Council Post: How Digital Transformation Is Driving The Fintech Industry

CEO & Co-Founder at Ionixx Technologies Inc., leading the company’s cross functional teams located in USA, India, Singapore & Canada

The “new normal” is a phrase that has become rather common today, and no prizes for guessing what initiated this. The Covid-19 pandemic has forcibly ushered in a transformation in not just how we live our lives but also in how businesses operate. With strict mandates in place across the globe, the need for businesses to transition online has become the norm. 

Startups and small and medium-sized enterprises (SMEs) have had to reorient their strategies and look in the direction of lending or loan management organizations for instant funding to restart and adapt to a digital ecosystem. At Ionixx, we’ve been working with many of these companies, providing a custom loan management solution with a digitized experience for lenders, thereby enabling a seamless and hassle-free lending process.

Based on my experience in financial technology (fintech), I’ve been able to watch this industry transform throughout the past year. Here are some ways this is happening and what we can expect in the future. 

The Changing Fintech Landscape

While we know that the financial services industry has a rather traditional outlook and takes time to warm up to change and innovation, the pandemic has shaped a different narrative. It has accelerated a perceptible shift by necessitating a quick transition from physical to digital, requiring the fintech industry to rise to the challenge of arming businesses with powerful digitization initiatives. The shift can also be largely attributed to rapidly changing consumer behaviors and emerging new patterns that are dictated by a clear preference for cashless and contactless operations. 

The pandemic has significantly contributed to a huge slump in the global economy, thereby exposing SMEs’ financial fragility. SMEs’ accessibility to finances has taken a dramatic turn, and to ease their struggles, an open and transparent digital ecosystem is useful. Through online loan management solutions designed to provide high-quality and user-friendly applications, the transition from physical to digital is made seamless.

Addressing The Pain Points Of Legacy Lending Models

In the current scheme of things, traditional lending models render themselves inefficient because they are not built to scale and, therefore, seem to pose a barrier for SMEs to access finance. Not just that, but legacy systems are not cost-effective compared to fintech companies, which boast a lean operating model designed to cut costs. There is also a lack of flexibility with legacy systems because most of their operations are not automated or paperless. 

It is here that a cloud-based lending mechanism could make all the difference. However, transitioning to the digital ecosystem overnight is no walk in the park. The best bet would be to consider building an application programming interface (API) architecture that would integrate seamlessly with legacy systems and provide a scalable and sustainable digital model that can drive an optimized lending solution.

Enabling A Channel For Adoption Of Digital Fintech Platforms

The pandemic has revolutionized the way digital payments work. With an increased spike in digital platform adoption during the pandemic, digital payments platforms and digital wallets and credit cards have seen an uptick in demand. I’m seeing more SMEs and startups looking to leverage the digital advantage and available loans through easy, quick and secure fintech solutions that are supported by strong infrastructural processes. 

With consumer awareness high and SMEs warming up to the idea of using fintech solutions to drive their financial operations, I believe the fintech industry is poised to make the most of digital transformation. 

Processing Data Optimally For Operational Efficiency

With digital lending platforms equipped with innovative features, such as video know your customer (KYC) and personal identity or social security-based KYC, account aggregators can easily access customer data and get their consent, thereby ensuring better due diligence.

Data analytics can be leveraged for enhanced understanding of customer portfolios to enable efficient processing of loans. Additionally, useful insights into credit history and customer preferences can be gathered from the collaboration of fintech and big data analysis. Another useful area where data can be leveraged is fraud detection, where customer behavior is recorded and used to analyze potential fraud.

What’s The Final Take?

It can be said that necessity is not only the mother of invention but also of adoption. Many industries have been in need of digital transformation, but without dire urgency, the adoption of this transformation has been slow.

As we have seen the fintech landscape change, we are also noticing other industries following the same trajectory. Many of our healthcare clients have added remote patient monitoring and telemedicine modules to their existing projects with us to meet the demands of their customers. This has been a much-anticipated shift for the past two decades. In every industry, there has been a shift to digital or remote wherever possible. 

With Covid-19 vaccines rolling out, we are finally seeing an end to this pandemic. There may be some fear of reversal to the old ways. However, significant investment has gone into digital transformation during the past year, and the fruits of this labor are becoming more evident. The way I see it, the cost savings, improved process efficiencies and superior quality brought by digital transformation will see that these changes are here to stay.

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