The FinTech industry is a burgeoning industry in India. However, there are widespread misconceptions about the scope, applicability, and risks involved in fintech, especially amongst the customers. In many cases, in spite of the curiosity to approach a Fintech lender, the fear of the unknown is causing the loan applicant to approach the traditional banking channels for a business loan. With its adoption of new age and cutting-edge technology namely IoT, Big data, AI, cloud computing, fintech is transforming the SME business loan segment in India.
We shall debunk the myths surrounding the fintech industry with the presentation of facts as to how beneficial fintech is to the financial needs of an SME:
#1 FinTech are all alike
This is an almost universal myth about fintech that besides minor differences, all fitness is fundamentally the same. They are often clubbed under a broad umbrella of financial service providers. The fact of the matter is that the fintech industry is gradually evolving and gradually including several new domain areas. However, broadly, fintech firms make traditional financing easier for the customer by leveraging upon technology. As the scope is gradually expanding, fintech coverage extends to lending, wealth management, money transfer, forex transactions -the list is ever growing, across all types and sizes of transactions. The fintech players need to create awareness about the benefits and different facets of fintech. This also includes educating customers especially SMEs on how fintech can be suitably applied to suit their business needs since SMEs are a significant number in India. This would prove a win-win situation for both the SMEs and the fintech lender. Fintech offer collateral-free unsecured loans for SMEs. Tapping into the SME market would provide a reliable long-term revenue source for fintech lenders.
#2 FinTech platforms have security risks
Digital security is the major concern area in the fintech space. Due to a few stray, random incidents of security lapses, many consider fintech as a whole to be insecure. The fact is that most fitness has in place, best in class security software on similar lines to banks. In fact, fintech, being largely technology driven, lay a lot of emphases and invest in cutting edge, expensive technologies, including new cloud-based technology that has better encryption standards and excellent fraud detection and security standards. The data is completely upheld at all times by fintech lender and no third party has unsolicited access to it. Some the facilities include
A. Data security framework: The applications are built using best-in-class security tools, strict IT governance, and security frameworks to virtually eradicate any security issues. The enterprise content management system is governed by the encrypted data security framework and standards with requisite permission systems.
B. World-class secure data center facilities and Infrastructure: Fintech data centers are hosted through secured public & private cloud operating from India and have been designed using global standards. All mission-critical systems pertaining to daily operations operate with minimum N+1 redundancy, which significantly reduces uptime to customers.
#3 Online means cheap, hence fintech reads inexpensive
This is a huge fallacy among customers as regards pricing aspect of fintech platforms. In reality, there is no such thing as a free lunch. Like any other service provider, FinTech players do not and cannot afford to offer free services all the time. Pricing discounts may only be promotional or seasonal in nature. In fact, the high-quality technology-enabled services offered by fintech players entail costs by way of service charges etc.
Quality comes at a price, and reputed FinTech companies transparently declare upfront the processing charge, documentation fee, stamping costs and any other fee involved. Hence, as a consumer, one needs to be aware of the loan requirement and research the costing of the fintech lenders, prior to approaching them.
#4 The FinTech industry is all about eliminating banking
This is no element of truth in this statement. Like everyone has a place under the sun, in reality, fintech firms often extend loans to those applicants who have been unable to meet the stringent loan criteria of banks. Hence fintech is complementary to banking channels. Rather, fitness has transformed the idea of finance and traditional banking by embracing cutting edge technologies. Banks can benefit from increased speed of technological innovation like their fintech counterparts. Fintech, on the other hand, need to emulate the stability, reliability and trust factor of banks, which includes procuring better sources of funding and broad basing the customer profile
For consumers, the best approach is to educate oneself about the scope and coverage of the entire FinTech industry and approach the best-suited one for their business needs.