The Changing FinTech Environment in India
In the last few years, the phrase “FinTech” has changed from simply a catchphrase among innovation company leaders to an organized industry with explosive development. Business, as usual, is being fundamentally reimagined by digital media and its manifestation in the financial sector. FinTech essentially combines technology with money. It alludes to a new breed of businesses that use cutting-edge tech to give financial services that are far more efficient and cost-effective than those offered by conventional financial institutions.
Is FinTech just a new technical development?
For further than 50 years, financial institutions have used technologies. Technology became increasingly important in the financial industry around the century. Without technology, online banking or banking sectors would struggle to remain relevant. Therefore, the issue is: How is FinTech different, and how is it represented as a distinct industry? Traditional banking institutions have “benefited” from technology during the last 50 years. However, the items sold or their target audience have not seen any significant shift.
FinTech is a by-product of the inevitable growth of the financial industry, not a substitute for conventional banking services. The enhanced convenience using technology is being used to provide financial services. Technology expertise, complex algorithms, deep learning, and big data, which have been quickly displacing conventional banking processes, are used by the industry to accomplish this. FinTech is revolutionizing how businesses obtain financing and fundamentally altering the corporate environment across several sectors thanks to its potent arsenal.
How would you describe the FinTech environment in India?
Businesses assume individual responsibility for traditional banking operations and developing their service structures. Companies increasingly focus on specific banking operations instead of using an aggregator strategy.
For SMEs and individuals, these businesses provide numerous financing solutions. Technology has provided better financial solutions, enhanced client satisfaction, and quickened loan approvals.
These organizations allow people and corporations to take payments without swiping a card. Without the necessity for a merchant account, transactions may be done online with only a smartphone.
Money Management & Savings
These businesses support people’s financial planning, investment creation, and management. Software facilitates decision-making by allowing quick comparison of many possibilities.
Remittances in and out of a country may be difficult, costly, and time-consuming. These purchases are now accessible and economical thanks to fintech businesses.
After demonetization, several new firms have entered this market and have grown swiftly to become significant participants. Companies in this industry provide card swipe devices that make it simple for clients to make cashless transactions.
The insurance industry has benefited from FinTech as it moves toward being cashless from a manuscript environment. By gathering information from insurance providers and streamlining the application process, some new businesses are improving the ease of decision-making on the customer side.
Factors promoting FinTech start-ups in India
High level of technological adoption
India has previously shown that it supports technology. Smartphone penetration demonstrates its rapid pace of technological adoption. According to Counterpoint Research, India has now surpassed the US as the second-largest market for smartphones in the world, with much more than 220 million active and engaged smartphone users. High technology usage makes lending simpler since it reaches a bigger audience than a hands-on approach.
The use of the Internet
The US may have a more significant internet penetration rate, but because of the country’s tiny population, the number of users is just around 300 million. On the contrary, India only has a 35percentage internet penetration rate. Still, due to its enormous population, its reach is far greater, with about 500 million people connected to the Internet. This emphasizes that internet connectivity is increasing quickly and has space to grow.
The FinTech industry has significantly boosted due to the most recent unexpected demonetization step. Fast-changing government regulations in India offer a supportive environment for fintech. The government has taken various steps to strengthen the FinTech environment, including pushing digitalization, establishing universal and ubiquitous identification (Aadhaar Cards), and implementing bank account systems. In summary, the FinTech ecosystem is essential to the digital economy.
Expanding financial inclusion
With an estimated 145 million units without access to financial services, India presently has a shallow financial inclusiveness penetration rate. The RBI’s goal, however, would be for adoption to reach 90percent by 2021. Financial inclusion may greatly benefit from fintech. Since online lending platforms may target historically underserved consumer demographics, the government’s campaign for financial inclusion helps FinTech lenders.
Investors’ interest in growing
High-net-worth individuals, venture capital firms, and private equity firms all find fintech to be a lucrative investment opportunity. According to KPMG research, FinTech investments in India increased significantly from $ 245 million in 2014 to $ 1.5 billion in 2015. The number of transactions increased from 370 in 2014 to 691 in 2015, even though there are around 1,800 angel investors throughout India (as opposed to over 300,000 in the US). This rise in interest is because there were more deals in the Fintech industry in 2015.
Small- and medium-sized business needs
While the variables mentioned above contribute to the development of fintech, the need has emerged as the main engine behind the expansion. Small- and medium-sized businesses (SMEs) were especially in need of such solutions since they were being strangled by the absence of loan assistance from conventional banking institutions. The bottlenecks built into traditional banking systems are supposed to be solved by fintech.
India’s FinTech industry’s future
By 2020, the worldwide FinTech market is projected to be worth $45 billion, with a CAGR reaching 7.1%. Given the very favorable environment, India should play a crucial part. By 2020, the Indian FinTech sector is expected to grow to 2.4 $billion, and FinTech is expected to rise rapidly. Partnerships between such a dynamic industry and the skilled conventional banking sector are among the reasons that might spur the expansion even further. Collaborations between the two may deliver specific items to more Indians and combine the finest elements of both disciplines.
It is abundantly evident from recent alliances between FinTech firms and conventional banks because two organizations don’t have to be competitors but may co-opt. At the same time, bankers can lend large sums of money, but successful startups are not. FinTech businesses add technical know-how and specialized credit products, including cutting-edge analytics, to the table. Young companies in the fintech industry need assistance to grow to their full potential. These enterprises may be mentored by incubators & accelerators, who can help them compete against the major players in the exceedingly complex and price-conscious Indian market.