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The Covid-19 pandemic which struck the world in 2020, was a harsh reality and many suffered heavy losses. It wasn't just human loss, but also investments were toppled. The pandemic also brought a sense of realisation of why investments and savings are vital for the future. Personal finance is all about meeting your personal financial goals which can be anything either for retirement or buying a house, or even a car. The financial goals can be both short-term and long-term. Some aspects of personal finance depend upon income generation, spending, savings investments, and protection of savings.
Currently, digital financing is at a booming stage. The pandemic led to a rise in digital finance with many fintech and neo banks coming into the picture. There has been a massive rise in financial services demand like lending, savings, and investing on fintech companies. Even when the pandemic spread has slowed down due to the rapid vaccination drive, the uptick in digital finance and other fintech innovations to meet financial needs has continued to be robust. Not just that, digital innovations led to doorstep banking services. Following this, digital transactions have witnessed a strong surge.
As per RBI data, the share of digital transactions in the total volume of non-cash retail payments increased to 99.3% during 2021-22, up from 98.8% in the previous year.
In its statement data on May 27, RBI said, "The growth in digital payments can be attributed to increased availability of acceptance infrastructure, which witnessed substantial growth during the year benefitting from the operationalisation of the Payments Infrastructure Development Fund (PIDF)."
There are many mediums for personal finance. One can invest in market-related instruments, or choose traditional schemes like fixed deposits or small savings schemes.
Sankalp Mathur, Co-founder & CRO at Niro said, "in recent times, especially with the advent of the pandemic, there has been an uptick in the number of people that have turned towards digital finance and other fintech innovations to meet their financial needs."
According to Mathur, this fintech revolution has ensured increasing participation from public and private forces to educate consumers, create easy-to-use differentiated fintech products, and make existing financial services digital.
"These efforts have become imperative to ensure consumers and the larger public are able to safely access financial services from the ease of their homes without having to jeopardise their time, efforts or financial health," Mathur added.
Niro co-founder highlights three methods to strengthen personal finance in India ahead:
Mathur said, "One of the most important steps to strengthen PF in India is to educate the masses. Our educational institutions are plagued with a curriculum that is not extremely relevant to most. Hardly any individual uses geometry in their day-to-day life whereas most individuals need 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 frauds. Moreover, there is a large public misconception about debt and credit which needs to be addressed. Hence educational guidance regarding personal finance is vital today, he added.
Investments and personal wealth management are other areas where a lot of digital innovation has taken place. The bare basic for any individual is to ensure that they have an investment plan in place and have the discipline to allocate capital as per the plan on a regular basis. There is a flurry of internet platforms now which enable an individual to choose from a wide variety of funds (or take a 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 time period which minimises risk and maximises return. Booking of fixed deposits, equity trading etc. has been made extremely easy with the availability of online portals for banks and the dematerialisation of stocks.
Now, investing in FDs has become as easy as a few clicks on your internet banking in the comfort of your home. You don't even need to visit a bank but just avail your cheque or passbook or open a bank account at your home. Further, you can invest in numerous schemes or file your income tax return in a few steps electronically.
"Yet I believe there is a lot more room for innovation in this space. We need advanced technology like AI and ML to personalize with accuracy, investments and financial well-being for individuals based on their portfolio size and financial health," Mathur added.
With the advancement of technology that has enabled day-to-day tracking of individuals' health using a fitness band, the current method of calculating insurance premiums seems fairly orthodox. There are companies outside the Indian sub-continent that have adopted advanced models for premium calculations and have witnessed increasing success in the approach.
Mathur added, "This is another form of digital innovation that can strengthen and revolutionise the personal finance market in India."