India has emerged as one of the fastest-growing fintech markets in the world. As of March 2020, India, along with China, accounted for the highest fintech adoption rate (87%). This was significantly higher as the global average adoption rate stood at 64%.
Start-ups have mushroomed all across the country and hence, the fintech industry in India is attracting increased investments. Initiatives undertaken by the government to drive digitization like demonetization, Jan Dhan Yojana, Aadhaar and Unified Payment Interface (UPI). All these have only bolstered the growth of the industry.
Here are the plain numbers that shed light on India’s remarkable potential and journey.
The fintech market in India was valued at ~INR 1,920.16 billion in 2019 and there are expectations that it would reach INR 6,207.41 billion by 2025. The compound annual growth rate (CAGR) stands are 22.7% during the 2020-2025 period.
So, what have been the reasons?
For starters, there is an increased adoption of the internet and improved digital infrastructure have been driving the fintech market in India. However, there still is a lack in consumers’ trust as well as the ever-growing threat of cyber and data security which have been impeding the market growth.
Apart from this, the industry has been seeing a surge in increased application of artificial intelligence (AI) and Big Data which as enhanced personalized offerings.
During the 2018-2019 period, the payments segment received the highest amount of venture capital investments and this was followed by the lending and insurtech segments.
We now take a look at the impact of COVID-19 pandemic on this sector
Owing to the pandemic, discretionary spending in the industry has gone down considerably. At the same time, the number of digital transactions has declined.
Sectors that have seen rapid growth include Healthcare, bill payments, grocery and food and these are the areas where Fintech business opportunities are awaiting to be explored.
The role of the Indian government should also be mentioned here as there have been various measures that are looking to make the country veer towards cashless transactions.
There has been a collaboration between tech innovators and financial institutions and it has started to yield dividends. We are already seeing a seamless eco-system that has benefited all parties involved.
FinTech has, in many ways, revolutionized the industry and it has offered personalized service to the customers, where customer is truly the king. Now, initially there was skepticism associated by larger banks to incorporate technology in their systems, but they have had to change their course owing to changing consumer behaviour. Technology has well and truly swept this sector and no financial institution can ignore this.
The National Association of Software and Services Companies (NASSCOM) reported that around 400 FinTech firms have set their operations in India. They are being boosted by foreign investments in FinTech-focused startup accelerators and incubators.