FinTech – refers to companies that are using technology to help solve issues or challenges regarding the financial aspects of individuals, corporations, and governments. Today the FinTech industry in India is experiencing an unprecedented growth with about USD 2 Billion in investments in 2015 alone. This sub-sector within the overall technology landscape is attracting similar attention to HRTech while investments in HR Tech are not as high as those in FinTech. Both these areas have received significant investor and entrepreneur activity and interest, especially in the last 2 to 3 years.
In this article, we take a look at these 2 worlds and identify potential areas of collaboration and collision in them as more and more companies look to optimize solutions while also looking at “adjacent white spaces” for their respective technology solutions.
The Indian FinTech industry, in particular, is focused on the unbanked and converting more and more transactions from offline cash based to online cashless based transactions. The recent drive of demonetization and subsequent efforts by the GOI to launch various payment gateways and apps has given impetus to this particular part of the FinTech story. The GOI’s efforts to link Aadhaar – the digital identity card of Indian citizens to their Pan Card – the quintessential document that captures your income tax payments is seen as next step to “push” more and more Indians on the digital payments highway.
If you take a look at this infographic of 72 Indian FinTech companies you would primarily see companies on Merchant payment, Lending & Finance, Consumer Payment, Personal Finance, and Insurance & Tax related aspects. This is where I argue that whitespace lies between HR Tech and FinTech.
For most organizations ensuring that all income and expenses are accounted for is a basic necessity. Many Indian organizations rely on simple and affordable Tally software for the same. Companies like QuickBooks, Zoho and SAP have been gaining entry into this market essentially on the back of “a lot more” than just accounting software.
What follows closely the accounting is the salary processing and payroll process which no organization can avoid. It’s the most crucial and essential link between FinTech & HRTech. QuickBooks has been selling its solution with an integrated payroll in the Indian market for a while now.
While payroll seems to be the most logical entry point for FinTech companies – helping employees file their taxes and help them with their investment decisions right from the payroll solution is not very far. Most salaried employees in India today make these decisions outside of their workplaces while interactions about the same at the workplaces are commonplace. Companies like ClearTax and HRBlock have already started offering a simple & intuitive user interface for salaried employees to simply upload their Form 16 to file their income tax returns. I guess the days are not far when such solutions come integrated with the payroll solutions which in turn are integrated with the accounting software.
The other area where FinTech and HRTech will overlap is travel and expense tracking module. Today most HRIS or HRMS solutions do not have this module by default while not many accounting solutions look at this module from an employee facing point of view. Companies like Zoho and Quickbooks are changing that which offers an interface for employees and employers on Travel & expense tracking. While large enterprise clients are using best of breed solutions like Concur. I would argue that soon these siloed solutions will make way for a unified platform. While companies like Darwinbox have created integrated expense tracking modules within their HRMS solutions. Companies like Happay, Zento, Expenzing are some examples of specific point solutions that are available to companies especially around travel and expense tracking. I believe these point solutions are more likely to merge with a larger FinTech solution or platform.
The area of reward and recognition is where we see a lot of activity today and companies like Zeta and Sodexo who operate in the space of digital rewards and tax friendly benefits are they really FinTech or HRTech companies?
The area that has been not attracting a lot of attention from either FinTech or HRTech is the area of compensation and benefits or what’s now referred as total rewards. The opportunity for FinTech companies is to create modules that help companies create salary structures which are more tax friendly, allows companies to look at salary variation within same role across geographies, create integrated solutions for health & wellbeing including group and personal insurance products etc are some areas where FinTech companies will start to cross over to HRTech. Few HRTech companies like Darwinbox are offering integrated modules around Compensation modelling currently.
Companies will need to look at the holistic employee experience across functional silos while deciding on their digital journey. They would have to select solutions which is likely to be a mix of generic solutions and point solutions which essentially need to talk to each other & provide a uniform and unified employee experience. This is indeed a very tough job.
If you are buyer of HRTech you would need to continue to ensure that solutions you buy have capabilities of integrating with upstream and downstream applications that exist in the organization to ensure that you make optimum use of available technology and data.
So essentially the argument is that anywhere there are payments involved with a need to create a trail of transactions to ensure compliances to state or federal laws, FinTech companies will have an upper hand than HRTech companies. With new age technologies like blockchain, IoT, and AI set to fundamentally change the business world both FinTech and HRTech will find use cases for application of these technological advances in various business functions. My argument is these new age technologies will further accelerate the pace of consolidation or collision.
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