India’s fintechs find fortune in underserved segments

For Sarika Shetty, the dream of homeownership hit a roadblock when a bank rejected her loan application, citing overexposure to car loans. Shetty, who had been diligently paying rent for years, argued that her consistent rental payments should be considered as a positive financial indicator.

However, the bank’s systems lacked a mechanism to account for rental history. This rejection, though frustrating, helped her to uncover a significant blind spot in the financial system and spurred her to start RentenPe, a company pioneering India’s first rental score system.

Shetty’s story isn’t unique. A new wave of fintech innovators are leveraging cutting-edge technologies such as artificial intelligence (AI), machine learning (ML), natural language processing (NLP) and blockchain to unearth hidden revenue opportunities, address overlooked customer segments, and create innovative products that were previously inconceivable.

“With nearly 50% of India’s population under the age of 40, many young professionals relocate from smaller towns to major cities,” said Shetty. “These individuals often dedicate a substantial portion of their income – up to 30% – to rent, while aspiring to own a home.”

Despite the regularity and significance of these payments, they remain invisible to traditional financial metrics. RentenPe aims to change that by using AI, NLP, ML and pattern recognition to transform unstructured rental data into quantifiable financial insights.

“RentenPe’s matrix and algorithm for rent credit scoring is based on financial, qualitative and quantitative parameters aligned with existing global credit rating bureaus for easy adoption by financial institutions,” Shetty explained. This approach offers renters the financial recognition they deserve, potentially unlocking access to credit and other financial products.

This trend extends beyond rental scoring. Deepak Chandani, chief data officer at Angel One, a retail stock broking house in India, explained how AI has revolutionised trade execution and portfolio management.

Angel One’s ARQ Prime platform uses a rule-based recommendation engine powered by “smart beta” principles by scanning a diverse range of stocks across market capitalisations, including value, quality, high momentum and growth stocks. “The system enters and exits markets strategically, cutting losses early and allowing profits to compound, even in volatile markets,” said Chandani.

By leveraging data sources like historical stock performance, macroeconomic indicators and financial ratios, ARQ Prime aims to eliminate human biases and navigate market fluctuations effectively, he added.

The impact of AI is also being felt in the decentralised finance (DeFi) space. Himanshu Maradiya, founder and chairman of CIFDAQ, an AI-powered blockchain ecosystem company, said AI has unlocked new revenue opportunities and enhanced personalisation in the blockchain and cryptocurrency industry.

“AI-powered predictive trading models and automated decision-making in DeFi have opened up new revenue streams by optimising tokenomics and executing complex, high-speed market analyses,” said Maradiya. This allows for more accurate trading decisions and market predictions, far exceeding the capabilities of manual processes.

Personalisation is another key area where fintech innovators are making strides. MyFi, a conversational AI-powered investment advisor, provides tailored wealth management recommendations to Indian consumers.

Kiran Nambiar, co-founder and CEO of MyFi, said: “MyFi leverages a combination of AI models built and back-tested over years by a team of seasoned investment professionals, considering market data, historical trends and various factors. The recommendations are built on our own financial models with very little room for inaccuracies and hallucinations.”

Beyond generating revenue and improving customer experience, AI is also playing a crucial role in fraud prevention and risk management. Maradiya said AI-powered solutions can analyse real-time blockchain data to detect fraud, money laundering and suspicious activity, areas traditionally reliant on slower, manual processes.

AI-powered solutions have demonstrated clear success, particularly in improving transaction security, enhancing market liquidity and reducing fraud

“AI-powered solutions have demonstrated clear success, particularly in improving transaction security, enhancing market liquidity and reducing fraud,” he added.

Even the potential risks of AI are being addressed. Insurance companies such as Munich Re are developing solutions to quantify the predictive robustness of AI models and assess the risk of errors, including copyright infringement and discrimination, which can be insurable.

The early success of these fintech innovators demonstrates the vast potential of exploring overlooked financial areas. RentenPe’s research with Ernst & Young revealed the substantial size and growth potential of India’s residential rental market, validating their focus on this underserved segment.

Angel One boasts a vast client base of nearly 23 million, benefiting from AI-powered enhancements in trade execution and portfolio management. CIFDAQ and MyFi are similarly capitalising on the growing adoption of AI and blockchain in their respective domains.

Maradiya noted that the combination of AI and blockchain is not just about efficiency – it’s also about unlocking entirely new possibilities in financial inclusion, governance and security. As these technologies continue to evolve, more innovative offerings are expected to emerge from the shadows, transforming the financial landscape and empowering individuals and businesses alike.