How digital innovations can strengthen the personal finance market in the future

The Covid-19 pandemic that hit the world in 2020 was a harsh reality and many suffered heavy losses. It was not only human losses, but also investments that were reversed. The pandemic has also provided insight into why investments and savings are vital for the future. Personal finance is all about achieving your personal financial goals, which can be anything from retirement to buying a house or even a car. Financial goals can be short and long term. Some aspects of personal finance depend on generating income, spending, investing savings, and protecting savings.

Currently, digital finance is booming. The pandemic has led to an increase in digital finance with many fintech and neo-banks entering the scene. There has been a massive increase in demand for financial services like loans, savings, and investing in fintech companies. Even when the spread of the pandemic slowed due to the rapid vaccination campaign, the rise of digital finance and other fintech innovations to meet financial needs remained robust. Additionally, digital innovations have led to home banking. Following this, digital transactions have seen a surge.

According to RBI data, the share of digital transactions in total non-cash retail payment volume increased to 99.3% in 2021-22, from 98.8% the previous year.

In its May 27 reporting data, RBI said: “Growth in digital payments can be attributed to the increased availability of acceptance infrastructure, which has seen substantial growth over the year thanks to the operationalization of the Payments Infrastructure Development Fund (PIDF).”

There are many supports for personal finance. One can invest in market-linked instruments or opt for traditional schemes such as fixed deposits or small savings schemes.

Sankalp Mathur, co-founder and CRO of Niro, said, “Lately, especially with the advent of the pandemic, there has been an increase in the number of people who have turned to digital finance and other fintech innovations to meet their financial needs.”

According to Mathur, this fintech revolution has ensured a growing participation of public and private forces to educate consumers, create differentiated easy-to-use fintech products, and digitalize existing financial services.

“These efforts have become imperative to ensure that consumers and the general public can safely access financial services from the comfort of their homes without having to compromise their time, effort or financial health,” Mathur added.

The co-founder of Niro highlights three methods to boost personal finance in India:

1. Improving financial literacy for the masses

Mathur said, “One of the most important steps to strengthen FP in India is to educate the masses. Our educational institutions are struggling with a curriculum that is not hugely relevant to most. no one uses geometry in their daily lives, whereas most individuals have to make financial decisions on a routine basis and unfortunately, they are not well equipped to do so.”

A large number of people do not understand the concept of inflation and thousands lose money in day trading or fall victim to investment fraud. Additionally, there is a big public misconception about debt and credit that needs to be addressed. Therefore, educational guidance in personal finance is vital today, he added.

2. Personalized investments and wealth management

Investments and personal wealth management are other areas where many digital innovations have taken place. The key for any individual is to ensure they have an investment plan in place and to have the discipline to consistently allocate capital according to the plan. There are now a host of internet platforms that allow an individual to choose from a wide variety of funds (or take an SIP) depending on their risk appetite and investment horizon.

There are also interesting platforms that allow an individual to create an investment basket for a particular period of time that minimizes risk and maximizes return. Reservation of time deposits, trading in shares, etc. has been made extremely easy thanks to the availability of online portals for banks and the dematerialization of actions.

Now, investing in FDs has become as easy as a few clicks on your online bank from the comfort of your own home. You don’t even have to go to a bank, just use your check or passbook or open a bank account at home. In addition, you can invest in many schemes or file your tax return in a few steps electronically.

“Still, I think there is a lot more room for innovation in this space. We need advanced technologies like AI and ML to accurately personalize, investments and financial well-being of individuals. depending on the size of their portfolio and their financial health,” added Mathur.

3. Greater sophistication in calculating insurance premiums

With the advancement of technology that has made it possible to track the health of individuals on a day-to-day basis using a fitness bracelet, the current method of calculating insurance premiums seems quite orthodox. Some companies outside the Indian subcontinent have adopted advanced models for premium calculation and have seen increasing success in this approach.

Mathur added, “This is another form of digital innovation that can empower and revolutionize the personal finance market in India.”

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