Milan Ganatra is the Founder and CEO of 1SilverBullet – A service-centric B2B fintech founded in March 2021. Serial entrepreneur, and former CEO of Miles Software, he is a seasoned entrepreneur with over 25 years of experience in the fintech space. In addition to running 1SilverBullet, Milan has an impressive reputation as an angel investor with significant investments made in companies like HalaPlay Technologies Pvt. Ltd., a subsidiary of Nazara Technologies, a publicly-traded company, Financepeer, and Finalyca. Milan is also a member of the Advocacy & Knowledge Management Committee for the Indian Institute of Alternative Investments funds and is a consultant for several top banks and financial institutions in India.
India’s financial services sector accounts for 6 percent of the country’s GDP. Commercial banks, development finance institutions, non-banking financial companies, insurance companies, cooperatives, and mutual funds make up the sector, which has remained essentially constant over the years. However, we have recently seen a shift toward digitization and innovation. Financial services in India are rapidly expanding into a diverse financial sector, both in terms of existing financial services firms’ robust growth and the entry of new finance firms into the industry. What caused this shift is newer technologies such as Blockchain, Cloud-based Workflow Automation, and B2B digital payments. Let us examine how they will influence the future of financial services from a B2B standpoint.
The Proliferation of ‘Plug and Play’ APIs
BaaS (Banking-as-a-service) is an end-to-end process that enables fintech and other third parties to interact directly with banking systems via APIs to enable specialised banking services such as loans, cards, deposits, insurance, and payments. BaaS interfaces have emerged as a crucial component of open banking in the financial services sector, where banks offer greater financial transparency to account holders. Today, there are a plethora of fintechs offering API services, allowing businesses to pick and choose which services from various providers to integrate and give to their own clients. Because such barriers to entry have been removed, companies that use integrated finance to suit client requirements have exploded. Retail and e-commerce, entertainment, and transportation and logistics are the three industries that have seen the most growth, according to our analysis.
Many of these businesses began offering their services through an API, or application programming interface. These effectively allowed a business to add a service to its existing products, such as payment transfer, credit, or insurance. Overall, because of direct interfaces, flexible plug-and-play API modules enable businesses to offer products to their clients within a week.
Better Platforms for KYC and AML
The emergence of FinTech as a substitute for traditional financial services has increased the demand for better risk management technology. Building systems with enhanced KYC features validates users and funds in advance, while AML solutions improve processes for quickly investigating and combating money laundering. Predictive algorithms to de-mystify money laundering are still in their infancy in AML. Financial crimes are intricate and require investigation. Signals that have previously led to money laundering schemes may not be able to predict future criminal activity. In hindsight, everything seems clear.
Data privacy solutions are likely to be a huge and quickly rising market as worldwide compliance rules become more stringent. GDPR, which went into effect in May 2018, is one example of new regulations. According to ResearchandMarkets, the AML & KYC solution market alone is expected to increase at a CAGR of 19.5 percent from $1.5 billion in 2019 to $3.6 billion in 2024.
International/Cross Border B2B Payments
The industry has achieved substantial progress in cross-border payments over the last ten years, particularly at the B2C and C2C levels. However, the B2B segment has lagged behind due to many challenges including outdated systems and a struggle to keep up with a changing regulatory environment. However, the pandemic has altered people’s lifestyles and, consequently, their interactions with the internet world, with new habits arising. The number of digital customers has increased dramatically, creating a whole new market where firms may reach out to digital consumers all over the world.
The days of checks and faxed purchase orders are long gone, and one of the best practises is to stay on top of the digital evolution and examine what you’re missing out on in terms of gaining a competitive advantage, is to decode how you can get money faster, and how you can make your customers’ payment processes easier. As a result, one must employ the embedded finance mindset. It is critical to select the right payment provider, one that prioritises scalability and offers a robust API suite, so that your payments arrive on the right platform at the right time. The digitisation of B2B is a growing trend the world is experiencing, with many digital marketplaces expanding their capabilities and integrating finance technology to create seamless experiences for both businesses and consumers.
Blockchain: A Stepping Stone To Future
With its ability to overcome significant international payment concerns, blockchain technology has disrupted global marketplaces. Banking as a service allows B2B enterprises to experiment with blockchain technology without having to invest in their own blockchain platform. The Ethereum blockchain allows digital securities to be issued in less time, at lower costs, and with more personalization. As a result, digital financial instruments can be tailored to match the needs of investors, thereby extending the investor market, cutting issuer costs, and lowering counterparty risk. Adding up to more accountable and transparent governance systems, more efficient business models, improved stakeholder incentive alignment, increased liquidity, lower capital costs, reduced counterparty risk, access to a larger investor and capital base, and access to all other digital financial instruments.
According to a Jupiter Research analysis, blockchain deployments would allow banks to save up to $27 billion on cross-border settlement transactions by the end of 2030, decreasing costs by more than 11 percent. Ethereum has already exhibited disruptive economics, with cost benefits of over 10x over incumbent solutions. Banks and big financial organisations accept that distributed ledger technology will save them billions of dollars over the next decade.
Cloud-based Workflow Automation and Merchant BNPL
Banks are compelled to develop strategies and become future-ready as consumer expectations, emerging technologies, and alternative business models all shift dramatically. Leading cloud service providers provide a number of distinct product-as-a-service options that can be accessed via a variety of platforms. It helps banks implement business and operating models that increase revenue generation, improve customer insights, reduce costs, deliver solutions that meet customer needs, and monetize enterprise data assets. Above all, Cloud computing enables financial institutions to synchronise their data and eliminate data silos in areas such as risk, regulatory, and customer support. When all of the company’s data is in one place, it’s easy to look for integrated data insights.
Flexible payment solutions like BNPL are fast gaining popularity around the world. According to Worldpay’s Worldwide Payments Report for 2021, BNPL accounted for 2.1 percent of all global e-commerce transactions in 2020. By 2024, BNPL is predicted to account for 4.2 percent of all worldwide e-commerce sales, doubling its current share. Financial institutions and merchants, on the other hand, need a thorough grasp of BNPL, including integration needs, customer onboarding, and a flawless checkout experience. BNPL integrations are simple for retailers and are technically similar to other popular solutions such as cards or digital wallets.
Several significant trends and strategic factors are driving future advancements in this area at the moment. For example, several B2B fintechs, as well as some large traditional institutions, are beginning to look at the possibilities of smart contracts and other types of blockchain technology. Furthermore, many B2B fintech companies are concentrating their efforts on building machine learning capabilities and improving their algorithms for better results. Collaborations and partnerships between the two can be quite beneficial. As companies continue to use emerging technology to increase efficiency and promote growth, the future of financial services in India is apparent. The growing population and technological advancements appear to be the driving forces that will propel fintech to new heights in the commercial world.