contract are met. With their characteristic Midas’ touch, fintech players are making the same services accessible for individual users, enabling them to conduct small-ticket transactions within a trust-enabling framework.
Take the real estate sector for instance. As per our primary findings, in nearly 60-62% of transactions involving property resale, the capital ends up getting locked in litigation due to violation of trust. This scenario can be avoided if buyers have the option of putting their money in an escrow account instead of paying an advance upfront to the seller. In case of any breach of contract, the money will not be lost to fraud. On the other hand, upon the successful culmination of an agreement, the relevant stakeholder will be able to access the amount due to them.
This financial instrument can even be extended to other domains and will find enthusiastic adoption in the post-COVID-19 economy. A tenant can use this facility to have a secure and hassle-free rental journey while stakeholders of the gig economy can rest assured that faultless deliveries are supplied and the due sum is paid in time and in full.
To comprehend how revolutionary this application is, one needs to understand that, traditionally, it used to take 40-45 days to set up an escrow account, with the subsequent transaction journey being extremely cumbersome. The innovation supplied by the intervention of fintech lies in the simplification of the user journey on the back of a user-friendly interface.
New-age players are democratising escrows by creating a digital overlay with the banks serving as the backbone of the entire framework. We leverage user-friendly front-end to facilitate a seamless user journey and enable contingent-based transactions to take place instantaneously over the digital platform. Like us, various fintech is actively merging their proprietary technology with the tech infrastructure of the banks to collectively function as the harbinger of trust while maximizing the access of new-age financial services to the new generation of users.
Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house
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