India is home to the fastest-growing fintech market in the world, and has the highest adoption rate along with China. One of the key components of this growth story is the wealth management industry. It has been characterised by an impressive emergence of startups that have disrupted existing business models and brought innovative technologies with increased adoption of mobile and digital channels.
In the process, it addressed critical structural issues in the industry, including the reduction of asymmetry of information between different players, simplifying legacy operations, and bringing in cost efficiency.
One of the remarkable aspects of fintech startups is their constant evolution. These companies have revolutionised the wealth management industry in a very short time, creating wealth for investors in a cost- and time-efficient manner.
In this constantly changing landscape, these are the top five emerging trends we can expect in the coming year:
Personalised service with unbiased advice
One of the perceived limitations of fintech wealth management was the lack of ‘human touch’. Automated tools take the approach of one-size-fits-all. But Robo advisors have since come a long way.
Digital platforms are now increasingly focusing on personalised services, such as tracking expenses, setting investment goals, competitive alternatives that are tailored to pre-set requirements, and using the cloud to track personal data that earlier existed in information silos.
On the other hand, Robo advisors are free from unconscious or subconscious bias. The data-driven, highly intelligent models used by fintech startups are calibrated as per the user’s risk profile in a completely neutral manner.
Relationship continuity in the absence of human interface
COVID-19 has significantly changed the way people manage their money. With restrictions on personal movements, many people switched over to digital platforms. Even wealth managers are now rapidly accelerating their digitisation to improve client interactions.
Fintech offers an in-built advantage in this scenario, with a dynamic digital delivery model without a human interface. But along with the personalisation of services, the focus is now shifting towards relationship continuity.
With a range of tools to quickly adjust their services, fintech can quickly adapt to changes in user expectations and risk profiles, giving them an advantage when managing wealth over a long period.
Holistic financial advice
Fintech firms will move further to consolidate their services with a more holistic approach. So far, wealth management firms have focused on either liabilities or assets. But with the democratisation of services, fintech has brought in small investors.
This has led to a higher demand for holistic services that include wealth management, diversification of assets, tracking financial goals, ensuring better returns on investments, and managing liabilities.
Micro-management of the investments
The pandemic has created a higher awareness of risk in all aspects of financial services. The push for holistic services will be paralleled with an increased focus on micro-management in keeping with the investor’s risk profile, changing requirements, and ensuring optimum returns.
The need for micro-management also evolved with stringent regulations that must be adhered at every sphere. As part of asset management, many fintech firms will also track investment updates on banking and capital markets, insurance, and real estate. Hence, fintech will eventually offer a one-stop solution that covers all related services.
Cost-efficiency with automation
Almost every wave of innovation by fintech startups has helped in reducing costs and improving financial services’ infrastructure. With high cost of manual services and disruptive models free of legacy operations, fintech has the benefit of leaner and more effective models. More importantly, this rationalisation does not come at the cost of efficiency as AI and machine learning have proven to be more powerful investment tools.
Like any evolving field, these advances are not without some concerns. The increasing risk of cyberattacks is the biggest concern with 98 percent of the top global fintech startups experiencing increased vulnerability in the recent months.
There are also challenges when it comes to dealing with multiple regulators. Given its scope, fintech straddles different fields, which translates into multiple rules and regulations. With a slow move towards account aggregation in financial services, there are also concerns on licensing, particularly in establishing regulations that can encompass this emerging industry.
These challenges are part of this rapidly emerging industry. We can already see a move towards tightening laws to safeguard the user interests. With India having the third-largest fintech ecosystem in the world and the second-highest funding (second only to the ecommerce sector), fintech startups have an expansive potential for growth. These emerging trends will further enhance their upward trajectory.
(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YS.)
