Traditional investing patterns have changed dramatically as a result of the advent of technology and the rapid rise of fintech firms
It is tricky to find new avenues to invest one’s hard-earned savings. Traditionally, salaried professionals used to park their savings in fixed deposits, term deposits at the post office, public provident fund, bonds, and in a few cases now, mutual funds. Some other alternatives were debt funds, gold and real estate. With the advent of tech and the sudden emergence of fintech companies, traditional investment models have undergone a sea change. Suddenly, there are more options available to retail investors compared to the past. What’s more, everything is available at their fingertips on their smartphones. The fractionalisation of traditional asset classes like debt and commercial real estate has made it accessible to retail investors via small ticket sizes.
Each investor has an individual risk appetite depending on their experience, income and savings. All investors do not have the appetite to invest in equity and ride the volatility of market cycles. So, how does the average investor get better returns without significantly increasing the risk quotient? Millennials who are on the lookout for adventure have invested in Crypto and NFTs; however, that is not an where majority of Indians want to invest in given their extremely volatile nature and lack of understanding as to how they work. Apart from market-related investments, many other channels are available to institutional investors that are not open to retail investors. The surge of fintech companies has reimagined the way traditional investment products are made available to retail investors and increased access to more sophisticated products for them.
Whether it is debt investments or commercial real estate or asset leasing or even investing in startups, tech-based platforms are helping to fractionalize conventional investment products to make them more accessible to the retail investor. Retail credit or real estate, for instance, have only been accessible by banks and large institutional investors requiring large amounts of capital with extended lock in periods. Smart tech platforms like Lendbox and Strata and Grip have now managed to make these products accessible to retail investors by reducing the ticket size to as low as ₹10,000. Combined with a superior user experience, easy liquidation, and access to diverse investments at the click of a button, modern WeathTech is a force to reckon with.
Today’s tech-savvy investors enjoy immediate service. If they don’t relish the user experience, they will take their business elsewhere. The availability of tech platforms has ensured a high level of liquidity that allows fintech platforms to offer shorter lock-in periods to investors to help them liquidate their investments in times of need.
Whether it is bill discounting or personal loans or payday advances or real estate, fintech companies have managed to package it in small ticket sizes that make it convenient for small investors. Complex products have been demystified and made simple so that the Indian retail investor has investment options other than bank deposits and Post Office. Today, thanks to technology, the Indian retail investor has access to high quality fixed income products that give double the returns of normal term deposits. While these cannot be categorized as 100% risk-free, the returns suit investors who can take a small degree of risk to get higher than market returns.
Is it any wonder then, that the new generation is lapping up the new set of fixed income products offered by fintech companies? The ease of access, the convenience of use, the limited risk and an assured reasonable return with principal protection in many cases, beats the fixed income product returns in the traditional model handsomely has led to the new generation investment products becoming very popular. Generating a passive income out of idle funds is an attractive proposition for the Indian retail investor who is ready to try unconventional investment options with at least 10% of their surplus funds. The popularity of these platforms and the rate at which they have attracted investments in the COVID-19 period is a clear indicator of the merits of these investment avenues and the interest they have managed to generate.
It is not a good strategy to put all your eggs in one basket. Given a dynamic business landscape that is constantly evolving, it is best to have a diversified portfolio that offers a mix of fixed, stable income and growth. It would be interesting to see more disruptions in this decade as more investment openings are bound to come up to meet the needs of the tech-savvy investor who wants his finger in every pie.
The Author is Bhuvan Rustagi, COO, Lendbox.
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