How Different Trends Are Driving the Fintech Revolution In India

This newfound focus on the financially backward entities in the market has triggered a wave of innovation in the finance industry

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The growth of fintech in the Indian market is a relatively recent phenomenon. The popularity came after the 2008 crisis when blockchain technology under the garb of Bitcoin saw the first light of the day. The financial markets in India have long been superficial due to painfully widening inequality in terms of access to financial instruments. There is a massive potential in the form of an unbanked section of the society, which is now being realised by corporates and governments alike.

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This newfound focus on the financially backward entities in the market has triggered a wave of innovation in the finance industry. Let us look at some of the revolutionary trends riding the Indian fintech wave.

Government initiatives

The Indian fintech sector is expected to grow to a whopping $150 billion by 2025, as per a study conducted by Boston Consulting Group in collaboration with the Federation of Indian Chambers of Commerce and Industry. This is mainly due to a historically low level of penetration in the sector and the second-highest adoption rate of fintech in the world at 87 per cent, according to EY's Global FinTech Adoption Index 2019.

The government's intervention has played a crucial role in enabling such a disruptive change. Factors such as Start-Up India and Digital India have encouraged the sandboxing of innovations under RBI's guidance. The Indian government also released a statement through its thought leadership forum on fintech called InFinity, which focused on security.

Trending features of the revolution

The robustness of the customer base in India coupled with product-market fit has emboldened the innovations in fintech. The pandemic has added to the acceptability of digitisation spearheaded by cashless payments. The ease of transactions has moulded customer behaviour so that all age groups and classes now willingly opt for digital mode. But with greater demand comes more significant challenges. So, the need is developing truly comprehensive super apps that combine all financial services under one umbrella.

Foreign investments in the Indian fintech sector are making a mark as the quantum is highly competitive among the developing nations. As the Industrial Revolution 4.0 and Web 3.0 picks up over the years on the shoulders of tech-savvy Indians, the target audience will expand to cover nearly 160 million middle and high-income households by 2030. The services will also evolve from typical lending, investing and insurance digital products to embedded finance, P2P and DAOs in all transactions.

A virtual ecosystem is the real end goal of this ball game which will be achieved once all stakeholders are a part of the ecosystem. Taxation and public spending will become transparent through blockchain, and leakages will be minimised. The current centralised financial ecosystem has been in place for over a century despite many drawbacks, which is now being questioned for all the right reasons. The systems being developed now are cost-efficient, as in the case of Intelligent Robotic Process Automation and are slowly also becoming scalable through positive network effects of the ecosystem. Big data analytics is making strides in offering personalised solutions to D2C and many more differentiated models.

Summing up

The focus of Indian fintech is currently on digital lending to SMEs, wealth tech, insurance and similar digital-native advancements. But the landscape is gaping in the face of Indian demography, which calls for many more startups despite an existing bulk. Even big tech companies have jumped into this arena of fintech to ride the digital wave.

Human capital is being taken over by exponential computing power, accessibility to smartphones and cheap Internet. National Common Mobility Card is yet another conception of the Indian government to regulate the digital financial system through public infrastructure. These macro, technology and customer-driven factors will combine to reshape the Indian marketplace.