India’s fintech sector is one of the fastest-growing in the world. In March 2020, India and China received the highest fintech approval rating at 87% of any world’s emerging market. In contrast, the global fintech acceptance rate stood at 64%.
Government’s Role in the Fintech Sector
Despite the turmoil from COVID-19, the Indian fintech market is expected to grow at a compound annual growth rate of 22.7% between 2020 and 2025. Government regulation is essential to support a healthy financial technology system and promote balanced competition in the market.
The Government of India is working to create a cashless society through several financial institutions. In tandem with the government’s policies, technology professionals from many companies are playing a crucial role in adopting technology to improve efficiency and growth.
With the proliferation of fintech start-ups, the Indian fintech sector is attracting more and more investment. Government initiatives to promote digitisation, such as Jan Dhan Yojana, Aadhaar and Unified Payment Interface (UPI), are contributing to the development of the industry.
Fintech Market Intelligence for Growing Areas
In 2019, India’s fintech market was priced at Rs 1,920.16 crore and is expected to reach Rs 6,207.41 crore by 2025. The fintech market in India has developed due to the deployment of good internet services and robust internet infrastructure. However, consumer confidence in digital payment systems and a growing threat to cyber and data security are disrupting market progress.
What are the key Fintech Industry Divisions?
Payments, loans, insurance (insurtech), wealth management (wealthtech) and banking digitisation (banktech) are the most critical components of the fintech market. Insurtech is a unique part of the Indian fintech ecosystem, including insurance, IoT, and health data aggregators.
The payments section includes M-Wallet, PPI (Prepaid Payment Instruments), Merchant Payments, International Payments, and Cryptocurrency transactions. The lending industry is increasing using fintech in operations. It majorly consists of peer-to-peer lending, crowdfunding, online lenders, NBFCs and credit scoring platforms.
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With the proliferation of fintech start-ups, the Indian fintech sector is attracting more and more investment.
Effects of COVID-19 on the Fintech Sector
With the drastic fall in costs and revenue of the fintech industry, the overall valuation and investment in digital transactions industry also declined. This had a significant impact on the cash flow of the country’s largest companies. However, the use of digital payment methods has increased by 42% due to many businesses, especially MSMEs and SMEs, shifting quasi-online.
The trade of basic amenities and daily use items on a small scale alone is not enough to jump-start the Indian fintech ecosystem. Healthcare, bills, and food industries are becoming increasingly digitised. But the major sectors, including entertainment, fashion, travel and tourism, have been crippled, weakening the country’s trade and severely affecting India’s fintech industry. These areas need to be revived to ensure a safe track for the Indian fintech sector and widespread digitisation.
What’s in it for Upcoming Fintech Businesses?
The future of the fintech industry looks bright. The sector is growing and giving a boost to numerous start-ups in the industry. With a growing number of smartphone users, the continuous build-up of the digital infrastructure and overall cross-sector streaming of financial processes, the fintech sector is pegged to grow significantly. Incoming entrepreneurs can take advantage of this upward trend and start their journey by learning the basics of a fintech business, which are- combining finances with technology and innovating solutions for customers.
