Digital Diversification and the Use of New Age Technologies on FinTech Firms

Introduction

In 1972, a banker from New York first used the phrase “FinTech.” Although the meaning of the term “FinTech” lacks a generally recognised definition of financial technology. The term “FinTech,” or “financial technology,” describes a business that combines the newest technological trends to offer its clients better financial solutions in the form of digital payments and transactions (Rajeswari & Vijai, 2021). It refers to any business that engages in price options, online market lending, mobile apps, financing, foreign exchange and remittances, investments, distributed ledger technology, virtual currencies, mobile wallets, artificial intelligence, robotics in finance, crowdsourcing, insurance, and wealth management. By enabling real-time financial control for the community, it has the potential to be advantageous (Brainard, 2016).

It is a new technical term that is supported by numerous cutting-edge technologies and describes a collection of novel business strategies and technical innovations that profoundly alter how financial services are provided in the present scenario. As per Statista (2022), the United States had 10,755 fintech (financial technology) start-ups as of November 2021. In comparison, the EMEA region (Europe, the Middle East, and Africa) had 9,323 such start-ups and the Asia Pacific region had 6,268. Further IAMAI, (2017) Report emphasised the fact that traditionally, financial institutions were viewing technology as an enabler to business propositions, on the other hand, Fintech are changing that role by leveraging digital technologies to create new business propositions and target new market segments that were previously unattainable.

Figure 1.

­

Source: Author compilation

FinTech refers to the development and successful implementation of innovative technology instruments to meet users' financial needs and demands. It goes beyond e-banking and consumer digitalization. It has been fascinating to follow India's transition from online banking (which primarily covered core services) to digital banking, which involves automating all banking services using a variety of digital platforms. The fintech mechanism involves BaaS (Banking as a Service), a platform that links banks and third-party APIs so that the latter can provide cutting-edge financial services through a network of fin-tech partners or developers. As a result, along with more conventional tools like banking cards, USSD, mobile banking, and POS terminals, the experience of digital banking has been improved by Open-API like Aadhaar Enabled Payment System (AEPS), Unified Payments Interface (UPI), and Mobile Wallets. Additionally, the growth in the Fin-Tech market can be addressed by explaining, emerging technologies that present a clear opportunity to accelerate the financial industry's transformation by providing greater value to users, increasing operational efficiency, lowering operating costs, disrupting existing industry structures, and democratising financial services access (Belanche et al., 2019).

In India, Fin-Tech firms are using Account Aggregator (AA) or Open Banking Framework. This framework offers a digital platform for the simple exchange and consumption of data and information from financial information providers (FIP) like banks, mutual funds, insurance companies, tax/GST platforms, and similar entities for the benefit of financial information users (FIU) like personal financial managers, wealth managers, and Robo advisors, as well as from credit providers (banks, other lenders, etc.), credit providers, and credit rating agencies, and similar entities. Further, AA only shares specific customer data with FIU with their consent for a specific period of time and does not store their customers' data while maintaining the highest level of data protection, data blindness, and other security concerns.