- India is home to 7500 + fintech startups along with 23 unicorns
- UPI monthly transactions reached a value of approximately $135 billion
- Fintech in India has 80 % adoption, compared to 64% in the rest of the world
– According to the inputs by Invest India
Financial technology, abbreviated as fintech, is a work in progress. It spearheads the transition process from a cash-based economy to a cashless one.
Fintech companies in India are increasingly gaining traction in payments, lending, wealth management (WealthTech), personal finance management (PFM), and insurance technology (InsurTech).
The UPI ecosystem has grown from 21 banks in 2016 to 358+ banks this year. India has already emerged as one of the world’s fastest-growing fintech markets, as the Chief Economic Advisor of India informs while speaking at the Global Fintech Fest 2022 in Mumbai.
Fintech in India: A Promising Sector
Historically, banks have served as the gateway to payment services in India. But, thanks to recent technological advancements, the availability of infrastructure and the adoption of goal-oriented programmes such as ‘Digital India,’ India’s payment infrastructure has improved significantly.
In India, fintech traces its origin to the introduction of revolutionary payment mechanisms and interfaces such as Immediate Payments Service (IMPS), Unified Payments Interface (UPI), mobile payment applications like Bharat Interface for Money (BHIM), and others.
Several government initiatives have also contributed to the growth of fintech in India. These include the Pradhan Mantri Jan Dhan Yojana, Demonetisation, the Digital India initiative, drives for a cashless economy, and other significant financial interventions.
Fintech has also been at the forefront of the country’s struggle for economic inclusion and service delivery since the pandemic outbreak.
Fintech’s Role in Shaping SME sector
SME stands for Small and Medium Enterprises. It is a vital sector contributing to the Indian GDP and socio-economic progress. The adoption of Fintech in SMEs has made critical processes like payments and receiving loans more effortless and efficient. Technology-driven solutions are also reshaping this sector.
Using machine learning (ML) and cutting-edge artificial intelligence (AI), Fintech has created several mobile business management solutions.
SMEs can connect to apps and accounting software, which allows for adequate verification, onboarding, validation and quick access to loans.
Whether for households with low incomes or SMEs, Fintech has improved access to banking (accounts, transactions, insurance, and credit) worldwide, especially in a developing economy like India.
For mutual benefits, the relationship between the banking industry and the Fintech sector is cooperative rather than competitive.
NBFCs with Fintech can revolutionise India’s lending industry through digital lending
Whether paperless lending, mobile banking, digital payments, mobile wallets, insurance, or other financial activities, fintech in India has revolutionised traditional banking.
There has been a tendency for lenders to take a ‘one size fits all’ approach, evaluating all types of customers against a single credit policy, resulting in the exclusion of a large number of credit-worthy clients.
By incorporating segment-definitive guidelines, utilising alternative data sources, and applying scorecard-based credit decisions, fintech companies can adopt and build models based on AI, ML, and advanced analytics. This will help NBFC lenders adopt a personalised approach to underwriting.
As a result of this approach, sales teams should be able to target a substantial pool of prospective customers and offer appropriate products according to their credit scores.
NBFCs are testing and implementing fintech SaaS solutions to automate back-end and middleware software applications. This will result in a faster, more structured, transparent origination and underwriting process.
To compete in the lending market, NBFCs and Fintechs are integrating technology and providing excellent customer service.
NBFCs have a large customer base, while FinTechs have the necessary technological support. Together, they can help customers secure loans faster.
By partnering with fintech brands, NBFCs can increase revenue and provide more services without taking on additional risks or deploying human resources while providing more advanced customer service.
Road to a $trillion Fintech economy by 2030:
“In terms of market size, fintech in India is expected to reach $1 trillion by 2030”
– V. Anantha Nageswaran, Chief Economic Advisor to the Government of India.
The MSME lending sector can potentially drive the next wave of growth in the Indian fintech industry. Cash flow lending to MSMEs will be done primarily through Account Aggregators, UPI, and Open Credit Enablement Network (OCEN).
According to the National Payment Corporation of India’s (NPCI) most recent data, 6.8 billion transactions worth Rs 11.17 trillion were recorded on the UPI platform in September. Every day, more efficient fintech startups emerge from the Indian fintech market.
In addition to fintech, agritech and proptechs are big bets. New asset classes will continue to attract more investment, including crypto and non-fungible tokens (NFTs).
To serve the Tier 3+ market, innovative solutions are being deployed using the India stack and finTech innovation.
Foreign and domestic investors have recognised India’s golden opportunity. Fintech is gaining popularity due to new technologies, shifting cultural trends, and a favourable regulatory environment. Paytm, Zerodha, Razorpay, and 22 other fintech unicorns have been established in the country.
This is because the country’s economy has become more skill-based and service-oriented and has adapted to the new technological environment.
Future Trends for Fintech
1. IoT and AI
“AI fintech Market will be valued at $22 billion by 2025, rising at a CAGR of 23%,” says Mordor Intelligence.
In finTech, many companies are leveraging the capabilities of new technologies like ML, AI, and IoT to provide financial services to the underprivileged through state-of-the-art lending strategies.
Furthermore, technology automates post-financial procedures to streamline complicated processes and monitor non-payments in real time for data-driven decision-making.
2. Open and NEO banking
Fintech in India has also opened doors for “open banking”. Neobanks powered by Fintech have made open banking possible, allowing anyone to access a host of banking services simply through apps. Therefore financial transactions will no longer be limited to banks.
Banks and Fintech companies can build their financial platforms by leveraging third-party APIs. This makes Fintech more accessible and makes it easier to obtain loans.
3. Blockchain
In the fintech sector, blockchain technology is becoming increasingly crucial in growing revenue, enhancing visibility and accountability, improving end-user experience, and streamlining delivery processes. Blockchain could solve several problems on the ground while increasing efficiency and reducing business risk.
Meticulous Research® estimates that the fintech blockchain market will reach $36.04 billion by 2028.
4. WealthTech
A new generation of fintech companies is changing the game with technology. They have already begun to provide wealth management infrastructure and tools.
Wealthtech uses technology to simplify more complicated computing and transactions related to assets. Robo-advisors, investment tools, portfolio management, and digital brokers are examples of some wealthtech verticals.
Key Takeaways
Fintech is still developing. It can significantly contribute to the BFSI sector and play an essential role in changing the pace of credit, lending, and borrowing.
However, the present economic climate has made the fintech sector lean towards survival. That is why staying on top of current trends is a must.
One way to stay ahead is to leverage revolutionary products daily that aid users in finetuning their financial transactions and facilitate more granular management.
Precisa is one such impactful product. It is a cloud-based technology that analyses bank statements and identifies the creditworthiness of applicants.
Precisa generally serves banks, non-banking financial institutions, wealth management firms, and insurance companies to help them take accurate credit decisions and minimise non-payment risks.
Contact Precisa today to make the creditworthiness verification of your potential customers smoother.
Mumbai