By Editor September 18, 2019
The FinTech industry has been growing in terms of innovations for the last several years. Fintech has a huge impact on traditional financial services as well as the Banking sector. With the rapid growth and innovations in the FinTech industry, the digital/mobile wallet feature has been introduced. These digital wallets play a major role in FinTech. The digital wallet provides fast transaction facility.
In order to take advantage of Fintech solutions, many FinTech companies have started offering digital wallets to users. And it may be true that the FinTech companies are making a profit nowadays, however, there are mobile wallet firms that are still not making much profit. Payments, in general, are not very high margin, normally here the margins are in the range of 1.5-2%. So It indicates that the digital wallet companies are not profitable.
The low-profit margin of payment service has made the mobile wallet companies think twice. Compared to the profit margins of payment, the ones in loans could be as high as 5-7%. Therefore, some mobile wallet firms have started offering instant loans, credits to their customers. To offer instant loans and credit the mobile wallet companies have to partner with some financial service providers.
Moreover, It’s difficult for mobile wallet companies to survive on just payment services due to the low margin. There are a huge opportunity and scope in digital lending for mobile wallet firms. One of the mobile wallet companies of India has started lending unsecured loan to local merchants who accept B2C payments from their own customers.
In conclusion, It’s a good decision taken by the digital wallet firms to diversify to provide credits and short-term/instant loans to their customers. However, a new challenge for digital lending firms will be to find a low-cost digital mechanism for collections.
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