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Major Trends Witnessed this year in Fintech Let's check the sector has been growing with a CAGR (Compound Annual Growth Rate) of 22% – or about three-times the GDP growth rate of the country

By Manish Khera

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The Financial Technology sector, a.k.a. Fintech sector is known for its fast-paced and dynamic nature. The sector was virtually in oblivion till late-2016, when, according to some, the formalization of the economy began post-demonetization. Since then, it is one of the most discussed industries in our society given its wide-ranging and quite ingenious day-to-day solutions.

Every year, the sector maintains its financial edge by incorporating some of the most cutting-edge approaches and vigorously changes itself in the due process. The year 2018 hasn't been much different for the Fintech sector (or virtually the same).

So, let us have a look at how the sector has transformed during the year. Here are five major trends witnessed in the fintech space in 2018:

  • Crypto Ban!

Jitters went down the spine of several cryptocurrency marketplaces and traders following an RBI order in early-2018. The order barred all Indian banks from dealing with cryptocurrency exchanges and related firms in a stipulated time. It prevented a majority of dealers to enter the seemingly "ripe' cryptocurrency domain. Thankfully, this happened right before cryptocurrency market size nearly halved and wiped out more than $200 billion in the following two months. There are still a few cryptocurrency players actively operating in India, however, their prospects are very thin following clampdown by the regulatory.

  • Alternative Lending:

Online lending platforms have been quite phenomenal in filling in the credit void within our country. But how accomplished are they in doing so? MSME loans are considered as the trickiest element of lending given the sheer opacity that exists within the sector. This opacity has decreased the share of scheduled commercial banks in MSME credit from 95% to 90% between December 2015 and March 2018. The credit growth turned negative post-demonetization. During the same period, the share of loans by NBFCs (which are essentially used by online lending platforms) nearly doubled growing with an annual average of 35 per cent, largely because of cutting-edge technologies such as Artificial Intelligence and Big Data.

  • Banks and Fintech go hand in hand:

Using their trailblazing approach, Indian fintech platforms have proven themselves effective in solving some of the most demanding financial challenges that our country faces. Now, since traditional banks have been late movers into space, such fintech platforms are also transferring their technological expertise to the Indian banking sector. Several traditional banks in India have lately been joining hands with fintech platforms and are now leveraging their backend solutions. The areas of the association include process automation, customer acquisition, customer retention, credit profiling, loan disbursements, etc.

  • The Gradual Progression of Mobile Wallets:

Mobile wallets, in their most basic form, add limited value to a person – especially with other payment alternatives such as UPI, AePS, etc. becoming more popular. In order to stay relevant to customers, the shift towards incorporating more day-to-day, customer-centric uses have been observed amongst mobile wallets including the ones offered by cab-aggregators and e-commerce platforms.

  • Forward-looking Government Policies and Regulators:

During the Union Budget 2018, Finance Minister Arun Jaitley announced the government's plans of exploring the Blockchain technology as a means to increase digitization. The government has been working on IndiaChain, which is possibly going to be the largest public blockchain network around the world. With IndiaChain, the nation envisions to minimize frauds, maximise transparency, and expedite contract enforcement.

The up-and-coming distributed ledger project will benefit the Indian fintech players in two major ways, i.e. expediting financial services such as cross-border payments and completely securing the transaction information. It will also help fintech players to address the growing threats of cyber-security.

Other regulatory amendments include eKYC, e-NACH, India Stack, and API integration alongside others. The Reserve Bank of India has also been optimistic about the fintech sector and is paving the way for more tech-driven reforms.

This was the roundup of fintech trends in 2018. The sector has been growing with a CAGR (Compound Annual Growth Rate) of 22% – or about three-times the GDP growth rate of the country. Yet, it can be said that the Indian fintech sector is still far from its true potential. With ever-increasing digitization, the future is even brighter for Indian fintech space. But we have to wait and watch till then to see how it gets transformed and transforms our lives along with it.

Manish Khera

Founder & CEO, Happy

A powerhouse of microfinance and micropayments knowledge, Manish Khera is the CEO and Founder of Happy, one of India’s most innovative loan facilitators. He spearheads operations at the organization and devises the overall strategy, ideates new products and offerings and leads the fund raising initiatives. With over 25 years of experience in the banking and financial sector, he has been an investor and advisor to several banking, technology and impact related ventures.
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