The next phase of fintech evolution in India
Fintech has rapidly gained ground in India. The massive market has a number of specific problems that are now being solved with cutting-edge technology and ideas. Apart from large institutions in the BFSI sector, it is the rise of tech-focused startups in the arena that has driven unprecedented innovation in the market. As things unfold in the post-pandemic normal, we are on the cusp of the next phase in the evolution of fintech in India.
Traditional organizations are increasingly looking for cutting-edge technologies to eliminate lingering inefficiencies and improve the customer experience. This is where new ideas and innovations introduced by fintech startups will have a major impact. These new-age companies don’t face the structural challenges that often hamper innovation in large corporations. So, as things move forward, we are likely to see a collaborative ecosystem evolve in the country where modern startups will innovate and build solutions on the respective regulator’s sandbox platform using industry experience and capital provided. by large investment companies.
This type of collaboration will only grow in the coming years as hundreds of millions more Indians will join the Digital India platform. To achieve this kind of mutual growth, large BFSI institutions need to warm up to the idea of collaborating with the disruptive fintech startups of the new era. The path to fintech evolution cannot be created by large corporations or startups alone, but only through coexistence and teamwork.
There are many favorable circumstances to foster this growth. India has had a strong IT industry and now cloud adoption has led to exponential growth in computing power. The internet has reached almost every nook and cranny of the country, and within a year or so we will see the start of 5G operations, which will dramatically improve data speeds. Thus, the doors are open for Indian fintech companies to make their mark not only in domestic markets but also in global markets. We are seeing a global increase in demand for more affordable, integrated, faster and more secure financial services, and Indian fintech companies can provide such solutions.
On the home front, we are seeing the rise of real-time payments, rapid loan disbursement, online insurance and mutual fund investing. Peer-to-peer lending, crowdfunding, and many other services are now part of the new digital-focused fintech ecosystem. Even though India missed out on the early acceleration of fintech, there is no doubt that the country has indeed jumped on the bandwagon in recent years. One of the main determinants is the volume of digital transactions currently taking place in the country. Then there are factors such as the growing market size, growing number of startups, huge user base, and funding flows in the fintech industry. By June 2021, India had produced 16 fintech unicorns with several more set to achieve status soon.
Some trends that have emerged in recent years will also provide a major boost to the future evolution of fintech. For example, digitally native millennial and Gen Z audiences prefer an aspirational and experiential lifestyle. This has given rise to the acceptance of the “buy now, pay later” culture, leading to an increase in demand for digital credit. Courtesy of BNPL, today’s shopping is neither geared towards the first part of the month nor reliant on consumer savings.
Innovative underwriting mechanisms adopted by fintech companies have fostered financial inclusion by providing access to credit to people who have traditionally been denied credit by banks.
Additionally, the digitization of services in recent years has led to transactions such as mutual funds, insurance, and other products being purchased online. This digital distribution has not only opened up pan-Indian markets for the BFSI sector, but also paved the way for the creation of other innovative technology-driven products and services in the times to come. Retail investors who primarily started their investment journey during the 2020-2021 “To The Moon” equity markets, now have access to other alternative asset classes like corporate debt, private investments, asset leasing and invoice discounting to diversify and navigate the current corrective scenario. In the banking sector, the customer experience is transferred by the first digital banks. They have not only improved access for the public, but have also changed the way banking works by enabling anytime, anywhere banking through app-based systems and home service delivery. At the heart of it, by proving digitized access to financial products and promoting financial literacy, fintech companies are empowering the Indian masses to lead their own financial journeys.
What awaits us?
As we move towards fintech adoption in the country, we will not only see the emergence of new proprietary technologies, but also stronger collaborations at all levels. BFSI players, regulators and innovators will all come together to create a holistic ecosystem that will take the financial sector to great heights and lead to the sustainable development of the country!
The opinions expressed above are those of the author.
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