The Fintech Landscape in India: A Revolution on the Horizon
Blog
istock.com/Peshkova
26 February 2022
By Varun Sarin
Today, digital payments have become a way of life for people and businesses across the world. The buzz around fintech had already been gaining substantial momentum around the globe before the pandemic but the last two years accelerated this growth at unexpected speeds. While many industries were harshly impacted by worldwide lockdowns and disrupted operations, the global fintech sector only grew stronger. The Indian market was no different.
A snapshot of India’s fintech landscape
By 2026, the fintech market in India is expected to reach INR 8.35 trillion. The volume of digital transactions made by Indians in 2021 broke its own records. Last October, UPI had reported record-high transactions of 4.21 billion, worth Rs 7.71 trillion . It was the first time UPI transactions exceeded the $100-billion mark in a month. As one of the fastest-growing fintech markets, India has over 2100 fintech companies, with 1800+ startups of which 18 have already entered the unicorn club. It is safe to say that a new revolution is on the horizon—one that puts financial inclusion, independence, and resilience at the forefront.
This large-scale adoption of digital payments systems in India has simplified the everyday financial needs of consumers, established businesses, and MSMEs. Traditional banking systems have also been quick to adapt to the changing needs of their young customers. Real-time payments, quick disbursal of loans, transparent lending and advisory, person-to-person remittances, are shaping the fintech landscape of India. This coupled with urban India’s growing interest in cryptocurrencies has triggered a shift in policies, paved the way for foreign investment, and further boosted fintech expansion in India. However, one must remember that building a cashless economy in a diversified and populated country like India has its own challenges. Despite the surge in internet and smartphone adoption across the country, a huge part of the population continues to be underbanked, impacted by a constantly changing regulatory environment. Addressing this challenge will allow fintech companies to boost socio-economic growth and drive innovation with a purpose.
6 significant trends driving the future of fintech in India
Neobanks: With the rise of digital-first banks, or “Neobanks”, almost all major banks now provide some form of mobile banking. Unlike their global counterparts, Indian neobanks work in partnership with traditional banks. Offering convenience, speed, and low-cost services, they are progressively empowering MSMEs as well as individuals with innovative banking services.
Insurtech: Insurance technology or insurtech is fast becoming its own industry. Several fintech businesses are collaborating with traditional insurance companies to usher in a new era of innovation in the insurance sector. India is one of the lowest penetrated markets when it comes to insurance. This is an opportunity waiting to be seized by digital insurance players who can transform the way customers understand and buy insurance in the future.
Buy Now Pay Later (BNPL): Flung into action by the pandemic, BNPL is changing the face of credit in India. The disruptive trend thrives in the growing e-commerce market in India, powering the millions of online shoppers in the country. However, what makes BNPL truly transformative is its ability to empower the underbanked/underserved segments with accessible and affordable credit.
Wealthtech: Revolutionizing the traditional wealth management services in India, the wealthtech market is set to grow to $60bn by 2025. This projected growth is driven by the increase in financial literacy and access to quality information, especially given India’s young demographic. Catering to this changing customer base means employing advanced analytics and technology to offer customized digital solutions. In the coming years, wealthtech companies in India will rely heavily on AI, ML, and big data to improve customer experiences, enhance investment decision-making, mitigate risks, and create innovative investment opportunities.
Blockchain: The emergence of cryptocurrencies and the rapid adoption of blockchain are creating waves across the fintech universe. In India as well, this technology is making inroads at a rapid pace. Pegged as one the most incorruptible, secure, and transparent systems, blockchain has not only attracted the attention of the banking sector but a diverse range of industries. The proposal to introduce the Central Bank Digital Currency by issuing digital rupees using blockchain technology in this year’s budget shows how deep and widespread the impact of blockchain has been in the country.
Ocular-based biometric technology: As the world of fintech is evolving, so is the technology used to strengthen it. Optic scans like iris recognition and retina scanning are fast becoming critical tools for fraud prevention. Eye scanning technology is one of the most secure and accurate biometric methods. For emerging fintech markets, like India, this digital authentication technology can play a vital role in accelerating the nationwide digitization of payments. The implementation of this technology not only boosts security for consumers but also simplifies the entire digital banking experience.
A closer look at the future
Fintech innovation is here to stay. The journey ahead is full of untapped potential and opportunities for emerging startups and even traditional financial institutions. While growth is inevitable, the larger question is how quickly and safely can fintech companies boost equity and inclusion and fill regulatory gaps to empower every segment of the population.