What is campus recruitment?

Key features of a good campus recruitment strategy

• On-site visits and presentations: Companies often visit educational campuses to conduct informational sessions, workshops, and presentations. These events are designed to introduce the company to the student body, showcasing their culture, values, and the opportunities available.
• Recruitment drives: These are the core of campus recruitment, where companies conduct tests, interviews, and group discussions to evaluate candidates' abilities and fit for various roles.
• Internship offers: Many organizations use campus recruitment to offer internships to students. These internships can sometimes lead to full-time job offers upon graduation, depending on the student's performance and the company's hiring needs.
• Diversity in hiring: Campus recruitment allows companies to enhance diversity in their workforce. Students from different academic backgrounds, cultures, and regions bring a variety of perspectives and ideas to the company.
• Early identification of talent: By engaging with students before they graduate, companies can identify and secure talented individuals early in their career search, often leading to long-term employment and loyalty.

Why campus hiring in India is a great bet

Benefits of campus hiring strategy?

• Connecting early with aspiring young minds
• Building an online personality that can’t be faulted
• Re-designing time-worn pre-placement presentations
• Infusing creativity into existing hiring practices and performance-based exercises
• Using a smart sourcing/screening/interviewing approach through online tools*

Hire for the long term

This article has been updated on March 7th, 2023.

Anonymity might be the only way to guarantee a truly diverse workforce that organizations are striving to attract. A diverse labor force—diverse in terms of ethnicity, gender, age, religion, sexual orientation, thinking style, and disability—means more creativity and innovation, a broad spectrum of perspectives on problem-solving, positive performance, lesser attrition, greater market share, and higher revenues.

In 2023, you can no longer put diversifying your workforce on the back burner; it has become a priority for employers if they want to attract and retain top-tier talent.

The new generations of potential candidates highly value workplace diversity. 40% of tech employers surveyed in Lever’s DEI Report say candidates are looking for more inclusive, diverse work cultures.

Recruiters seeking to level the playing field and prevent discrimination of all kinds need to step up their hiring game. Consequently, they are increasingly shifting to the “blind hiring” approach.

Read on to find out all about blind hiring, why it’s an effective way to cut down on hiring biases, and how technology can help you carry out blind hiring effectively.

What is blind hiring?

Hiding all personal information of a candidate including names, photos, addresses, education, hobbies, etc from the hiring manager is called blind hiring. This is done to ensure that a candidate is assessed and selected on ability and skills alone. Instead of being unconsciously biased by where they came from, their gender, or their pedigree.

For instance, let’s look at the Boston Symphony Orchestra’s blind audition process in the 1950s. Claire Cain Miller’s article in the New York Times Magazine explores this idea in depth. Long story short, in the 1970s, the Boston Symphony Orchestra decided to test the results of blind auditions.

Back then, white men dominated orchestras. The judges had no idea who was auditioning as both male and female musicians, were asked to audition behind screens.

Once anonymity was embraced, the results were a lot fairer than before. Women musicians became more likely hires than men (between 25-46%). Now that’s a much more level playing field than before!

In the same vein, organizations have taken a leaf out of the Boston Symphony concept. They have integrated “blind elements” in various stages of their hiring process. Blind hiring techniques include blind resume screening, blind pre-employment testing, and blind interviewing.

If done correctly, this method can greatly reduce the effect of cognitive biases on hiring decisions.

How do tech recruiting tools help you make fairer hiring decisions

Recruiting software platforms like Blendoor and HackerEarth help you implement blind recruiting accurately. There are three options to help improve workforce diversity through this recruiting technique:

Blind screening

To minimize discriminatory recruiting barriers, remove information that reveals the candidate’s race, gender, age, names of schools, links to social media, hobbies, etc. This technique helps mitigate unconscious bias and “first impressions” that creep into hiring decisions.

Tools like Blendoor exclude revealing data from resumes and CVs like:

• Candidate’s name
• Candidate’s headshot
• Candidate’s education
• Candidate’s zip code/address
• Candidate’s hobbies or personal interests
• Candidate’s age and other biographical info

Blind pre-employment testing

Recruiters use pre-hiring screens such as cognitive aptitude tests, coding assessments, personality assessments, sample job tasks, or language proficiency tests to evaluate applicants depending on the job role.

Pre-employment testing is fair, saves you time and money, and gives you data that ensures you have made legally defensible hiring decisions. It allows candidates to showcase their talent in a controlled environment.

Say, you want to hire a Java developer. You have tons of resumes where one candidate looks as “attractive” as the next in terms of qualifications. You can easily conduct an automated coding challenge for programmers.

For example, a platform such as HackerEarth Assessments offers the option to mask the personally identifiable information (PII) of candidates to anonymize screening. Companies can create highly accurate coding assessments with minimal technical know-how by choosing from a rich library of 17,000+ questions across 900+ skills.

Also read: Tips to Identify and Remove Unintended Bias In the Assessment Process

Blind video interviewing

This is perhaps the most difficult to achieve in terms of anonymizing a candidate, recruiters use chats or written Q&A tests to hire. Additionally, there are tools that allow for blind interviews by obscuring the candidate’s identity and/or using voice masking technology.

Our intelligent coding interview platform, FaceCode supports your pursuit of truly unbiased tech recruitment. FaceCode allows you to mask any and all candidate PII at the flick of the switch, before or during a live coding interview as seen above.

How effective is blind hiring?

As the numbers show, hiding personal candidate information does have a positive impact on resume screening. The Boston Symphony experiment opened up more doors than before for women musicians and reduced gender bias.

Another study shows that candidates who change their first names to make it sound more “white” have a higher chance of being shortlisted for the next round than those who don’t.

So yes, blind hiring is effective—to an extent. It maximizes chances for a more diverse candidate pool to get through the initial screening process. But experts are divided on the efficacy of blind hiring to reduce the overall bias and promote objective evaluation of skills.

Most employers worldwide are focusing on bettering the diversity ratio at their workplaces. And blind hiring is one of the various strategies they are relying on to address issues such as discrimination, a homogenous workforce, and attrition.

Still, putting all your eggs in one basket and expecting it to solve your diversity hiring problems is simply not enough. You have to do so much more for moving the needle on your diversity initiatives.

Some additional ways for your organization to reduce recruiters’ bias include:

• Write gender-fluid tech job descriptions so that they attract candidates from minorities and underrepresented groups in tech
• Use blind hiring tools to hide personally identifiable information (PII) of candidates on job applications and résumés.
• Consider using blind recruiting software like HackerEarth that allows you to objectively assess developers with ease, solely based on their skills
• Evaluate candidates based on pre-defined scoring parameters and standard interview questions
• Ensure in having an interview panel that is diverse and brings multiple perspectives to the table
• Focus on building a company culture where inclusion is at the heart of everything you do
• Train employees/managers about the common hiring biases and how to lead inclusively

Take the first step to increasing diversity with blind hiring

Blind hiring may not be the “end all be all” for reducing discrimination in tech. But it is a great starting point for building a more inclusive workforce.

At least as a “first cut”, anonymous recruitment methods can positively impact hiring. They enable you to objectively screen and push the right applicants through the door. Blind recruiting can prevent you from missing out on qualified candidates.

Bias can occur at any and every stage of the recruiting cycle be it at the interview stage or the final decision-making stage. Then, companies can go about fixing errors due to flawed human judgment. Arrange DEI training sessions, create a diverse interview panel, and conduct workshops on unconscious bias.

Here are a few resources to help you meaningfully diversify your workforce and recruit unbiased –

1. For those looking to build a diverse engineering team – we have a free template for you to pick and choose from this list of diversity-focused interview questions so you can conduct the best interviews and make objective hiring choices
2. For those looking to bake blind pre-employment testing into their hiring – we performed an exercise to determine if there was any bias in HackerEarth Assessments against people from different ethnicities, races, and genders and if there was a disparate impact

How important is it to keep your employees engaged?

• A Glint study revealed that the regrettable attrition rate of disengaged employees is 12 times higher than highly engaged employees over the period of a year.
• According to Gallup, engaged employees outperform disengaged employees by 21 percent.
• A Hay Group study showed that highly engaged employees are 87 percent less likely to leave your company than disengaged employees.
• According to a Temkin Group study, 63% of highly engaged employees always try their hardest at work, compared with 42% of disengaged employees, resulting in better productivity.
• A Shandwick study reports that 33% of engaged employees share positive sentiments or comments about their employers without any encouragement.

How can you improve employee engagement?

• Run internal contests to boost employee engagement. Intranet skill-based contests motivate employees to up their performance. Friendly competition, teamwork, and a promise of prizes can be a great draw. Asking for suggestions and acknowledging them to foster an innovative internal culture.

• Internal hackathons and gamified assessments can be the core of your employee engagement plan and can be tracked using employee engagement software. These create a buzz and spark interest.

• Identify talent within the organization using assessment tools and techniques while keeping employees engaged.

• For example, Recruit is a tool used by companies world over, such as Adobe and Wipro, to create internal programming challenges. It helps spot exceptional employees in and find solutions from the current workforce. Also, these coding competitions can build a talent pipeline for the future. Recruit comes with an exhaustive question library with over 18,000 questions in 32 programming languages across 51 major domains and inbuilt plagiarism checker. Any number of employees can take the test simultaneously. Submissions are checked for logical correctness, time efficiency, memory efficiency, and code-size limit; they are auto-evaluated instantaneously. Comprehensive test reports give you a complete picture.

• Tailor training programs for better business outcomes; do a skill gap analysis before you design your L&D agenda.

• Here’s a good read from McKinsey, and then another.

Java has continued to be a major force in enabling these technologies within these enterprises.

The problem arises when you want to hire a candidate who has proven Java developer skills.

How do you assess Java developer skills with accuracy when you have no clue how Java works or have never worked init?

If you want to hire a developer who knows Java but doesn’t know how to develop good quality code in a reasonable amount of time, then proceed with the Java APIs and programming tests.

If you want a decent developer, then forget about a paper-pen programming assessment and just talk to them about how they would go about building solutions and the tools they would use, and you’d better use an online assessment.

Ask them about frameworks they know of and what their strengths and weaknesses are as developers. (Read:How to hire a technical source)

Awareness of different IDEs, build tools, test tools, and documentation skills would also be worth querying. If you want quality software, it’s important that they know the “why” and the “how.”

Does a resume by itself represent the actual skills of a candidate? If not, then how can you screen the candidate?

I’ve seen people without degrees who could write incredible algorithms and could quote Knuth by heart.

How can you find the right Java developer skills for your organization?

In this post, I will discuss the best practices we follow while hiring and screening Java developersat HackerEarth.

But before I begin, here’s a little primer.

Why Java?

Java is the closest thing to a Lingua Franca (idiom meaning “Common Language”) in the IT industry. Everyone who has used it once is likely to stick with it.

Java is a computing platform used for portable codes for desktop and server environments. In simple terms, it helps develop an application and share it cross-platform.

It’s an object-oriented programming language which comes with the niche facility of a just-in-time compiler.

What do you need to know before you hire a Java Developer?

Since Java is so often used in every possible application in IT, it is essential to understand that learning it in college or getting basic certifications are hardly useful unless the recruitment is for a beginner’srole.

Java is changing almost every year and with new build and framework releases, hands-on experience in the latest or required libraries and framework should be the priority.

These libraries contain pre-written essential required functions; you can save time by not having to rewrite anything.

A candidate working on J2SE 5.0 released in 2004 may not be knowledgeableenoughto work in Java 8 released in 2014.

Before we begin discussing the Java developer online hiring process, it is essential to understand common terms used in Java hiring. Many of these terms are often used interchangeably, and I will be sharing only the important ones.

Check out this amazing glossary of all the Java terms here .

What is Java SE and Java EE?

It refers to Java Standard Edition used for development and deployment of codes for the desktop environment.

Java Enterprise Edition is built on top of Java SE. Java EE provides an API and runtime environment for developing and running a large-scale application.

What certification can you expect?

Most candidates today, who see themselves as skilled developers, are certified in Java. But what are the various Java certifications and what do they mean?

Oracle has 4 levels of Java certification that certify you in different levels of expertise.

The table below represents the four levels and the certification and associated skills.

* Only Oracle certified candidates are considered to be Java certified.

List of common skills on which candidates are evaluated in a Java Developer hiring process

• OOP Concepts
  • Abstraction (Interface, Abstract Class, implements)
  • Encapsulation (access modifiers – public, private, protected, default)
  • Inheritance (extends, super)
  • Polymorphism (overloading, overriding)
• Core Java Concepts
  • Variables, Scope of Variables, Autoboxing/Unboxing, Constructors, Operators, Input, Output, Conditions, Loops, Methods, Arrays, Objects, String APIs)
• Advanced Concepts
  • Packages, Interfaces, Inheritance, Polymorphism, Exceptions
• Java Generics
• Collections/Data Structures
  • Lists, Maps, Arrays Lists, Sets
• Inner Classes
• Static – Keywords
• File Handling APIs
• Network APIs
• Garbage Collection
• Serialization
• JVM Architecture
• Frameworks
  • Spring, Hibernate
• Multi-Threading
  • (Synchronization, Thread, Runnable)
• Experience in web services (REST and/or SOAP)
• Build tools – e.g. Ant, Maven
• Lambda Expressions
• Streams
• J2EE, EJB, JSF

Irrespective of this detailed list, there is no definite fail-safe way or approach to judging a candidate on these parameters.

Assessing a Java developer skills

Screening is often considered tedious, time-consuming, and still frequently inefficient when you are trying to find the right candidate. You may source 500 or 1000 resumes for a job, but what is important is getting the most suitable candidate for the job.

Over a period, I’ve realized that any Java developer candidate can be screened based on the following two challenges:

• Simple algorithmic challenge
• Application development

Simple Algorithmic Challenge

Despite some really amazing sources available for more detailed testing, many firms still prefer using simple algorithmic challenges in assessing the job aspirants. (Read – How to remotely assess tech talent?)

Thecandidate is provided with one or many programming problems which have to be completed within the stipulated time. The solutions are usually judged based on test cases, time, and memory efficiency.

Each programming challenge taken by candidates is evaluated for its accurateness, time, and space complexity by the technical team.

Unlike automated scoring, human raters could bias test results in different ways.

Tools like HackerEarth – Recruit help you test candidates with minimumhuman intervention. (5 reasons you should use a talent assessment tool)

Recruit challenges candidates using questions from its extensive library while also providing flexibility to enter questions of the recruiter’s choice.

A candidate can be tested on various programming skills through multiple-choice questions, subjective questions, programming questions, golf questions (Problems which are solved in the least number of steps), and approximation questions.

The solution to these questions is automatically evaluated based on defined criteria.

A sample Golf problemstatement for assessment:

Application Development – Java Multiple File Project Challenges

Real-life problems do not come with a problem statement. Developers usually deal with problems of finding the right framework or editing a broken patch in a program while coding.

When it comes to hiring senior-level or experienced Java developers, it becomes verydifficult for recruiters, as well as candidates, to demonstrate their knowledge and skill througha simple programming challenge.

A full-fledged application challenge is used to test a candidate’s capability of developing a complete Java application. He or she has to apply theoretical knowledge and practical skills to get a complete application running.

The candidate must know enough about the framework and libraries to survive the screen test. The solution is then assessed manually using JUnit and by creating custom test cases.

HackerEarth Java Multi File Application helps you assess candidates on application-building skills. Similar to Algorithmic challenges, you can test candidates by using questions from the Recruit library or via a custom library.

The application feature helps a recruiter to check candidates’ know-how by requesting them to develop an application from scratch.

Or the recruiter can choose to partially share an application feature and ask them to complete the rest as part of the assessment.

Benefits of using a Java Multifile Project are the following:

• It can be used to test hands-on programming skills rather than just algorithmic coding knowledge.
• Candidates can actually relate the problems to real-life scenarios, which makes problem-solving interesting.
• JUnits help in testing the entire code flow and not just I/O. Output matching is flawed and can even be achieved through brute force. JUnits on the other hand, if written properly, can test the entire code flow of the candidate.

You may have realized while reading this lengthy article that the best approach to assess a Java developer is not via conventional approaches but vianew technologies foreffective assessment.

1. How to hire a data scientist
2. 5 must-have proctoring tips for a developer assessment platform
3. How to ensure your tech talent pool is poaching proof

Quality Assurance is more than just finding bugs in an application. The QA team focuses on delivering a quality product that is developed by a developer,within a deadline. The QA team’s primary task is to eliminate the issues that may affect the way the product works and thereby hampering the user experience.

When we approach testing in a project, irrespective of how small or big a project is, we always strive to achieve the testing pyramid. If you have never come across this model then go and look it up, it’s on the list of being a badass!

“Quality is not an act, it is a habit.”— Aristotle

Here is the pyramid,

Why Quality Assurance (QA) is a must in software development?

The longer a bug goes undetected, more expensive it is to fix. A simple cost vs. benefits analysis overwhelmingly shows that the benefits of employing a QA test engineer to validate the code far outweighs the costs.Most importantly, it also influences your product’s reputation!

Here is why the QA process is important in software development:

• An extensive QA process is performed to eliminate avoidable defects or bugs before a site is made live.
• QA is done to make the website credible and easy to operate.
• What if the search button of a search engine like Google, which is used by millions of people every single day, doesn’t work? It might require a simple fix, which can be done by a developer in a jiffy. However,this defect will encourage users to use a different search engine,which leads to a loss in users
• A proper QA process will help you find defects that can be fixed before the website goes live.
• When a product is launched, it is a must for the product to have undergone the complete QA process. What if the product is launched and the users find that something is not working as expected? The company will lose its credibility, reputation, and resolving the issue will become expensive and time-consuming
• The QA process is not just for delivering stable products there is a higher purpose. The purpose is to make users and customers believe that the company is credible, retain the number of users, provide the users a great experience.

If you are still skeptical, look at these stats!

• In April 26 1994, China Airlines Airbus A300 crashed due to a software bug killing 264 passengers.
• In April 1999, a software bug caused the failure of a $1.2 billion military satellite launch, one of the most expensive accidents in history.
• In May 1996, a software bug caused the bank accounts of 823 customers of a major U.S. bank to be credited with 920 million US dollars.

The QA process can be a lifesaver sometimes, can’t it?

How is the QA process performed?

Method

Courtesy:Jack Sheppard

The QA should be aware of the stack, the frameworks, the business purpose of the feature, and most importantly understand the customer’s and user’s pain! This is where the QA process starts and this is where you should begin!

We believe that the QA then enters into the Design Phase and starts its transformation from then on. Having a pre-design QA assessment is even better. Once the company decides to build a product, the PM schedules a meeting with the developers, QA engineers, and designers.

During this meeting, the PM explains the purpose, need, and user requirements that will be used when the product is built.This clarifies information about design, engineering, stack, and other engineering requirements. During this time the QA engineer will understand and clarify information about the origination of the requirement.From there on, QA becomes an integral part of every process till and after the delivery of the product

The following processes must be followed for an effective QA process:

Design QA

Once the design is completed, there should obviously be the obvious design QA. The QA engineer has a discussion with all the members of the software development team.

In this informal discussion table,the features in the product would be explained to the entire team,which they will soon be starting to develop.Then we start the design QA, in which the QA team will go through the entire design to check about functionality, feature, enhancements, user requirements, business purpose validation, potential issues, foresee complexities that may exist and are briefly made aware on the drawing board to the devs during the design QA process.

Create the test scenario document

After the design QA is done, the QA team starts designing a test scenario document (sample template), which is a hybrid of use case and test case documents.

This document will be used throughout the testing phase. It contains a list of all the possible scenarios that are identified for testing in the product based on the design. Once the testing begins, the scenarios will be iteratively added during the Executing phase.

Documentation review

Documentation review is a critical step in the QA process.This review decides the direction of the testing process and direction is very important.

This review is done by developers or the PM before the execution phase starts. In this step, either the developer or the PM goes through the test scenario document that was created by the QA team and checks whether all the scenarios have been covered.

If a scenario is missing, it is the shared responsibility of the PM, developers, and QA engineer to ensure that it is added. It is recommended that you do not start testing until all the scenarios have been added to the document.

Execution

Execution is the phase where the real testing happens. The testing process is started when 75% of the product has been developed thus avoiding rework by the time the development reaches 95%.

Rework is mitigated by the test scenario document which was created during the test scenario phase. If you take up QA earlier, then you will not have the appropriate QA and test coverage. If you do QA after the product or feature has been fully developed, then you will have to deal with a lot of demotivation among the developers due to rework.

You must test all the scenarios which are covered in the test scenario document along with the scenarios which you come across while testing the actual product. Add the new scenarios to the document while testing.

The execution phase takes its own time.There will not be any compromise on the time for QA. The results of the execution will be noted in the test scenario document and the same will be shared with the developers who have developed the product.

During the execution phase, not only the scenarios are just covered but the user experience would be tested too.The way the product behaves,all the functionalities,features,UI would also be tested.If a scenario fails.We would add the explanation of it along with the screenshot,URL,steps to reproduce.

Defect reporting

As Joel says in his blog,

“A great tester gives programmers immediate feedback on what they did right and what they did wrong. Believe it or not, one of the most valuable features of a tester is providing positive reinforcement. There is no better way to improve a programmer’s morale, happiness, and subjective sense of well-being than a La Marzocco Linea espresso machine to have dedicated testers who get frequent releases from the developers, try them out, and give negative and positive feedback. Otherwise it’s depressing to be a programmer.”

During a sprint ,the defects that are found should be noted in the a defect summary sheet (sample defect summary) of a test scenario document (sample template).This helps the developer to view the defect along with the explanation, screenshot, URL, and steps to reproduce the defect.

The developer then fixes the defects. If a defect is not valid, then it will be classified as one of the following:

• Feature
• Bug that cannot be fixed for various reasons or requires a design change.

Otherwise, the defect is marked as fixed in the relevant column of the test scenario document and also updates the Maniphest log. The defects can be related to the functionality, features, UI, or anything that affects the way the product works.

Maniphest

Maniphest is one of the defect-management tools that is used during the QA process. It helps to manage the entire bug life-cycle. As tests are executed, you may find bugs in the existing flow or may feel there is scope for a few enhancements. You should immediately, create a task in Maniphest and assign it to the relevant developer.

Based on the priority, bugs will be fixed. Once the bug is fixed, the author of the bug i.e. the relevant QA engineer will receive an email notification.This helps the QA engineer to retest the bug and change the status accordingly.

Retesting

Once the issue is marked as fixed by the developer in the test scenario document, the retesting of the specific defect is the responsibility of the QA engineer who reported the issue. The results of the retesting should also be recorded in the test scenario document.

The Testing phase ends with this step. Retesting will be done at the end of the Execution phase because execution is usually done on a fully developed product—the most stable version of the product.

Test closure

This is the step where the QA team prepares the release notes of the testing process.

Release notes contain the following information:

• Description of the product that was tested
• Time taken
• Approach followed
• Reference links
• Test results
• Type of testing that was done

After the release notes are sent to the whole team, the QA process ends.

Types of testing at HackerEarth

Automation testing

While there is plenty of room for improving the QA process at HackerEarth, we are now trying to put an emphasis on building automated tests so that we can let people do what people are good at and have computers do what computers are good at. That doesn’t mean that we never do manual testing or drop out of the pyramid. Instead we do the “right” amount of manual testing with more human-oriented focus (e.g. exploratory testing) and try to ensure that we never do repetitive manual testing.

Performance testing

Performance testing is an important type of testing which is a must before deploying any new change. Performance testing is performed to determine the behavior of a system under both normal and expected peak-load conditions. It helps to identify the maximum operating capacity of an application.We use New Relic for the performance testing.

“An application can work fine for a single user but may break when multiple users use it simultaneously.”

We use JMeter to perform load testing.

JMeter creates realistic & accurate scenarios, sends requests to appropriate servers which show the performance of an appropriate server/application via tables, graphs etc.

Environments used for testing

We have an environment that is a replica of the production environment. It is called the ‘staging environment’.We use this staging environment for the testing process.

The developers develop an application in their local environment and push it to staging where the QA engineer will test the application. All the testing takes place in the staging environment.

We would never have been able to get this far and achieve an effective QA process without a dedicated grassroots effort from everyone in the team. This effort would have failed if it hadn’t been combined with huge improvements in our testing tool, processes, and mind shift along with the business and developers.

“QA is hard!! If it was easy, anyone could have done it. The ‘hard’ part is what makes QA important!”

We have taken a serious and pragmatic approach to establish a definite QA process. The important thing about this process is that QA at HackerEarth has evolved into a multi-dimensional process. We have formulated this QA process collaboratively and improved it over time.

Wondering what is the best way to introduce QA process in your team? Just get started! Good luck!

Fintech is the application of technologies to disrupt existing processes or bring in new paradigms in the financial industry. Be it banking or insurance or digital payment, fintech is currently revolutionizing the world.

Fintech has disrupted all aspects of the industry. Rapid innovation is the key in sectors like lending, financial inclusion, financial advisory, personal finance, security, and digital payments. Fintech, on one hand made services like Net Banking a given in today’s world. On the other hand, it has made names of startups like PayTM a common word in the vocabulary of the laymen.

Fintech companies are more customer centric than traditional financial companies. They believe in rapid innovation. The fact that many of the early adopters are low-age groups with disposable incomes has made fintech one of the hottest trends in technology.

What are the companies in fintech?

There are mainly four types of companies that are interested in fintech.

1. Major banks that have traditionally been associated with finance and look at technology and fintech as the next level, for example, any large bank that has technology offerings
2. Well-established tech players that are also looking for business opportunities in the financial services space although they are not traditionally financial companies, for example, we now have the Google wallet and the Apple pay.
3. Companies that provide infrastructure and services which enable other fintech players to operate in the financial space; examples include PayUmoney that acts as a payments gateway, or MasterCard, which processes payments between banks of merchants when the merchants use the cards that are issued by the banks

Disruptors that are fast-moving companies and startups; these companies generally focus on a single business innovation or process. For example take SoFi, it is a San Francisco based company that focuses on high-earning recent graduates and tries to refinance their student loans. Or take the case of PayTM, which focuses on the Indian payments ecosystem.

What are the major fintech areas that are driving innovation?

Lending: Lending is the space where the biggest innovations in fintech are coming from. Traditionally, lenders have given more money to people who already have money. Fintech companies are doing away with the traditional credit history-based scoring system and coming up with lending solutions even for the unbanked. For example, Lending Club operates an online lending platform that helps borrowers get a loan and investors purchase notes backed by payments made on loans. Others like Biz2Credit are using social profiling tools to access the credit worthiness of individuals and small businesses.

Financial Inclusion: Experts believe that fintech is the key behind financial inclusion. For example, M-Pesa reached 80% of households in Kenya in 4 years[source]. Fintech companies achieve financial inclusion through various methods. One of them can be by leveraging existing low-cost solutions, like M-Pesa doing transactions through SMS. One other example is Kobocoin, which is giving an existing technology, blockchain in this case, a more local flavor so that it reflects the needs of the masses.

Even for developed countries, companies that focus on financial inclusion have the potential to make social security programs more effective. For example, in various parts of the world like Japan and India, public benefits are directly paid to the bank accounts of the recipients and the process is tracked through a Unique Identification Number like Aadhar Card in India or the My number(??????) system in Japan.

Financial Advisory: Fintech companies have generally relied on automation to provide services and this is the strategy being applied to traditional advisory services like M&A transactions, restructuring, raising capital, and forensic investigations. There can be a common platform where the users can engage with the experts as in BankerBhai.com. One more example is Elliptic, which provides services like identifying illicit activity on the Bitcoin blockchain.

Personal Finance: Through the use of fintech, there is a lot of scope to have more efficient processes. Many organisations are building companies by automating the acts of personal finance like individual or family budgeting, insurance, savings, and retirement planning. For example, Wealthfront provides online money management. Paytm tries to keep all your different payments under one portal.

Blockchain and distributed ledgers: Blockchain, which is the technology behind the famous bitcoin, is an open source distributed database using state-of-the-art cryptography. Currencies that use blockchain enable us to do transactions without a powerful third party like a bank or the government. There are various companies that are operating in the space of blockchain, either by using bitcoin, the largest blockchain, like Blockchain.info or Unocoin, or by having their own blockchain cryptocurrency like Kobocoin.

Security: Fintech is only projected to grow in the future and since this domain primarily deals in finance and financial products, customers will have high expectations in terms of security from fintech products. Also, fintech companies will always be a lucrative target for people with malicious intent. For example, there was the JP Morgan Chase data breach in 2014[source] which affected 83 million customers accounts. For this reason, heavy investment is being done in security. and we have a lot of companies in the field. For example, VKey focuses on user security. Tranwall is a Hong Kong startup that focuses on providing increased levels of security to the cardholders of the customer banks.

What is the future in fintech

The rise in fintech has led to growth in both customer awareness and customer expectations, and this acts both as a challenge and as an opportunity. This has resulted in financial incumbents, those who are already established financial services players, taking bold steps and engaging with emerging innovations. Also, new start-ups have found greater acceptance with the population. Following graphs show the amount of investment the fintech companies have received globally.

Image: the growth of global investment in the fintech sector from 2011 to 2016

Source: Business Insider

Users are also spending more time on various apps and doing a greater part of their financial transactions through the apps.

User activity on various payments apps
Source: Nielson

If you think that these trends are astonishing, remember that this will only grow in the coming years.

References:

techstory: lending market in india
letstalkpayments: 22 fintech companies in africa

fintech is the key driver of financial inclusion
fintech and financial inclusion
how fintech security helps foster innovation
fintech companies in fraud prevention
how banks are leveraging developer community