For a long time, traditional banks have enjoyed a monopoly in the global financial markets. And these are institutions that are highly regulated and well supported by regulators and the government. Banks have been a critical pillar of any nation’s economy as they help mobilize money that helps shape the economy. But more importantly, they enjoy high loyalty, trust, and goodwill. Hence, they attract a lot of rich talent and have invested heavily in acquiring the top talent with relevant skill sets so that the whole machinery works smoothly.
While most years of its existence, the banks have been serving the local or the regional population. With the advent of technology in the last two decades, banks have slowly started moving globally. Today a bank in any country having foreign branches is not something unheard of with this evolution of globalization. This revolution of going global has intensified the competition among banks who now are seen battling against each other by providing a wide range of products and services which are technology driven.
But with the advantages that banks hold in terms of trust, customers, and infrastructure, they significantly lack a lot of points due to their nature of operations and the regulations they operate in, which restricts them from baking the unbanked completely and becoming customer friendly.
Rise of Fintech- The Gap Filler
To understand the basics, fintech combines the words “financial” and “technology.” It’s a term used to define new-age technology that looks to automate and improve the use and delivery of financial services and products and onboard people and businesses that are left out of the banking system due to geographical proximities, lack of financial knowledge, and the regulatory walls that make banking inaccessible to many.
This is where fintech steps in, as it helps individuals and businesses access formal channels of finance and money, enabling the same by using technology. While some sources believe fintech was born in the late 1990s around the dot com era, its prominence in the last decade has grown significantly primarily with its use now reaching out to various industries, including retail banking, investments management, fundraising and nonprofit, education, and financial services for individuals
The growing Fintech Story in India
According to a recent report released by BLinC Insights, The overall size of the Indian financial services sector in 2021 is estimated at $500 billion, of which the FinTech market comprises $31 billion. The report credits accelerated digitization in the country as one of the critical reasons for the rapid growth of fintech.
According to various sources, the Indian fintech ecosystem is currently the third largest, only behind the United States of America and China, and is further estimated to grow at a compounded annual growth rate (CAGR) of 22% in the next five years. The country currently has over 6000 fintech companies, with the majority in investment and payments.
The sector has also attracted significant funding over the past decade, which is another lever of its growth. According to a report published by Economic Times, from 2016 to 2021, the total fintech funding stood at USD 16.5 billion, of which 60% was in the last three years.
The levers continue to keep the fintech industry lucrative as an enormous untapped market is glaring at these young companies, which, combined with high internet penetration, expanding middle-income and high-income households, and favorable government initiatives, create a considerable potential for growth, especially in sub-segments of digital lending, insurance, and neo banking
Skilling the youth for fintech
As mentioned earlier, the traditional banking channel has been investing a tremendous amount of money and efforts in the skilling labor force to join the conventional banks and financial institutions. But fintech is a different ball game, especially if one looks at the skillset and understanding an individual requires to operate in this industry.
While the basics of money, finance, and economics are critical, it is also necessary that one realizes that fintech is no more about the niche and isolated technologies like mobile development or single program function. Today’s fintech businesses utilize all central technology stacks for various solutions along with the traditional skills of business that are needed to scale and grow.
As the environment continues to be challenging for fintech companies to grow and survive the global race, skilling the Indian youth for this challenge is a massive task. It’s not a hidden secret that there is a wide rift between the traditional education system and what the industry needs. While there has been significant progress in improving its vocational and technical education infrastructure, a significant gap still needs to be filled.
Fintech companies across the board are making evident efforts toward upskilling and developing models to keep them engaged and help them flourish in the workplace. In December 2021, Paytm signed an MoU with the skill development ministry to train over 6000 young Indians in fintech through a 6-month course and even offer employment to eligible candidates.
Digital innovations like fintech have made upskilling and reskilling imperative, especially for the younger generations. For that, young professionals and employers will have to make collective efforts. 13 million youngsters join the workforce in India every year and skilling them for a challenging field like fintech is an uphill task, especially given the shortcomings of its education system
Nilesh Maurya has been an investment banker for over eight years at Omega Capital, a bespoke investment bank with offices in Mumbai, New York, Singapore, and Dubai.
