Ease of transaction and the convenience linked with applications offered by fintech players is driving consumers from small towns to explore investment products beyond recurring or fixed deposits offered by traditional banks.

Most of the consumer-facing fintech startups told BusinessLine that small towns (Tier III and IV) now form 25-30 per cent of their total consumers investing in mutual funds and equity markets as against a mere 2-3 per cent about four years ago.

Ajit Narasimhan, Category Head - Savings and Investments at financial services marketplace BankBazaar.com, said that for BankBazaar about 90 per cent of mutual fund investments used to come from the top 16 cities about four years ago. Now, about 30 per cent comes from smaller towns on the back of smartphone penetration, improving connectivity and increasing level of financial awareness created by market regulator SEBI. The government’s push towards digital transactions, eKYC and linking of Aadhaar for financial transactions have also given a major boost to the fintech segment.

According to data from research firm Tracxn, of the 238 start-ups that have emerged in the past 3-4 years, 138 are fintech-related. There are digital companies now providing personal finance-related advisories, robot advisors (ArthaYantra) , stock-trading platforms (Zerodha) or allow users to invest in mutual funds (Scripbox and FundsIndia). Ashok ER, CEO and co-founder of investment portal ScripBox, said that earlier bank customers in India used to visit a branch 3-4 times and interact with bank officials multiple times before making an investment. However, with consumer fintech apps, people can complete a transaction writing in less than five minutes with just a few clicks.

Scripbox uses proprietary algorithms to suggest mutual-fund options to individual users, based on their data. It has expanded to over 370 cities and towns in the past 18 months. Ashok said simple infographics, engaging video contents, de-jargonisation of financial terms, simple user interface and price comparisons also play an important role in getting more people to start investing.

R Sriram, a 35-year-old teacher from Visakhapatnam, said: “My friend introduced me to one of the fintech firms and I have never after felt the need to call my relationship manager for any query on equity investments. I have now started investing in SIPs (Systematic Investment Plan). Earlier, I was sceptical and saved my money on FDs and other insurance schemes.” Like Sriram, several other consumers also feel empowered with the thought that they don’t have to depend much on banks or their relationship managers, who are generally not available in smaller towns; fill lengthy forms; or make multiple trips to the brokerage firms — and without having to worry about mis-selling.

Manavjeet Singh, CEO and founder of fintech firm Rubique, said: “Five years ago, no one thought of buying goods online, the same thing is happening with the financial sector. It has also broken the myth that one needs to invest in lakhs; one can start SIPs with as less as ₹500 a month.”

Most of the companies said the median age of customers is 31 with about 70 per cent first-time or newbie investors; 50-60 per cent invest in mutual funds or SIPs. According to Scripbox and FundsIndia, which have special plans for women, more women are entering the investment ecosystem by opting for mutual funds instead of the traditional way of hoarding cash.

A report by the Association of Chartered Certified Accountants (ACCA) says the regulatory challenges faced by the global fintech boom offers a real opportunity for India to establish itself as a centre for global finance.

Related Topics
comment COMMENT NOW