What makes India a FinTech Powerhouse? Let’s Understand Fintech in India

Increasing partnerships between FinTech companies and traditional banking, insurance, and retail sectors, where they serve evolving customer needs, will further accelerate FinTech’s expansion in India.


FinTech is rapidly transforming the banking industry, as numerous banks are now implementing digital channels along with paperless and cashless processes. To those of you who are unfamiliar with FinTech, it is an emerging digital technology that enhances and automates the delivery and use of financial services.

The term FinTech was first introduced in the 21st century as a way of describing technology used in back-end systems of established financial organizations. However, FinTech has since spread across various industries and sectors, including education, retail banking, nonprofit fundraising, and investment management.

FinTech enables companies, business owners, and consumers to manage their financial operations and processes through specialized software and algorithms. In contemporary times, FinTech has also included the development and use of cryptocurrencies like Bitcoin. Even though different FinTech sectors are gaining momentum today, a large part of FinTech still focuses on the traditional global banking environment. And India is on the leading edge of this FinTech revolution.

India’s FinTech Boom

One of the fastest-growing economies in the world, India has undoubtedly emerged as one of the world’s hottest FinTech markets in recent years. Many new concepts are already being adopted in India, such as paperless lending, mobile banking, secure payment gateways, and mobile wallets.

It has become much easier to get basic financial services in India over the past two years thanks to the popularity of digital payment systems. A number of factors have contributed to India’s growing FinTech ecosystem, including increased smartphone usage, improved internet access, and high-speed connectivity.

According to Boston Consulting Group and FICCI, India is poised to have a FinTech industry valuation of USD 150-160 billion by 2025, implying an incremental value potential of USD 100 billion. According to this report, India’s Fintech Sector will need investments of $20-25 billion over the next few years.

Also read – FinTech in India is on the rise – as per latest reports.

Taking a closer look at India’s FinTech industry

In India, banks have traditionally been the gateway for payment services. Having said that, technology has advanced rapidly in recent years, and this appears to no longer be the case, as monopolies are being broken down gradually.

Over the last few years, India’s payments infrastructure has seen significant progress, particularly since the introduction of new payment mechanisms and interfaces such as the Immediate Payment Service (IMPS), the Unified Payments Interface (UPI), and the Bharat Interface for Money (BHIM). Additionally, initiatives like “Make in India” and “Digital India” have played an important role in accelerating the adoption of Fintech. The Reserve Bank of India (RBI) has also sought to accelerate the process of economic growth.

Also, government actions such as demonetization and GST have created significant growth opportunities for fintech projects across the country. Though demonetization caused a lot of chaos, especially among the common folk, it was ultimately the catalyst for the transition from a paper-based economy to one based on electronic platforms that benefited the country’s already existing FinTech revolution. In addition, it is reasonable to assume that COVID-19 has hastened this digitalization across various categories, with contactless and cashless payments being promoted to encourage social disengagement.

Since the last 12 months, 15-20 million new customers have joined the digital bandwagon in India. The two main factors behind the change were demonetization and the Covid-19 pandemic. The backend ecosystem is very complex, but the reimagining has led to a fantastic customer experience, causing a massive adoption, says Hemant Gala, VP, Financial Services and Payments at PhonePe, an Indian digital payments and financial services company founded in 2015. Furthermore, the report states that 67 percent of the more than 2100 FinTech companies in India today were founded in the last five years after demonetization.

Payment systems such as PayTM, PhonePe, MobiKwik, etc. have undoubtedly been the leading trends in India’s FinTech market. In addition, Facebook and Reliance Jio’s global partnership is expected to significantly impact India’s digital payments sector, with a particular focus on hyperlocal digital commerce that will reach tier 2 and 3 cities and rural areas.

The future of FinTech in India

Although the country is enormously diverse and populated, a large part of it remains unbanked, underserved, and regulated in a constantly changing environment. Due to these reasons and others, the nation’s financial landscape and unsolved challenges are not easy to overcome. As a result, Fintech could fundamentally alter and transform India’s financial and banking services sector, thereby changing the entire financial sector.

The country, with its high level of innovation-led startups, highly competitive market, high levels of smartphone and internet penetration, young population in their 20s, and government-run initiatives to promote the industry, offers a good environment for a FinTech revolution. Further, the growing awareness of financial technology has provided the Indian FinTech industry with a much-needed boost.

Increasing partnerships between FinTech companies and traditional banking, insurance, and retail sectors, where they serve evolving customer needs, will further accelerate FinTech’s expansion in India.

A positive shift towards FinTech is evident from all of these factors, with a huge growth potential for the industry in the country.

Also read – PINCAP: Taking A Quantum Leap In Navigating The Fintech Industry Towards Success.

Source: Economic Times

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