How are new-age financial platforms redefining financial services for small businesses in India?

The very function of time is to change the course of things. There is but one trait which can perfectly capture the essence of this change – “inevitable”. However hailed or celebrated a technological breakthrough is today, it is prone to replacement 🤔. Adaptation has always been the key to survival, and this extends to the realm of products and services in the marketplace too. 

Banking as a service (BaaS) has not been left untouched by the tide of time! According to industry reports, the overall BaaS market is expected to reach ~US$ 12.2 Bn by 2031. India is among the top 5 countries driving the demand for BaaS platforms. The country has witnessed a surge of innovation in banking and financial services industry, especially since the pandemic. One such innovation is a financial platform! ⚡️

In this blog, we will explain what a financial platform is and how it is going to be a game changer for small businesses in India? 🇮🇳

Financial Services Sector – A tryst with technology

It is quite amazing to observe that only a couple of decades ago, India’s financial services ecosystem was so drastically different than it is now. It used to evoke pictures of long queues, piles of documents, hours of repetitive and tedious work and everything overwhelming in a nutshell. There was also a time in India, when credit cards and ATM machines were a novelty. With transactions being a “scan & click” away, we can say we have come a long way since then. The sole driver of this evolution was a necessity to reinvent the existing model in accordance with the changing needs of customers. 

The pandemic, with all its challenges, has also been a catalyst for technology driven platforms and services. People had to resort to the digital alternatives out of necessity, and then it became a part of their lives owing to the sheer convenience and flexibility it offered. Despite this development, an average consumer, especially from Gen X and Millennials, still prefers the human touch. This can be attributed to their legacy and trust that people associate with the tangibility offered by them. 

However, a drastic change  has been brought about by the emergence of digital-only financial service platforms. Their unique proposition of revolutionising customer experience via innovation is what makes them a suitable option for small business owners in India 🇮🇳.

Manifesting disruptive innovation using fintech

Business financial platforms are essentially fintech firms which can be thought of as the “Digital Only Avatars” of traditional financial service providers, minus the physical presence. They provide a host of financial services but in a more streamlined, convenient and personalised manner. At the heart of their unique value proposition is the idea of customer centricity. They leverage technology to help traditional players bridge the gap and improve customer experience. In a nutshell, these platforms focus on making financial services hassle-free. 

Why it’s time to make a move ?

We are the denizens of a world that moves at an unprecedented pace. Gone are the days when customisation was limited to pizza toppings and fine tuning to guitar. Now we want this privilege in every product and service that we avail. Financial platforms bring down the time for customer onboarding process and reduce excessive documentation. They leverage technology to make financial services as convenient as possible for consumers. 

Benefits of a financial platform:

1. Customised financial services 
2. Providing tailored products and services for every segment
3. Credit Underwriting using alternative data (individual turnover constraint which happens to be a bottleneck for SMEs and their expansion)
4. Predicting cash flow
5. Simplifying loan application process and credit facilities 
6. Transparency

What’s In Store For You?

Business financial platforms, provide the essential services to cater to some of the most underserved segments while delivering a plethora of business related and additional  services under the umbrella. These include card services, expense and invoice management, credit score builder, reconciliation, payment gateways, payroll management to name a few. 

Some essential services provided by financial platforms:

1. Card services
2. Expense and invoice management
3. Credit score builder
4. Reconciliation
5. Payment gateways
6. Payroll management

Some features which make them all the more appealing for the customers include:

1. User-friendly app and website design
2. Round the clock customer support for solving the long standing issue of grievance redressal 
3. Simplified tracking and management of financial transactions
4. Hassle-free onboarding with an overall tailored experience especially for small businesses 
5. Customer data protection and security of funds 
6. Rewards like offers and cashbacks 

Another facet which makes them different and more contemporary is their niche positioning. Business financial platforms create an environment that fosters growth and encourages self-starters, basically providing impetus to the gig economy. Their agile model, without the rigidities of traditional structure, can be aligned with specific needs of the customers, this value addition ensures a superior customer experience. 

The other side of the coin

Having talked about the advantages of financial platforms at length, here arises the question – How do they function?

The absence of physical infrastructure and the cost of operation and maintenance involved in it, acts as a key differentiator in the business model. By deploying artificial intelligence, machine learning and data analytics for decision making, financial platforms are able to function in a more efficient and cost-effective manner. This reflects in the significantly lower charges and fees associated with them. Their business models and unit economics are different, as compared to traditional financial institutions. In India, they work in partnership with traditional institutions, and are governed by the central regulator RBI for licences and other regulatory norms. 

The path ahead

Convenience, as we know, becomes a habit over time, and once it does there is no going back. Everything today is available at the tap of a button, time and place are no longer constraints. Earlier we had to walk a distance to avail certain services, however, today we have them at our doorstep, rather in our hands! And the fact that a service such as lending and payments would be a click away is nothing short of a miracle. This synonymity of financial platform with convenience has paved the way for its adoption by the masses and it has further been expedited by the pandemic. Rising internet penetration has made it possible for these fintech services to expand their reach to remote corners of the country. This would enable business financial platforms to extend their services to businesses in nascent stages and provide aid in expansion. 

Wrapping Up

From smooth and hassle-free onboarding, account opening and management, lower fees, ease of accessibility and an overall seamless and personalised experience – financial platform are set to overhaul the financial services sector in the years to come. However, this expansion would require a certain degree of reliance and partnership with traditional players for licensing framework. It can be inferred that the future of financial services lies, not in competition, but in collaboration between the new age and the traditional.