Witnessing exponential growth, especially in the wake of the unprecedented pandemic, Fintech or financial technology institutions have altered the way people now interact with financial institutions. The evolving fintech sector in the country has revolutionized financial services with significant players gradually shifting from conventional processes to digital modes of financing. In comparison to the global financial technology adoption, India has been a leading player with an adoption rate of 87 per cent, as compared to the global average of 64 per cent.
With steadily increasing demands, the fintech market was valued at $50 billion in 2021 and is expected to reach around $160 billion by 2025. Market surveys have indicated that by 2030, the sector will reach $1 trillion in Asset under Management (AUM) and $200 billion in revenue – being a key driver towards India’s ambitious target to become a $5 trillion economy.
“The Indian fintech market is already the third largest in the world and is further growing at a fast pace. With the fintech players revolutionizing the financial ecosystem in the country, people are now getting used to new and modern financing terms like Buy Now Pay Later (BNPL), Neo Banks, Insurtech and others,” PayMe India co-founder and CEO Mahesh Shukla said.
While modern-age technologies like data analysis, artificial intelligence (AI) and machine learning (ML) have added value to financial processes, Fintech industry in India has been a major contributor towards the overall growth of the economy. The sector has facilitated the digitalization of the banking processes including lending and investments, making it easier for people to take financial decisions and thereby empowering their financial aspirations.
“The advent of technology has also improved credit access by enabling lending institutions to use modern tools to understand a client’s access to credit and payback capacity. While providing data-driven solutions to the increasing tech-savvy audience, fintech companies have been promoting financial inclusion across all sectors; thereby eventually gearing up the economic growth of the nation,” Mahesh Shukla said.
In view of the massive potential of digital financing in the growth of the overall economy of the country, the Reserve Bank of India (RBI) constituted an internal fintech department in January 2022 to promote digital lending and address challenges and opportunities in the sector. The RBI initiative will further ease the operation of the fintech industry by accelerating the use of UPI and mobile banking. The government has also introduced several facilitating initiatives like Jan Dhan Yojana, Unified Payment Interface (UPI) and widespread Aadhar linking to boost the growth of the fintech sector.
One of the major trends in the fintech sector is digital lending. The digital lending market in India has increased significantly in the previous two years with the market projected to be worth $ 350 billion by the financial year 2023 from $ 150 billion in 2020.
Alike conventional lending, the operations of digital lending is also regulated by government financial regulatory bodies. However, with the financial processes going online, there are increasing risks of cyber security threats endangering the online loaning structure.