Where once, words like lending, borrowing and loans belonged to the confined walls of a bank, these terms have now grown to the unconfined boundaries of technology.

Fintech i.e. Financial Technology is a term used to describe technology disruptive start-ups that are changing the way traditional financial services are carried out. Any app that you use for availing financial services all fall under the Fintech ambit, whether you’re talking about digital wallets or robo-advisors. Even lending has transformed significantly thanks to Fintech!

This means one can safely bid adieu to long queues, heavy paperwork, continuous rejection and slower procedures when it comes to borrowing loans. Fintech makes use of big data, cloud and digital technologies to acquire, retain, underwrite and monitor customer’s behaviour at greater, efficient speeds and at betters costs and accuracy.

Abhishek Kothari [Founder of Indian digital lending platform FlexiLoans] in his article in VCCIRCLE has thrown light on how Tech & Data has driven the fintech lending space in India

Tech: With cloud-based IaaS [Information-As-a-Service] models and API [Application Programming Interface] banking gaining rapid adoption, it is now possible to have the stack ready with minimal capital expenditure. In fact, technology has been a great asset for companies across the globe to gain speed to market and grow as fast as the more established counterparts in other countries. In many countries, disbursing and collecting installments has been made possible through seamless banking integration but India is yet to see a mature solution around it. UPI is a step in the right direction but still needs a lot of work before lenders can use it.

Data: Alternative finance hinges on the availability of newer data sources to make risk decisions. More data allow informed decision making and lending to segments which were otherwise underserved. On this metric, countries like the US, UK and China have been far ahead because of connected data sources like bank accounts, companies database, tax data, etc. while India lags behind as many data sources are still inaccessible [e.g., litigation database], insufficient [e.g., bureau penetration] or inaccurate [e.g., business ratings]. However, the government has put huge focus on this and programmes like UIDAI and IndiaStack are enabling this at a good pace.

He’s also spoken about the unique problems faced by Indian retailers and how Fintech has helped overcome some of them

Fintech lending platforms provides credit to small segments

According to him small Indian businesses are really unique and in the absence of government aid they fall back on the informal sector for funding. That’s why fintech companies in India try to innovate on the acquisition model to provide finance to this segment. They use partnership models wherein they either partner with e-commerce platforms for borrowers or offline retailers through point of sale providers.

Fintech solves the problem to identify risk of borrower

But, after the acquisition, the bigger problem is assessing the borrower’s risk of default. That’s where the ‘alternate lending’ methodology helps. Because of a thin credit file or sparse financials in this segment, new-age lenders have developed innovative data science-led approaches to solve this problem. Various sources like social sites, device data, digital footprint, seller reviews, etc. are being used to develop surrogate yet highly correlated indexes that can potentially replace or enrich traditional models.

They solve the problem to provide credit at low costs

Another problem banks face is the difficulty to carer to small business segments. These segments want quick, unsecured, small-value loans but because of the cost-heavy branch-based operating model, it is sometimes unviable for banks to lend small-value loans. New-age lenders have solved this very efficiently by using cutting-edge technology to bring the acquiring, processing and servicing cost down such that they are profitable for small value loans as well. This is really the birth of ‘digital lending’.

Collection of data is super useful to a company to understand the credit worthiness of a customer. Here’s how this data is collected

Suppose you opt for ‘Pay as EMI’ while online shopping, this information is captured and gives an insight on your payment history. According to one Fintech startup founder, “Someone has to look at a range of these financial, behavioural, and social attributes, make sense of them and make the data available to institutions in a manner that they can trust and use for lending.”

He believes that, “Most institutions are completely missing out on maximizing how they use old data, let aside new data and new insights. Alternative data may be the answer”.

He explains how sometimes the name and details on an Aadhaar card may not exactly match the one name on the PAN card. Location data might suggest that the person is living elsewhere. Or an individual may on paper be working with Company X, while social data suggests that they’ve already moved on to Company Y.

For a lender all these are extremely important and valuable pieces of information. If used they could significantly bring down default rates. He also throws light on how Mobile Data in India might not exactly be clean because of use and throw sim cards. But that’s when algorithms come into picture to counter this problem.

References1, 2, 3 and 4

Retirement planning is like jogging. You know you start doing it today but you keep postponing it. Your retirement may be decades away but that doesn’t mean you ignore it. Proper planning today can help you enjoy a great retirement life in the future. However, many people make a lot of mistakes when it comes to retirement planning.

Image Source – Retirement Planning

Here are a few you should avoid:

Late start

Many investors avoid retirement planning until the last moment. This can negatively impact your retirement corpus. There is a common saying when it comes to road trips: start early, drive slowly and reach safely. This principle can be applied to retirement planning too. The earlier you start investing, the greater will be your final corpus. Even a difference of ten years can make a huge difference to your retirement fund.

Take the following example:

Suresh starts investing for his retirement at the age of 30. He regularly invests Rs 10,000 per month in a SIP. The fund earns him 15% rate of interest. His colleague Giridhar starts investing at the age of 40. He invests Rs 12,000 per month. Both of them retire at the age of 60. At the end, Suresh has amassed a corpus of Rs 7 crore. On the other hand, Giridhar has earned only Rs 1.8 crore.

Lack of proper planning

Not many people know how much money they need for their retirement. So even if they invest for retirement, the returns they earn can be much lower than what they would actually need. For example, Sanjay creates a corpus of Rs 4 crore for his retirement. He expects that this amount will be enough to finance his expenses for 20 years. But what if the funds are not enough?

The first step is to identify your needs and requirements during your retirement. How much money do you need to maintain your lifestyle? Once you retire, your income stops but your expenses continue. In fact, they may even increase during the retirement phase. You need to account for all these expenses and provide for them.

Underestimating cost of health care

In this current day and age, the cost for quality health care is sky rocketing. Older people are more exposed to health concerns. And as a retired person, it is extremely important to ensure that you are prepared to meet these expenses. Otherwise, your hard earned savings can quickly go toward medical expenses leaving your finances depleted.

Make sure that you buy a good health insurance plan for yourself and your spouse for the retirement phase. Also create an emergency fund in case you need to pay for medical expenses urgently.

Poor investment decisions

If you have Rs 1 Lakh to invest for your retirement, you can invest it anywhere you choose. But remember that different investment avenues offer different returns. For example, bank savings accounts offer around 4% returns while fixed deposits give around 8%. In comparison, equity mutual funds and stocks offer anywhere between 10~15%. Sometimes, these returns can be even higher.

By choosing a wrong investment avenue, you can lose out on good returns in the long term. It is ideal to invest in equity funds for retirement. This way, you can benefit from high returns at a faster rate. And as for the risk, it shouldn’t be a great issue since the long investment term can help you comeback from any downfalls in the market.

Dipping into your retirement fund

Praneet had been meticulously saving for his retirement when his son announced that he was going to do an MBA course in Australia. The course cost around Rs 20 Lakh rupees. Not wanting to disappoint his son, Praneet decided to dip into his retirement savings to fund his education.

A lot of parents dip into their retirement funds to finance other financial goals that come along the way. This is not a wise step. This is because it is possible to finance your son’s education through other sources such as bank loans. But once you take out money from your retirement fund, it may not be possible to rebuild the corpus. This can be especially problematic if you are close to retirement. As a result, your fund would be depleted and you wouldn’t be able to enjoy your retirement as you hoped. Always seek out better alternatives to finance your other goals. Don’ dip into the retirement fund unless it is absolutely necessary.

Conclusion

Retirement is like a second childhood. People discover new hobbies and a new zest for life. But to make it truly special and comfortable, you need to have a solid financial backup. And for this, you need to start planning for your retirement today.

Ever since the Punjab National Bank Fraud case has come to light, many believers of Blockchain have been saying that Blockchain could have stopped it.  Present company included.  I for one, very truly believe that Blockchain will become pervasive and not too far away.  But could it have avoided this huge fraud that has shaken the Indian Banking system? Well it’s hard to respond in the affirmative knowing that no technology is smarter than the human brain at its best. If the intent is wrong, loopholes are found or made. Just as in this case.

Image Source – BlockChain

What was the main reason behind this fraud? While there were multiple, like mal-intent of account holders, corrupt employees, audit failure, manual contracts etc., the key reason was un-integrated applications, i.e, the SWIFT gateway was not integrated with PNB’s Core Banking System. So transferring data from one to the other was a manual process! When money was lent by foreign branches of other Indian banks, based on the false LOU issued by PNB, no record was being made in the banks CBS.  Thus year after year, the fraud remained under cover. 

Could Blockchain have solved it?  Well the answer is yes and no. Blockchain definitely has much higher security capability built-in. The basic concept underlying Blockchain, is Distributed Ledger Technology or DLT. So the master data is maintained in every node of the distributed ledger and hence there is no dependence on a single source of truth. While today the banks CBS is the single source of truth for the bank, in a Distributed Ledger framework, each node would contain the same truth. So tampering one node would not be possible and would immediately bring to light any kind of malpractice. So technically speaking Blockchain technology does have security mechanisms to deal with these frauds. However the success of this would depend on how distributed the ledgers are and how big the chains are.

Anytime there is a gap or a break between the chains, or two or more chains are not integrated, demanding a human intervention, mistakes or fraud are likely to happen. So whether or not Blockchain technology could have stopped the PNB fraud, would depend on how integrated the Blockchain was. So even in a Blockchain scenario if the Bank and the SWIFT payment gateway were not connected by a single chain or two integrated chains and had it required a manual intervention, the problem couldn’t have been avoided inspite of Blockchain technology. So Blockchain technology alone, is not an answer to avoiding such problem, intentional or not.  The most critical requirement is for all stakeholders to be part of the Blockchain, with no breakage in the chain.

There are a few other necessary conditions to the success of Blockchain as well

  1. All Manual contracts of today will have to be converted into smart contracts to run some automated checks on them, whenever there is any transaction involving a contract.
  2. Since the security will be so much dependent on the technology itself, technology audits will have to become much more stringent and pervasive
  3. Finally in order for all stakeholders, no matter which industry they belong to, need to come together as part of the same or connected Blockchain, there needs to be common processes and protocols accepted and agreed on by regulators of all industries. Hence the Regulators need to come together to ensure the same.

So bottom line is no technology can eradicate fraud. People are much smarter than computers, being the inventors of all technology.  And people with mal-intent will be there. So while Blockchain has the technology built-in to improve security, it is definitely not the answer to all fraud.

About the author

Mohua Sengupta is the EVP & Global Head at Services at 3i Infotech Ltd. More details about her can be found here

There is no denying the fact that the stock market can perform exceptionally well over a short period and post a record high after high. Investors may feel excited due to the upward movement and expect the market to continue to move in the same direction. However, seasoned investors are well aware of the fact that the market never moves in one direction forever. With the upward trend, the market will eventually come down but there is no reason to panic.

Image Source – Stock Market

Things to remember when the market falls

Here are a few things every investor needs to remember about equity investment and stay calm while making investment decisions.

Occasional declines are normal

The world does not end when the market declines. It is very normal for the share market to show a decline occasionally. It should be expected by the investors. Market analysts who study the historical returns and offer equity tips are of the opinion that market declines happen from time to time. There could be a massive decline yet the market may finish the year with a positive return. It is important to accept the fact that investment in the equity market has its own difficulties. Hence, investors must stay invested and remain patient.

No one can predict the market movement

The movement of the market cannot be predicted by anybody. Investors, media, and wealth managers who study the markets have never been able to time the market accurately as to when to get out and when to get back in. Sometimes investors get lucky and exit the market at the right time. However, this rarely happens. Investors should focus on what they can control and leave out the rest.

The biggest threat is not the market

If investors put all their money in a specific sector or industry, they will end up losing all the funds when the market falls. In this case, the threat to an equity portfolio is not the market but it is the investment strategy. This is why analysts recommend diversification of the portfolio. It helps reduce losses and spread out the risks.

Investors should make logical decisions and not let emotions drive their financial goals. The emotion of panic and fear of loss will lead to irrational decision making. Accept the highs and lows of the market as a part of the investment strategy and deal with it calmly. The stock market has resulted in significant results in the past but it requires patience for every investor to achieve the same in the long run.

Processing of cards may be confusing and overwhelming. To enjoy a positive experience, it is important for individuals to understand some basics. They must understand what they are being charged for and the different options that are available.

Image Source – Credit Cards

Here are six parties involved in a transaction.

  1. Merchant: He is the business owner that accepts the payment
  2. Cardholder: The individual who uses the credit card to make purchases
  3. Card association: Governing bodies that set the interchange rate, maintain and improve networks, and arbitrate between issuing and acquiring banks
  4. Acquiring bank: Is the merchant’s bank that holds the funds and acquires the money through sales
  5. Issuing bank: Issue credit cards to customers and pay the acquiring bank for customer purchases
  6. Payment processor: Handles batching and processing of the purchases made through cards

Credit card process

  • The customer makes a purchase using the card
  • The card is swiped through a processing terminal that recognizes the same and intimates the card issuing company
  • Card authorization
  • Card company remits the payment to acquiring bank through certified providers
  • Acquiring bank deposits funds into the merchant’s bank
  • Monthly statements detailing the interchange fees

The issuing bank lends the money to the cardholders who may pay it after the credit period or carry it forward by paying the finance charges. Both the issuing and acquiring banks deduct fees. Therefore, the amount received by the merchants is lesser than what is charged to the customers.

  • Interchange fee: Issuing bank fees
  • Discount fee: Acquiring bank fees, this may be supplemented with other charges

Both these fees are a certain percentage of the transaction. However, a small fixed amount may also be applicable for every transaction. Several banks issue cards to individuals and are issuing banks.

Interchange rates are published and may be found online. The interchange fee depends on several factors such as the type of card used, kind of merchant that accepts the payment, and if the card is available during the transaction.

The type of business accepting card payment affects the interchange fees. This to compensate the issuing bank in case of any charge-back. It occurs when customers successfully dispute a charge. In case a customer complains about the product or service, there is a possibility that the merchant’s bank account may be debited with the money paid by the acquiring bank along with an additional fee. Although merchants may dispute this, resolving the issue is time-consuming.

The acquiring bank’s responsibilities are often split between two entities. The merchant service provider stays in constant touch with the merchants. The other company, also known as the processing company does the execution of the transaction. It transmits the relevant information to the merchant, the issuing, and the acquiring bank.

Despite the potential risk, the acquiring bank remits the money to the merchant a few days after the transaction. This is perceived as a loan and therefore, the capability of the merchant to borrow these funds is evaluated. The credit score and ability to borrow is important.

If you’ve been keeping up with the world of auto vehicles, you probably know that a revolution is in place. Autonomous vehicles, aka driverless cars, aren’t just the stuff of movies anymore. They are real and they are here already.

Image Source – Driverless Cars

Over the past decade, various companies have been working on bringing autonomous vehicles to the road. These cars will use a series of technologies to navigate the roads and avoid traffic all on their own, thus drastically cutting down on accidents caused by human error as well. If you’re not all caught up, this article will give you the lowdown on all the essentials about driverless cars.

What are Autonomous Cars?

Autonomous or Driverless cars are vehicles that can perform all the necessary functions of driving that humans can, including navigation, parking, etc. It uses a series of tools, several sensors and GPS technology to navigate the path, interact with other vehicles, avoid obstacles and get you to your destination in the fastest and safest way possible.

There are various tiers of autonomic cars out there. Some of them do most of the navigation but require minimal human intervention, and some don’t require any intervention at all. The former of these categories has already been launched in several countries around the world. In fact, autonomous trucks have already become a reality in the US.

A lot of vehicles these days come with some of these autonomous features such as self-adjusting speed controls, adaptive cruise control, blind-spot warnings, etc.

While Tesla was working on autonomous vehicles, it seemed to be something far-fetched, something that only the super-rich of the world can afford. However, now that traditional companies such as Ford have taken it up as well, it seems likely that driverless cars will soon be the norm rather than the exception.

Benefits of Autonomous Cars

The following are some of the main benefits of autonomous cars:

  1. Reduced Maintenance Costs: Autonomous vehicles will be able to automatically gauge whether a certain part of the car is not running in optimum quality and initiate maintenance. Furthermore, it will run in optimum driving parameters, thus increasing fuel efficiency. And because of the sensors and the lack of human error, accidents – even minor ones – will be reduced drastically.
  2. High Efficiency: The car will be able to monitor the surroundings and objects and monitor speed to be able to drive in optimum condition. Furthermore, it will be able to pick you up at just the right time and drop you off at your destination in the quickest time possible. You also won’t have to worry about parking issues as the car will be able to locate a spot after you have been dropped off.
  3. Enhanced Safety: Autonomous vehicles will have a far faster response time than humans. This will completely negate most of the reasons for accidents, i.e., human error, road rage, etc.

Well, that’s just the basics of autonomous technology. It’s believed that once driverless cars take over, insurance companies will be in for trouble as there won’t be as many accidents and problems to insure against anymore! However, for now, our regular cars are all too prone to accidents so you should always have a reliable car insurance with you.

A life insurance scheme is one of the best wealth-building vehicles due to the numerous benefits it has to offer. It is the perfect answer to obtain financial security and protection in the long run. You may, therefore, live your life stress-free, knowing that you are covered by such an insurance scheme.

Image Source – Life Insurance

There are multiple advantages of investing in a life insurance policy. Following are six major benefits of purchasing a life cover.

  1. Risk cover

Life is uncertain. In case of an unfortunate event such as death, your family may lack a financial support system. Since a life insurance policy is a life risk cover, you and your family are protected in an event of a premature death.

  1. Death benefit

Your beneficiary may avail of the death benefit in case of an untoward incident. The insurance provider is liable to pay the sum assured amount along with the bonus if any. This amount may be used by your near and dear ones to meet their lifestyle needs, pay off an existing loan, or meet funeral costs, among others.

  1. Tax benefits

Not only may you enjoy a life cover through a life insurance policy, but you may also avail of tax benefits on the premium paid. You may avail of a maximum deduction up to INR 1.5 lakh under Section 80C, 80CC, and 80CCE of the Income Tax Act, 1961. You may, therefore, invest in life cover and reduce your tax liability largely.

  1. Higher coverage

One of the most important benefits of investing in life insurance plans is higher coverage through riders. You may supplement your existing policy by opting for riders, also known as add-ons. Some of the most common riders that extend the scope of your life insurance cover include personal accident rider, critical illness rider, and waiver of premium rider, among others.

  1. Life stage planning

You may consider a life cover to help you meet financial goals at every stage of your life. You may plan for your life stage needs such as meeting your children’s educational costs, arranging finance for their wedding, purchasing your dream home, and planning a retired life, among others.

Life insurance plans, therefore, provide numerous benefits to you and your family. These insurance plans not only provide support in case of a sudden death but also acts as a long-term investment. You may, therefore, consider such an insurance policy as a part of your wealth planning.

The number of smartphone users in the country has been steadily rising. You may increasingly be using your phone for various activities to get your work done efficiently and quickly. Stock trading through these smart devices is also gaining popularity because the entire process is easy and quick. A large percentage of retail investors, especially within the cash segment place orders through their phones.

Image Source – Trading

According to a study conducted by The Economic Times, the turnover through mobile trading as a percentage has grown significantly in the last few years. A huge portion of this growth is within tier II and tier III, which often do not have a branch network.

Trade on the go

If you regularly trade on the stock market, it is important to place buy and sell orders at the right time to maximize your profits. During market volatility, the possible opportunities may get away through your fingers within seconds if you do not take immediate action. Such immediate action may be an issue if you have limited access to a trade terminal at your office. Moreover, you do not want to miss any investment opportunity while you travel. A share trading software overcomes all these limitations and ensures you are able to profit from all available opportunities.

Small ticket size

A large majority of retail investors prefer to use this option to execute small ticket size trades. The demand for mobile trading has increased because of the reduction in the prices of smartphones that come with high-tech features. This, coupled with the affordability of Internet plans has contributed to the surge in the demand.

You may simply download the share trading software offered by a reliable and reputed broker. To activate your account, you may need to send an email request. On the successful activation, you may trade through the account using your username and password.

Accessibility Another major factor that has contributed to the popularity of mobile trading is its easy accessibility. The investors who reside in small towns and may not have access to a computer may easily trade on the stock market using a basic smartphone. Such software applications provide you access to the share markets even from a remote location as long as you have an Internet connection.

Unique features

Most of the reliable brokers offer high-end share trading software that comes with several unique features. Several discount brokers are increasingly using mobile technology to provide improved services to their clients. Here are three unique features of such trading apps.

  1. Multiple segments

Mobile trading apps allow you to trade in the cash segment of the stock markets. In addition, you may invest in the derivatives segment [futures and options] on the leading share markets. Several apps allow you to trade in commodity and currency markets. Therefore, you are able to benefit from trading through multiple segments.

  1. Real-time price tracking

You may create a watch list for your favorite stocks. The prices of these may be streamed live to receive real-time updates. This allows you to make accurate investment decisions that will maximize your benefits.

  1. Seamless fund transfer

Most of these share trading software mobile apps provide seamless and hassle-free fund transfers between the trading and bank accounts. Therefore, you are assured of never missing on an investment opportunity due to lack of adequate funds.

The brokers may offer discounts on the commissions charged on the mobile apps. However, before you choose one of the several brokers, it is important you compare the features, and terms and conditions of these different service providers.