Introduction: Non-Financial Back Company

The banking sector has undergone a change in recent years and mainly witnessed a transformation since the period of the Global Financial Crisis which happened in the year 2008. This phenomenal change occurred mainly because of the surfacing of the “FinTechs” which are basically called financial technology firms. 
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Fintechs have played a significant role in contributing to the development of the modern banking sector by means of numerous channels that are inclusive of optimization of cost and financial inclusion. Varied functions of the banks have been reported to sort them out as being core in relation to settling of the payments, to be able to perform transformation and allocation of capital. 

The technological revolution has been the driving force behind the growth in the scope of FinTechs entailing an incredible movement from crypto assets to insurance, p2p lending, and other robo-advisors.

FinTechs, as being a crucial component of the financial system in India carries the vision to bring about a fundamental change in it wherein the consumers would be able to make a wider choice from the range of given alternatives.

Talking about the scenario in India, one can say that the Fintech market has expanded invariably. To be precise, we are able to carry out relatively all the financial activities that might range from having to open a bank account to trading on the stock markets, without having to pay a visit to the bank in person.

Understanding FinTech Broadly

No universally accepted definition has evolved when it comes to FinTech. In general, FinTech can be referred to as an industry that employs the use of technology to enable the delivery of financial services.

FinTechs usually comprise the company or can even be a startup that works in parallel with offering financial services backed by innovative technology. In today’s time, the modern consumer has relatively less dependence on one provider, they rather seek to get their services through the use of available applications. FinTechs are quite aware of this opportunity at hand and are keen on tapping on exploiting its potential.

Likewise, the different financial services offered by the FinTechs are also inclusive of a range of non-financial services powered by computer and application base applications. With the coming of the smartphones, it brought along with it a considerable revolution in the way the banking sector functioned. Now with only one click, all the desired services can be fetched.

The year 2009 witnessed yet another innovative upcoming in the form of Bitcoin, which is better called as cryptocurrency. Also with artificial intelligence paving its way and trying to capture the tech market, the services having a financial nature are now being personally taken care of.

What are the benefits of having FinTech in place?

There are numerous benefits of having a FinTech startup or a company. We can jot down some of the benefits as follows:

1. Enhancement of efficiency: With the help of FinTechs it has been made possible to fuel the financial sector with efficiency. The lenders of FinTech have eased out on the process of borrowing.
2. Financial inclusion: FinTechs play an instrumental role in rejuvenating financial inclusion and this is done through overcoming the failures that surface in the market like higher costs of transactions or related to asymmetrical information.
3. Reduced credit-associated risk: With relatively more sources of credit at hand, FinTechs being proliferated carries the potential to bring down the risk rate that is faced by an economy. 

Driving force behind India FinTech

There are many factors that act as a driving force behind the success of FinTech, some of them can be jotted down below:

1. The first factor that enables and triggers the growth of FinTech is obviously the Internet. The Internet has solely shouldered the responsibility to propel the reach of FinTech across different cities and regions.
2. The second factor pertains to the existence of the demography that proves to be very much favorable. It should be noted that the population in India is dominated by the younger generation, therefore it can be said that they would not shy away from making a transition from traditional banking options to adopting FinTechs. 
3. India Stack has played a critical role to transform India into a pro-FinTech nation. India Stack comprises different sets of technologies and other relevant policies which enable the innovation to set its foot. It is founded on the foundation of mainly two principles, the first one talks about giving effect to more digital platforms and the second one relates to the incorporation of the data privacy structures.
4. To exemplify, UPI whose full form is a unified payments interface, is yet another enabler that in a way puts the accounts on a virtual platform and helps customers with transferring funds, and facilitates merchant payments.
5. The other driving force lies in getting access to the data generated through online activities. It would foster financial inclusion and prove to be very beneficial.

FinTech ecosystem in India

India’s FinTech environment entails a hallmark owing to the presence of diverse elements in the markets and the varied applications. It has been taken into account that the industries that are emerging focus on reaping benefits from the effects of agglomeration but on the other side FinTech does not approve of this trend. FinTech is expanding its reach to smaller cities besides being established in metropolitan cities.

Can banks and FinTechs be Bound by Collaboration?

FinTechs are now not judged as presenting a threat to the banks. They are not considered as being disruptive. As supported by evidence and expert opinion it has come to light that FinTechs are acting to forge a balance in the financial and banking realm.

Banks are trying to get familiar with the idea of bringing the use of technological innovation in carrying out their routine activities. They are welcoming to invest in the FinTech companies and set to launch the related subsidiaries.

Banks and non-banks are forging partnerships and coming into collaboration so that the Indian consumer can be provided access to innovation-enabled services. In a bid to reap profits, an attempt is being chalked out to extend diversified services like brokerage and insurance.

There is an urgent need to amalgamate the technical know-how offered by the FinTechs and client base that the banks possess. Traditional banks are equipped with vast experience that must be streamlined by the Fintechs.

Is an NBFC license required by the Fintech startups?

Numerous companies operating in the FinTech environment are looking forward to grabbing the NBFC license from the RBI (Reserve Bank of India). The reason behind such demand stems from the fact that the focus of such companies is directed at maintaining the books related to loans instead of profit sharing.

If such companies are granted the NBFC license, then somehow due to this, the process of loan disbursement would get affected along with the capital’s cost. As per the expert opinion it has been cited that the fraudulent activities would witness reduction because of it backed by the use of technology.

Can FinTech Companies operate as NBFCs?

FinTech in a way forms the foundation of the modern economy. As they are operated with innovative technology, they are able to provide the customers with an enhanced experience of availing quality services. Listed below are the advantageous features of FinTech which makes them apt to be operating as NBFC.

• FinTechs have established their strong presence in the Indian financial services sector since its inception. They are becoming an all-pervasive concept, and working in a direction that promotes financial inclusion. Its potential is seen to be making an impact in the areas of managing assets and putting forth the credit system. Other financial activities like lending are very well purported by the FinTechs. The traditional banking system has been utterly modified.
• FinTechs can ensure that all the diverse financial needs of its customers are duly met. These entities are leaving no stone unturned in bringing the technology to its optimal use. All previously untouched areas are being automated with the aid of FinTechs, for example:

1. Detection of fraud
2. Regulatory compliance
3. Carrying out automated accounting
4. Faster delivery methods
5. Resorting to new2 credit models.

• FinTechs are exploring larger avenues when it's about satisfying the needs of a modern customer. Their artificial intelligence based approach has proven to be useful for targeting the potential customers. 

FinTechs to operate as NBFC: Current challenges

It is to be duly noted that the road that lies ahead with respect to the growth of any FinTech is full of obstacles and challenges. A few of the challenges that FinTech would be presented with can be jotted down below:

• In the very first place, it is essential to know that the present laws and regulations in place discourage the growth of FinTech startups. Additionally, FinTech firms have to comply with many regulatory compliances that restrict their ability to function smoothly.
• It is indeed a difficult venture for FinTechs to try hands-on building a management system dealing with the recovery of credit. Professionalism is well required when it's about having to be in constant touch with credit seekers, which might sometimes appear intimidating.
• Owing to many factors, a major chunk of the population in India is still illiterate and has no access to internet facilities which makes it rather difficult to tap into such a customer base. In line with this it can be concluded that for new entrants in the FinTech business, it would be an enormous responsibility for them to encourage people to choose online transactions instead of relying on traditional methods of cash.
• FinTech companies have to remain active while dealing and managing with ample amounts of customer data. Securing such data against any cyber fraud is of utmost importance to FinTechs. FinTechs would have to bear enormous financial losses in case there is any breach of data or information. The major concern of any FinTech is that any information pertaining to the online transaction must remain end-to-end encrypted.

Yet another obstacle that can show up is regarding the inaccessibility to many other banking services by FinTech startups. They might not be able to get hold of all the available banking services.

Conclusion

In a nutshell, it can be concluded that though there might be many challenges and obstacles that might crawl in the way of the establishment of any FinTech company, however, the brownie point lies in knowing the fact that they carry the ability to transform the banking landscape.

FinTech teaches us how technology can be employed in the best of ways to render a big transformation in any area. Presently there have been many instances wherein the FinTech startups have partnered with banks and are operating through applications and other programs.