Growth of Fintech Industry in India
Finance is the back-bone of for the economy of any country and
when it is driven by the Up-Coming new technologies, it has given
rise to a new industry i.e., Fintech. So fintech technology as any
technology that helps companies in financial services to operate or
deliver their products and services, or that helps companies or
individuals to manage their financial affairs. Now with the booming
IT industry and great enthusiasm of Indian investors Fintech industry
has been flourished in the Indian market. FinTech is one of the
fastest growing sectors in the financial services space worldwide.
India ranks among the top 5 counties in the Fintech market
worldwide with market value of 31 Billion Dollars. With a view of
making India Digitalised, government is framing different policies to
give this sector a boost.
Fintech as an industry creates applications, products or business
models in the financial services industry. Their services include
marketplace platforms for investments, online investment advice,
budgeting and financial planning and online trading. They are
tapping each and every sub sector of finance so that they can be
accessible through one’s device. They are covering wide variety of
consumers, markets, services. They are giving consumers greater
accessibility, efficient secure payments and better banking
experience. Some of the firms that are prominent in this space
include Paytm and Zeroddha.
Governments around the world, have taken different approaches
toward fintech, it is clear they see fintech as a critical part of the
future of financial services, and believe they have a role in ensuring
the sector evolves for the good of consumers, businesses and the
global economy. In india the growth has been powered by the
Government of India (GOI) with introduction of innovation-
supported startup landscape, friendly government regulations and
policies, and a large market base. the GOI has launched initiatives
such as National Payments Council of India (NPCI), Digital India
Programme, and also given tax benefits for businesses and
consumers on e-payments to promote entrepreneurial climate in the
country for startups in fintech. RBI has given a boost to Bharat Bill
Payments System and UPI along with digital payments. It has granted
11 fintech entities licences to introduce payment banks that offer
deposit, savings, and remittance services. The GOI and budding
entrepreneurs have taken the fintech space by storm and the future of
finance technology does show a bright prospect.
Financial services, as an industry, has traditionally had extremely
high barriers to entry. This is because of a combination of factors,
such as the high regulatory burden on them, high capital
requirements that can make it difficult to start a new enterprise. But
now due to surge in technological advancement ease of doing
business, various startups have flourished in the market. Of the 2174
Startups as of June 2020, over 67% have been setup in the last 5
years.
India's evolution as a progressive FinTech nation is due to its ability
to solve for identity in the form of Aadhaar for formalization, getting
everyone a bank account by PMJDY yojna to store money, building
scalable platforms like IMPS, UPI, to move money, which is possible
due to innovations like blockchain, artificial intelligence, machine
learning, biometrics, instant payment, etc. Along with this, the virtual
infrastructure such as Bharat QR, India Stack and UPI has
strengthened and generated strong tailwinds for the fintech in India.
The Open API infrastructure has heavily leveraged the fintech to
address diverse use-cases and has helped fintechs in significantly
reducing costs of acquisition and servicing. All these have added
towards transforming financial service industry of India.
Covid-19 has also played a huge role in accelerating the fintech
industry. It has added more number of internets users since they were
availing all the banking and finance services on their fingertip, which
also led them to follow government regulation of social distancing
and gathering. Covid-19 pandemic has fast forwaded fintech industry
by 3-5 years. The companies are leaving no stones unturned to come
with new business initiative and products to cope with impact of
Covid-19 pandemic. For Example Digital payments and financial
services platform Paytm has rolled out a Covid-19 insurance policy.
This policy can be purchased on the Paytm app, and is generated
online within a few minutes. Apart from this other findings have
demonstrated how the COVID-19 crisis has created opportunities for
fintechs to expand and tailor financial services and contribute to the
financial resilience of small businesses. While fintechs have shown
resilience by innovating and evolving their offerings in the wake of
the COVID-19 crisis, their biggest need remains access to capital in
order to continue innovating.
Earlier fintechs were only concentrated in payments and lending,
however growth of fintech ecosystem has encouraged diversification
of new fintech platforms in different segments. Platforms like Ease
my GST, CC Avenue etc are exploring untapped fields that fintech
industry wasn’t able to cover. Along with such innovations and
progress the fintech sector also faces some challenges that could
impact its growth. The biggest challenge is the industry’s hidden
cybersecurity risks which include data breaches, third party security
threats, digital identify risks, etc. To overcome this threats a balanced
approach like setting up a regulatory authority is needed as proposed
by Srikrishna’s committee in Personal Data Protection Bill (PDPB) to
support the fintech industry’s growth.
With a view of making cashless and digitalised economy government
is trying to strengthen fintech by leveraging SMSEs and MSMEs and
promoting start-up culture. It is expected to realise a valuation of 150-
160 Billion by 2025. Fintech is still in the development phase in india
and if worked on with different policymakers and global players, they
potential to to revolutionize the banking industry and other financial
services sector.
