Web 3.0, SaaS and fintech will be big focus areas for 2022, even though early-stage investments are expected to slow down
According to a recent analysis by investment firm InnoVen Capital, Wb 3.0, software-as-a-service (SaaS), and fintech are emerging as major priority areas for investors in 2022.
According to the report, over seven out of ten respondents, or 67 per cent, believe that Web 3.0 will be something to watch out for. Six out of ten respondents believe SaaS will be a strong performer this year, and five respondents expect big things from the financial industry.
Web 3.0 is the most recent version of the Internet, which uses machine learning, artificial intelligence, and blockchain to enable real-time human communication.
Healthtech and the Creator Economy are two other sectors to watch in 2022. Over 29% of respondents (three out of ten) voted for health tech, and 24% voted for the creative economy.
3one4 Capital, Blume Ventures, First Cheque Ventures, Indian Angel Network, Kae Capital, Mumbai Angels, Omnivore, Orios Venture Partners, Good Capital, and YourNest Capital are among the early-stage institutional investors who contributed to the research.
Five out of ten respondents predict that early-stage investment will slow down in the following years. This will be disheartening to observe, as early-stage investment has been picking up steam in the recent year.
“In 2021, early-stage investment activity remained stable, with larger transaction volumes at higher values and an increase in the number of Angel Syndicates, all of which are clear evidence of a developing early-stage ecosystem.” Although the market mood is showing signs of slowing, Tarana Lalwani, partner at InnoVen Capital India, believes the early-stage fundraising climate will stay strong.
In 2021, seed and pre-Series A round raised about half a billion dollars in India, compared to $365 million the previous year. In addition, the transaction size increased from 243 in 2020 to 316 in 2021.
In the same time period, the average deal size climbed from $1.5 million to $1.8 million in the early stages.
Over the last three years, Bengaluru has been the most popular investment destination, followed by Delhi NCR. According to recent research by InnoVen Capital, Bengaluru and Delhi NCR businesses raise two out of every three early-stage investments. Companies based in Mumbai have increased about 12% of all funding.
Apart from that, Pune and Chennai are among India’s top five startup cities.
About Web 3.0
Between 1999 and 2004, Web 2.0, popularised by O’Reilly and others, changed the globe away from static desktop websites created for information consumption, served from expensive servers, and gave birth to Uber, Airbnb, Facebook, and Instagram. Three key layers of innovation fueled the rise of Web 2.0: mobile, social, and cloud.
With the introduction of the iPhone in 2007, we went from calling up the internet a few hours a day at home on our workstations to being “always connected” – the web browser, mobile apps, and personal notifications were suddenly in everyone’s pocket.
Until 2004, when Friendster, MySpace, and then Facebook were launched, the internet was primarily dark and anonymous. These social networks tempted users into good behaviour and content generation, including recommendations and referrals, by encouraging people to share photographs online with specific friend groups, surrender their houses to unknown tourists on Airbnb, and even get into a stranger’s car with Uber.
By pooling and improving mass-produced personal computer hardware over a global network of enormous data centres, the cloud commoditised creating and maintaining web pages and apps. Rather than purchasing and maintaining expensive and dedicated infrastructure, businesses may choose to rent storage, processing power, and administration tools. Low-cost tools that grew with their company may help millions more entrepreneurs succeed.
While the Web 2.0 mania is still going strong, the following big paradigm change in online applications, fittingly termed Web 3.0, is showing signs of growth. Web 3.0 (dubbed the Semantic Web initially by Tim Berners-Lee, the Web’s creator) is an even more profound upheaval that will eventually eclipse everything else. Switching to open, trustless, and permissionless networks are significant.
• Open- Web 3.0 is made up of open-source software created by a global community of developers and executed in public view.
• Trustless— in this situation, the system allows users to interact openly or privately without the requirement for a trusted middleman in Web 3.0.
• Permissionless- in the sense that anyone can participate, including users and suppliers, without the authorisation of a controlling authority in Web 3.0.
These new open, trustless, and permissionless networks have the power to organise and stimulate the long tail of job, service, data, and content providers that constitute the marginalised backdrop to many of the world’s most acute health crises, food, finance, and environmental issues.
Web 2.0 was spurred ahead by mobile, social, and cloud technology. Edge computing, decentralised data networks, and artificial intelligence are the three new layers of technical innovation that makeup Web 3.0.
Web 3.0 is pushing the data centre out to the edge, often right into our hands, whereas Web 2.0 used cloud services to recycle recently commoditised personal computer technology. Large historical data centres are augmented by sophisticated computing resources dispersed among phones, laptops, appliances, sensors, and autos, which are expected to produce and consume 160 times more data in 2025 than in 2010.
Thanks to decentralised data networks, these data producers (ranging from a person’s health data to a farmer’s crop data or a car’s position and performance data) can now sell or trade their data without surrendering ownership control, privacy, or reliance on third-party go-betweens. As a result, decentralised dispersed networks in the developing economy have the potential to include the entire long tail of data providers.
AI and machine learning algorithms have advanced to the point that they can now make useful, perhaps life-saving predictions and acts. When combined with new decentralised data processes that provide access to a wealth of data that would make today’s IT behemoths envious, the potential applications extend far beyond targeted advertising to industries such as precision materials, medication production, and climate modelling.
Web 3.0 will allow dispersed people and computers to interact with data, value, and other counterparties in the future without the need for third-party intervention. As a result, the next generation of the internet (web) will be built on a modular, human-centric, and privacy-preserving computing fabric.
So much for technology, but what impact will it have on individuals and society as a whole? And how may this have a greater impact on our families, businesses, and governments than current applications? Our ability to organise ourselves in the pursuit of a common goal is one of the features that distinguishes humanity. As a result, going back in time/history to identify four key social and technological milestones in human collaboration is extremely useful:
Villagers could only trade value and information and work with a small group of known counterparties due to geographic proximity and personal trust connections. Due to their diminutive size, people such as farmers, firemen, warriors, and fathers commonly fulfilled several tasks in society. As a result, most transactions revolved around food, security, and recreation, with little coordination outside of largely self-sufficient families.
In urbanised cities, the number of counterparties with whom people can trade value, knowledge, and labour increased dramatically. Starting new specialised enterprises, producing accounting at that level, and relying on others to provide the remainder of the goods and services that the city’s residents required became economically feasible.
While certain physical limits persisted, the larger spatial playing field and higher population density allowed people to coordinate their skills thoroughly.
Web 1.0 and Web 2.0 drastically reduced the latency and value at which individuals and organisations could trade discounts and information and work with geographically dispersed counterparties they didn’t necessarily know via trusted intermediaries, allowing them to trade deals, information and work with geographically dispersed counterparties they didn’t necessarily know. Because the reach of counterparties grew by orders of magnitude, really global corporations began to emerge.
Through multiple mediators, such as Facebook, Airbnb, and eBay, the internet facilitates worldwide coordination by establishing a digital social confidence level that allows strangers to communicate. Regrettably, we’ve become unduly enamoured with these platforms. When they go from “appeal” to “remove,” their customers pay higher prices or risk losing their platform (the platform has the facility to destroy your business running on it).
While today’s online (web) interactions may happen magically and dependably all over the world, the $200 billion digital advertising business with ‘we the people is the engine that drives this machine. It’s now well known that these “post-truth” forums have resulted in comment boards where unfiltered and shamelessly populist or even untrue assertions bounce around and reinforce one another – sometimes with disastrous repercussions.
Thanks to Web 3.0, individuals, machines and corporations can now transfer value, share information, and collaborate with global counterparties they don’t know or explicitly trust without the use of an intermediary. The most significant change facilitated by Web 3.0 is the erosion of trust, which is essential for worldwide collaboration. This represents a shift toward implicitly depending on all network constituents rather than explicitly counting each participant and attempting to achieve trust extrinsically.
This web will substantially expand the dimensions and variety of human-machine interactions, well beyond anything we can currently imagine. These interactions will be possible with a much broader range of potential counterparties, from frictionless payments to richer data, flows, and secure data transfers.
We will be able to connect with anyone, anywhere on the planet, without having to go through fee-based intermediaries, thanks to Web 3.0. This change will enable a new wave of previously unimagined firms and business structures from global co-operatives to decentralised autonomous organisations and self-sovereign data marketplaces.
Software as a service (SaaS) is a software licencing and delivery paradigm in which software is licenced and hosted centrally on a subscription basis. “On-demand software” and “Web-based/Web-hosted software” are other terms for SaaS.
Infrastructure as a service (IaaS), platform as a service (PaaS), desktop as a service (DaaS), managed software as a service (MSaaS), mobile backend as a service (MBaaS), data centre as a service (DCaaS), integration platform as a service (iPaaS), and information technology management as a service are all considered to be part of cloud computing (ITMaaS).
Users often access SaaS apps through a thin client, such as a web browser. SaaS has become a popular delivery model for a variety of business applications, including office software, messaging software, payroll processing software, database management software, management software, CAD software, development software, gamification, virtualisation, accounting, collaboration, customer relationship management (CRM), management information systems (MIS), enterprise resource planning (ERP), invoicing, field service management, human resource management (HRM), and talent acquisition.
Almost all enterprise software vendors have included SaaS in their approach.
Business application hosting has been centralised since the 1960s. Starting in that decade, IBM and other mainframe computer vendors began offering a service bureau, often known as time-sharing or utility computing. One of these services was offering computing power and database storage to banks and other large corporations from their global data centres.
During the 1990s, as the Internet grew in popularity, a new type of centralised computing emerged: application service providers (ASP). ASPs offered organisations the service of hosting and operating specialised business applications, allowing them to cut costs by using central administration and the provider’s expertise in a specific industry.
Based in the Washington, DC region and Futurelink Corporation, in Irvine, California, USI were two of the most potent ASPs.
The idea of software as a service is essentially an extension of the ASP paradigm. However, the term software as a service (SaaS) is frequently used in more particular contexts:
- Whereas many early ASPs focused on managing and hosting software from third-party independent software vendors, SaaS vendors now typically develop and manage their own software.
- Whereas many early ASPs offered more traditional client-server applications requiring users to install software on their personal computers, later implementations can be Web applications that only require a web browser.
- Unlike most early ASPs, which required each business to have its own application instance, SaaS services now have the option of using a multi-tenant architecture. The application serves numerous businesses and users and splits its data accordingly.
On September 23, 1985, the acronym first appeared in a USPTO trademark application’s products and services description. DbaaS (Database as a Service) is a sort of cloud database that has emerged as a sub-category of SaaS.
For a few years, Microsoft referred it SaaS as “software plus services.”
Distribution and pricing
The cloud (or SaaS) model does not require indirect distribution because it is not physically distributed and can be deployed virtually instantly, eliminating the requirement for traditional partners and middlemen. Unlike traditional software, which is typically provided as a perpetual licence with an up-front cost (and optional continuous maintenance), SaaS providers usually charge a subscription fee, normally a monthly or annual fee. As a result, SaaS often has a lower initial setup cost than comparable corporate software.
SaaS companies usually charge for their services based on specific use factors, such as the number of people who utilise the software. Because customers’ data is stored on the SaaS vendor’s servers, there are options to charge per transaction, event, or other units of value, such as the number of processors necessary.
In a multi-tenant architecture, the relatively low cost of user provisioning (i.e., establishing a new client) allows certain SaaS companies to offer freemium apps. This approach makes a free service with limited capability or scope available with fees levied for increased functionality or broader scope.
The capacity of SaaS companies to deliver a price that is comparable with on-premises software is a fundamental driver of SaaS growth. This is in line with the usual justification for outsourcing IT systems, which is to take advantage of economies of scale in application operation, i.e., an outside service provider may be able to provide better, cheaper, and more dependable applications.
FinTech is a word that combines the words “financial technology” and “financial services.” In a nutshell, FinTech pushes businesses to use digital technology to create new goods and services, such as mobile payments, alternative finance, online banking, big data, and complete financial management.
FinTech is a term that refers to the technology that financial institutions and banks use in their back-end operations. Its definition, however, has altered drastically since then. It now includes a number of consumer-oriented apps. By 2019, you’ll be able to trade stocks, manage funds, and pay for insurance and groceries with this technology.
FinTech in banking has inspired a wide range of applications and altered people’s financial habits. Square, a mobile payment platform, and financial and insurance organisations are all affected. The enormous impact of FinTech can be considered a potential threat to traditional or brick-and-mortar banks.
Customers like less traditional financial services in today’s digital world. People want services that are quick and secure. This is why FinTech and FinTech companies are gaining popularity in the banking and financial services industries and wreaking havoc.
Let’s take a look at some numbers to see how FinTech has impacted the world. Around 1.7 billion individuals do not have bank accounts, according to estimates. FinTech is a lifesaver and gamechanger for all of these people since it allows them to engage in and access financial services without having to have a bank account. FinTech is the best option for attaining financial inclusion because it was designed to provide people with direct access to their funds through cutting-edge but simple technology.
FinTech’s Impact on the Financial Industry
- Smart Chip Technology
Smart chip ATM cards have drastically reduced the amount of money lost due to errors. It comes with EMV technology embedded right into the chip. This system uses a one-time password for each transaction. This improves security because the code is only good for one transaction; if it is stolen, it will be useless.
Bank personnel frequently advise their customers to memorise their pin in order to avoid additional headaches and hassles. Bankers are always looking for new ways to safeguard their customers from theft and fraud by providing superior security. Magnetic stripe technology, unlike smart chips, uses the same pin for all transactions, making it more open to fraud.
- Biometric Sensors
FinTech has brought various innovations to the banking industry, including biometric sensors. Biometric sensors and iris scanners are two technological improvements in ATMs. Furthermore, these advancements are revolutionary since they eliminate the need to carry your credit card. Moreover, you will not be required to remember your pin.
These advancements will make ATMs safer than ever before, as you can access your personal account without entering a password. And biometric ATMs use integrated mobile applications, fingerprint sensors, and palm and eye recognition to identify the account’s owner. ATMs also use micro-veins to improve identification accuracy and security, removing ATM flaws in customer recognition.
Biometric technology allows customers who are concerned about losing their ATM card to breathe a sigh of relief. This is because even if they misplace their card, they will be able to access their funds.
- Online Transactions
The Monetary Control Act (MCA) was enacted in 1980 to foster an efficient payment system across the country by encouraging competition between private-sector payment service providers and the Federal Reserve.
Thanks to the Automated Clearing House (ACH), all computerised interbank payments were processed smoothly. Electronic payments include insurance premiums, social security, salary, dividend payments, bill payments, and direct mortgage debts.
According to Federal Reserve data from 2016, the number of online transactions handled in 2015 was over 3362 million, a significant increase from the 1189 million transactions in 2012. Payments by credit card have also increased at a similar rate. Furthermore, the number of payments misdirected from merchant sites increased by more than 45 per cent in 2013 compared to 2012.
The same pattern was observed among debit card users. The number of people who use debit cards has climbed by about 90%. In 2012, there were about 2.1 million debit card transactions, which rose to about 270 million transactions in 2015.
- Omni-channel & branchless banking
FinTech financial services transform the banking system by moving it away from a branch-specific procedure and toward many digital channels like the internet, social media, and mobile. It also reduces the bank’s reliance on physical locations to run its business.
As a result, numerous banks use omnichannel banking to reduce their branch count. Around 9100 bank branches had been shuttered across the European Union by 2016.
- Customer service chatbots
Customer service chatbots, which have become increasingly popular in recent years, have also been developed by FinTech companies. Chatbots are essentially bits of software that use machine learning and natural language processing to learn from human interaction on a continuous basis.
Chatbots are extremely useful since they automate client interactions by answering inquiries and routing customers to the relevant departments.
As proven by Bank of America’s Erica chatbot, chatbots can also do additional functions, such as delivering investment advice to customers. On the other hand, UBS’ chatbot can scan client emails on its own, reducing the task’s entire time to a mind-boggling two minutes. A chatbot employed by Japan’s largest bank, for example, may aid consumers with finding vital information on the bank’s website.
Chatbots have become an important part of all banks’ operations since they save money and improve customer happiness and free up call centre agents to focus on value-added services.
- Artificial intelligence (AI)
Over time, AI has become a crucial component of FinTech banking services. AI and machine learning are critical for fraud detection. The fraud detection software used by banks generates notifications when a suspected fraudulent transaction is discovered. It is then backed up by a human examination, which determines whether or not the attack was real.
On the other hand, detecting attacks is becoming increasingly difficult as attacks become more complicated with each passing day. As a result, much time and money are squandered. Furthermore, there is always the possibility of losing customer information. Banks are turning to artificial intelligence (AI) technologies to address this issue.
According to McKinsey, implementing machine learning-driven statistical modelling, data aggregation platforms, and process automation can totally transform AML operations simply by infusing new efficiencies.
To provide a 360-degree consumer picture, data aggregation solutions, for example, may account for data and mine unstructured transactions. The transaction validation process is sped up with this view. Furthermore, using machine learning algorithms, banks can leverage historical data to discover and evaluate fraud attack tendencies. The amount of manual labour required will be cut in half.
The tremendous surge in E-wallets is another indicator of the growth of FinTech financial services. Samsung Pay, PayPal, Android Pay, and Apple Pay are just a few of the most widely used e-wallet systems around the globe. P2P payments, top-up & utility bills, foreign transfers, ticket booking, and various additional functions are all feasible with these wallets.
Solo wallets include Starbucks and Walmart Pay, to name a few. E-wallets have attracted users due to their alluring offerings, which include exciting bargains, hefty cash back, and reward points, among other things. Due to their widespread adoption, many institutions increasingly see e-wallets as a collaborative method of embracing technological developments.
- Mobile Banking
Banks have been forced to build mobile applications that deliver convenient FinTech financial services because of the surge in smartphone usage. The vast majority of banks now provide a user-friendly smartphone app. Banks have also developed smartphone apps that recognise the user’s fingerprints. The application performs this function without the need for any biometric software or hardware.
A smartphone application allows you quick access to funds. A user can utilise a mobile application to perform various banking operations, such as quick bill pay, check deposits, account balance, statements, etc.
edited and proofread by nikita sharma