The financial services sector is the backbone of an emerging market like India. It is also one of the biggest generators of alpha for investors historically. And key players in banking, non-banking finance, insurance, microfinance, asset and wealth management have kept the space vibrant with strong organic as well as inorganic expansion.
On the flip side, at a time when the clouds of a slowing economy were overshadowing the growth opportunity, the pandemic-induced lockdown has exacerbated the pain. Lenders and asset managers are facing more asset-quality concerns as companies feel the pinch of an unprecedented contraction of the economy, smaller firms face an uncertain future and the spectre of job cuts threatens retail spending and borrowing. Fintech startups are reassessing their business models to create a sustainable venture and companies at large are seeing how to hardwire systems to ensure data security and privacy to maintain trust with customers.
The financial services sector has been trying to cross the hurdles with innovative products to better channel household savings and surplus corporate income, improve processes, weigh the asset-liability mismatch and evaluate corporate underwriting methods with the help of technology. It also aims to grow the retail book, improve efficiency as well as risk management and compliance, diversify product catalogue, cross-sell products and use technology to screen borrowers. The sector remains attractive, having absorbed over $45 billion of private equity money over the last two decades. This accounts for around a sixth of total private investments in the country, according to VCCEdge, the data research platform of Mosaic Digital. It received more than $7 billion in the past 12 months alone and has seen M&As worth a similar amount in the same period. Although the pace of investment activity has slowed in the last quarter it is expected to pick up again as the long-term picture remains attractive.
To gauge how the firms are adjusting to the new normal, reimagining their tech stack and creating a stronger base to leverage the growth opportunity, VCCircle is organising its next edition of FinServ Summit on September 25, 2020 on a virtual platform.