Data and technology have been the driving factors in the lending and payments industries worldwide over the past decade. The Indian market has shown an amazing embrace of this technology. Thanks to the robust UPI infrastructure, the country is hailed as the pioneer of tech-based lending and effortless payments. It is now a challenge to maintain this momentum by constantly improving the end user’s entire experience.
According to research, by 2023, India would account for 2.2 percent of the global market for digital payments and lending, with the total value of such transactions expected to reach $12.4 trillion by 2025.
Fair lending procedures need to be constantly regulated and monitored. India will experience the expansion of countless small-scale firms due to hassle-free loans. As a result, we will see a boost in constructing a $5 trillion economy by establishing a solid digital lending system. The digital payments sector will see a rise in innovation in 2021 due to the backing of regulators and banks seeking to build trust and reduce the risk of non-cash payments.
Some Major Shifts That Have Taken Place In The Financial Sector
Point Of Sale Financing
Point-of-sale (POS) financing is the way to go as customers increasingly adopt online shopping culture. It’s a sort of credit explicitly intended for customers, allowing them to apply for a loan or credit for a specific purchase. These loans can finance the entire transaction or establish a restriction on how much the buyer can spend with one particular seller. Borrowers can repay these credits in monthly installments.
International firms such as Affirm and Klarna transform the space by providing simple, trackable financing solutions with no hassle customizations. This revolutionary tool provides clients with access to a dashboard where they can log in and reschedule their payment date at no additional cost or late fee penalty if they are sure they will be late with their payment.
Neobanks And Overlay Services
It’s a bank that doesn’t have a physical location and only operates through internet interfaces. All financial services who use digital channels to deliver financial solutions and services such as money transfer, lending, payments, and others are included. Neobanks, on the other hand, are highly adaptable and customer-focused. Payment apps allow you to invest as well as pay your bills. In India, a neobank provides payroll services for businesses and current account and vendor payment services.
Tap And Go Payments
In 2020, the global use of digital and contactless payments was expected to expand. Even in India’s smaller cities, where cash is still widely used, contactless payments are becoming more popular. The advantages of paying with a single tap extend far beyond social distance, as consumers will prefer to utilize it for various reasons, including simplicity and security. The RBI has increased the limit for contactless card payments from 2,000 to 5,000 to boost contactless transactions in the country
Improvement In E-commerce Transactions
People depended primarily on e-commerce to acquire groceries, health items, and other basics due to the limitation on movement during the lockdown. Consumers prefer to shop online even now that the lockdown has relaxed because they perceive the benefits of having more options, remote commerce, and digital payments.
QR Code Payments
Payments by QR code will continue to demonstrate its versatility, particularly in emerging economies, owing to their ease of use and low cost of implementation. This sort of payment is supposed to be simpler to use because it requires a single application to be utilised in a single location. These payment apps include Google Pay, PhonePe, Paytm, Amazon Pay, and many more.
Use Of Cryptocurrency
According to recent reports, the crypto sector is growing at 100%, and the market is worth $2 trillion. India can close the gap between bank credit and SME finance by exploiting this industry.
Crypto inflows via KYC-certified investors—who have been recognised by Indian or worldwide exchanges—can be allowed in a restricted manner to improve access to low-cost, risk-managed global capital. Companies that have registered for GST, for example, can access payments against their issued e-invoices and other information collateral held in dedicated accounts on this platform.
Blockchain Technologies
Transparency, traceability, and improved accessibility are just a few outstanding characteristics that help maximize efficiency. When it comes to the exchange of money and sensitive information, blockchain will provide a high level of security, allowing users to benefit from its transparency while cutting operational costs and creating a safe environment for real-time transfers.
Blockchain currencies like XRP, Ethereum, and Bitcoin, among others, have the potential to revolutionize India’s cross-border payments industry and provide tangible benefits to users, banks, and regulators. However, all of this will be contingent on a sufficient level of confidence, credibility, and regulatory acceptability. More significantly, these transactions will have to meet AML and KYC requirements to verify that they are real.
Final Verdict
With each passing day, digital payments and lending gain more and more traction. In the next few years, futuristic technologies such as AI, Machine Learning, and IoT will significantly impact the development of personalized digital payment systems. Still, there are restrictions by the government of India on Bitcoin and Cryptocurrencies for lending and borrowing.
References:
1. International companies- Affirm and Klarna
2. Changes in the Banking Industry- Forbes
