Outlook for 2022: BFSI, Personal finance, and FinTech

By Puja Sharma

As we embrace ourselves for the New Year, here’s what the industry experts have to say about FinTech, personal finance, and the BFSI sector.

BFSI: New regulations in digital lending

Digital lending especially emerged as a boon for MSMEs that have traditionally struggled with credit accessibility due to the lack of proper financial documentation or collateral for the underwriting process. In the next year, we expect an increasing number of MSMEs to be financed to scale. Additionally, since the integration of technology means that credit can be delivered to the underserved areas of the country, it will lead to an increase in the contribution of MSMEs towards national development.

“As the pandemic continued into 2021 with the deadly second wave hitting in April, India witnessed a further rise in technology adoption in financial services. One segment that has been changed forever is lending,” Lalit Mehta, Co-founder & CEO, Decimal Technologies said.

“Many customers have realized the inefficiencies that plague traditional lending such as the need to complete physical paperwork, undergo cumbersome KYC, and deal with in-person interactions. In the past year, digital lending has come to the fore and portrayed its ability to eliminate these common problems thus, making the complicated process seamless,” he added.

As we step into the new year, digitizing offline channels by onboarding Direct Sales Agents (DSAs) and Banking Correspondents to offer credit services to their communities will play a pivotal role in reaching small rural businesses and helping them secure credit.

FinTech: Focus on the rural economy

While India continues with the digitization drive, it is important to understand that rural India is still a cash-driven economy where, as a recent study by CMS Infosystem found, even when one is comfortable with online shopping, they prefer the ‘cash on delivery option. Hence, in the coming year, there will be more innovations in the ‘phygital model’ that suits the rural lifestyle.

“We saw the government and the RBI making strides towards inclusion by addressing rural-specific needs through developments such as the deployment of 57 lakh payment acceptance devices under PDF, plans to launch UPI on feature phones, and Jan Dhan 3.0’s focus on doorstep banking,” Dilip Modi, Founder of Spice Money said.

In 2022, we expect an increasing number of youngsters in rural India wanting to be financially independent and take the entrepreneurial route to become merchants. They will further promote assisted financial and digital inclusion that supports those with minimal financial and digital literacy with seamless access to banking services.

“From a business perspective, 2022 will witness more fintech tap into the business opportunity in rural India. More companies will realize the benefit of creating a tech-driven ecosystem and come together as partners to address the needs of the untapped customer in India’s tier 2 towns,” he added.

Personal Finance: Digital gold expected to see more traction

The pandemic brought the importance of building wealth into the spotlight and many resorted to investing in gold as it is widely known as a haven during turbulent times. Digital gold emerged as a great investment option, especially for first–time young investors, due to it being easy to purchase through fractional investments and to hold on to as a long-term asset.

 “As each year comes to a close it is human nature to reflect on just the past twelve months. At the same time, it serves us well to remember that prudent investments are often held for the long term.  Gold is one such investment that has consistently outperformed cash deposits and inflation when held for the long term,” Ashraf Rizvi, Founder & CEO of Gilded said.

Over shorter time horizons, of course, gold sometimes rises and sometimes falls.  Over this past year, gold in India has indeed gone through both rising and fall in demand, reaching pre-pandemic levels during the festive season due to pent-up demand as well as gifting.

“Digital gold also gained considerable traction in India as it combines the traditions attached to the yellow metal that the older generations appreciate with new-age technology that the millennial and Gen Z population desire,” he added.

The outlook for digital gold in 2022 is positive as people continue to grow comfortable with digital alternatives that make ownership of physical gold easier than ever before.

Millennials and Gen Zs are expected to become more visible in personal finance management as more of them join the workforce and begin building their investment portfolios. Given they are largely digital natives, digital gold and other digital alternatives, along with wealth-tech apps, are expected to see more traction from this demographic.

In the new year, we are hoping for clarity in regulations that will help enable investors to make informed investment decisions and help them to continue on their journey of achieving financial freedom.