Marathoning through the obstacles, FinTech is transforming India

In a recent interview with ET Now, Sanjeev Bikhchandani, Co-founder, Info Edge, referring to the FinTech growth in the country, said, “Any prediction I make now for the next 12 years could be 100 times better.”

The India Finch Report of 2020 by MEDICI reported that India, till 2020 was harbouring 2174 FinTech startups. “The period between 2015 to June end 2020 has seen phenomenal growth in new startups across Payments, Lending, Wealth, and others. India’s evolution as a progressive FinTech nation is not a miracle.” stated the report.

The number of financial firms in the country has been steadily increasing, from InsurTech to RegTech to WealthTech. According to Invest India research, India has the highest FinTech adoption rate in the world, at 87%, much above the worldwide average of 64%.

Who'd have guessed that opening a bank account from the comfort of your own home, setting up a dematerialisation account, and buying shares in a firm could be accomplished in less than five minutes? In recent years, the financial industry has seen a major change. EMI has changed the landscape in India, with it being available for shoes as well now! This is accepted and promoted by a set of people whose culture makes them risk-averse and treats credit as the last thing they should agree on. New patterns have emerged of the wind of change, as have cultural prejudices about money.

It was 2016 when the Governor of RBI, Dr.Raghuram G Rajan launched the Unified Payments Interface (UPI) with NPCI. By bringing all the banks together on one platform via UPI, mobile banking became easier. According to a study by Credit Suisse, UPI was the main driver of the country's fast payment digitisation since it provided large tech firms with an interoperable payment network. In the last five years, digital payments via UPI have risen by 10.5 times to a $450 billion annual payment run-rate, covering 30% of all retail transactions.

Due to easier online payments, better interoperability, many startups have come up in the payments arena. Bill payments, donations, online shopping, and business transactions have all become more convenient and efficient thanks to the likes of Paytm, PhonePe, and Razorpay. Paytm has even added the ability to record vaccinations, while Spice Money is integrating doctors into their app for consultations. The pie is surely larger than expected and innovation has broadened the horizon of the audience.

Demonetisation was another key driver in digitising India and thus attracting eyes to the Indian FinTech market. With a country-wide ban on Rs. 500 and Rs. 1000 denomination notes which accounted for 86% of the currency in circulation at the time, digital payments zoomed. Debit cards were primarily used at ATMs before demonetisation, but they soon grew common for financial activities too. It paved way for Fintech companies like Paytm, Phonepe, and MobiKwik, and a rise in prepaid transactions using UPI and mobile wallets. Interestingly, between 2018-19, UPI transactions were 1.2 times higher than debit card transactions, as reported by RBI.

While Covid has copious upsetting and unsettling stories attached with it, there’s a silver lining as well. Apart from families finally getting together and hearts growing fonder, many FinTechs grew too. Due to the lockdowns and customers' fear of catching the virus, the shopping and payment space increased, with consumers choosing contactless payment completion. Paytm is even planning India's largest IPO, which will be held in a pandemic. Well, this is a totally different topic but it is comfortable to say that Covid-19 was a sure shot catalyst to a more digital India while also raising financial inclusion.

During Covid, many subsidies were provided to the people and even though, with the formation of the Pradhan Mantri Jan Dhan Yojana scheme, many living in the interiors of the country have access to bank accounts but with too few and too far bank branches and ATMs, POS has an advantage over these brick and mortar financial services.

Companies like Mswipe, Spice Money, PayNearby, Ezetap among others are coming up with innovative POS terminals for the rural and semi-urban space. Not just payments but the provision of credit, savings, insurance policies, all of it can be made possible via POS terminals in a Kirana store or a neighbourhood shop.

The three-year-old FinTech startup, BharatPe has acquired the 37-year-old PMC Bank; the five-year-old Groww which is an online investment platform has acquired the 13-year old AMC Indiabulls. New and advanced FinTechs marrying the oldies in the game is a handsome display of how technology is revolutionising the financial space in the country and also how not just experience but innovation in the field is imperative.

All things that our parents and grandparents couldn't have imagined are now feasible thanks to technology's seamless integration into our lives. The Indian FinTech sector has gone a long way, with a lot more in store, from safer digital payment networks to buying Dogecoin, from Blockchain technology connecting the financial sector in a new way to insurance firms identifying hazards via smartphone signals.