Fintech is the future. Today the statement is truer than ever. A traditionally cash-driven country, India has become the third largest fintech ecosystem globally. The upcoming years sound promising as India’s fintech market is expected to hit USD 150 billion by 2025.
The fintech landscape has evolved immensely in the past decade. Of the 2000 fintech companies in India, 67 per cent were founded after 2016. The rapid rise in success begs the question of how it came to be and what factors accelerated the growth of fintech in India.
The widespread adoption of smartphones and the push of the COVID 19 pandemic toward digital payments is one of the key factors. Not only are there increasing demands for inclusive financial services, but businesses also need to reduce costs and provide faster, safer, and more reliable services to stay competitive. And the result is, you guessed it right: the rise of fintech.
Let us take a closer look at what factors changed the face of fintech in India.
Factors Contributing To The Future of Fintech
All fintech companies have one thing in common: technological innovation. They are constantly on the edge of developing products and services that cater to customers’ problems, save them time, and relieve their efforts. They are seizing control of their business strategy by leveraging technology.
The fintech landscape in India is driving industry trends such as Digital Lending, WealthTech, and InsurTech to the next level. With that, current trends like Open Banking, Banking as a Service, and Platform Banking are also rising to greater heights.
1. Untapped Customer Pool
A report by Statista claims that India’s middle-class population would occupy 46 per cent of total households compared to 37% in 2018, making the middle class, one of the largest customer sectors. The Boston Consulting Group (BCG) report says that the rise in the middle-class coupled with urbanisation will be the propelling factor in the growth of fintech in India.
The total number of internet users in India came to a whopping 825.30 million at the end of march 2021 (TRAI). The numbers will continue to grow, aided by the reduced cost of data and rapid rural adoption rate.
According to the BCG report, “India’s significant financial services value-pools, coupled with its fast-growing digital adoption have been a key determinant to fintech success”.
2. Government Initiatives
Support of the Government has been a key pillar in the unprecedented growth of fintech in India. From enhancing the broadband infrastructure, providing easy access to the internet in rural areas to programs promoting digital literacy, various government initiatives have fueled the rise of the fintech industry in India.
Programs such as Startup India, Digital India program, India Stack, E-RUPI, and Jan Dhan Yojana have been incredibly successful. Furthermore, features like Aadhaar, UPI, and account aggregation have proven advantageous.
A supportive regulatory environment has helped augment and ease the technological transition in India. The regulators, such as the RBI, have taken countless measures to ensure accountability and, by availing secure and affordable digital financial systems, have cemented the fintech scene.
3. Fintech Funding And Investments
India’s fintech sector is experiencing global growth, and it is one of the fastest-growing markets in the world. The total volume of fintech funding as of June, 2021 was $20.8 billion, with 36 per cent of the funds raised in the last two years, which amount to a massive $8.6 billion.
India’s leading fintech companies such as Pine Labs, BharatPe, OfBusiness, and Khatabook recorded massive investments. And despite the pandemic, when virtually every other market was plummeting in terms of capital, the fintech industry received a steady flow of funding. It is also important to note that the investments made in the Indian fintech market were almost double than that in China.
4. Technological advancements
The financial market is experiencing a major revolution in terms of advancements in tech. We’re entering a new era with cutting-edge technologies such as blockchain, Artificial Intelligence, and cloud infrastructure. The growth of fintech is also backed by:
- Strong talent pool.
- Banking and fintech Collaboration
- Rapid technological innovations.
Technology is used to bring efficiency to digital processes such as payments, claims, and savings marketplaces through e-KYC, video-KYC, AI, digital signatures, and account aggregation systems.
The technological advances happening right now bring a sense of security to consumers through biometric identity verification techniques, such as voice, face recognition, and fingerprints,which is one of the challenges faced by fintech giants.
Wrapping Up
Although the rise of fintech in India is unprecedented, it is not unchallenged. It continues to face hurdles such as data security and privacy breach risks, platform downtime, lack of financial literacy and awareness in India, and varied adoption rates among MSMEs that dominate the Indian economy.
Additionally, due to the ever-changing nature of the industry, it presents cost-related challenges for both users and businesses. The world is continually changing how financial services and products are being manufactured, delivered, and consumed by users. With the adoption of new technology, it is critical for all players in the fintech ecosystem to come together to write the success story of fintech in India.
One product of such technological advancements is the Bank Statement Analysis software. With tools like Precisa, you can make faster and smarter decisions, pick out the tiniest of mistakes, enjoy error-free analysis in a short time, assess the lender’s credibility, and take an informed step.
Want to make your banking operations and lending process smoother, quicker, and more accurate? Get in touch with us today and call now for a free demo!
Mumbai