From Technology to Digitalisation, How will Indian BFSI Sector Perform in 2018?
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From the implementation of GST to the growing popularity of Bitcoins and the stock markets scaling new heights, 2017 proved to be an eventful year for the Indian financial sector. However, of all events, the biggest disruption in this sector was caused by technology.
With the advancement of digitalization and huge inroads made by fintechs, will the Indian financial services sector continue to disrupt or the companies will gracefully embrace technology in 2018? In a conversation with Entrepreneur India, some of the key BFSI stakeholders spill beans on what should India expect from the sector in New Year.
Sudip Bandyopadhyay, Group Chairman, Inditrade group of companies feels that GST will impact the BFSI sector at two levels and those companies that successfully digitalize their operations will be best equipped to manage the transition at both levels.
"As a result of GST, the internal operations of companies in this sector will have to ensure compliance to requirements of registration of branches in different states, cope with the possibility of higher costs of borrowing due to reduced tax credits and possibly, more complex assessment and adjudication of tax issues," he said.
At the same time, to effectively cater to the needs of clients, BFSI companies will have to considerably overhaul their IT systems, as the backbone of GST is digitization, which in turn requires IT support.
"A number of BFSI transactions, be it fundraising, fee-based services, insurance services, lending, lease, hire purchase, etc., all attract GST. Accordingly, the ability to process high volume data in order to be ready for complete GST compliance will depend on how competent and vigilant the IT services of companies in the BFSI sector are," he added.
Ajinkya Lokhande, Director, BitBox claimed that blockchain is the future and if anyone is denying the potential of the technology today then, we are doing the same thing that people had done to the internet in the 1980s.
Even Apurva Damani, Managing Partner, Artha India Ventures concurs with Lokhande and believes in blockchain's prospective future. However, "with so many start-ups claiming to use blockchain, there is still scope for creating a good business model based on the solution," she shared.
The VC firm is also anticipating more debate around permission vs. permission-less blockchains in 2018.
Additionally, when discussing blockchain, one cannot ignore the growing popularity of cryptocurrency, which is presently in the grey area when it comes to regulations. Damani and her fellow partners are looking forward to knowing SEBI's take on the matter and how will the government regulate cryptocurrency trading.
While on the other side, looking at the growth of current trading volumes, Lokhande is expecting exchanges to introduce multiple cryptocurrency pairs and futures trading on their platforms. Cryptocurrency futures trading is presently unavailable in India.
Opportunites for Fintechs
Consolidation of fintechs will be a highly probable event in 2018 with players trying to find their niche to expand target segments and growth verticals while looking for active collaboration with banks and other financial services companies that are increasingly wanting to digitize the lending verticals.
Manish Lunia, Co-Founder of Flexiloans.com says the Indian fintech lending ecosystem will witness transformational opportunities in the coming year due to GST data availability, E-NACH mandates and POS digitization initiatives of the government that will expand the eligible borrower ecosystem.
"With seasoned books, fintechs will be able to run artificial intelligence and machine learning-based algorithms that will have large testing databases to improve the efficiency of their models. The digital sources of loan origination will expand with the customers getting familiar with these companies," he added.
Additionally, Damani from Artha feels with an increase in digital transactions month on month, India will see more ancillary services burgeoning in the payments space.