The India FinTech market is growing at a robust
growth rate owing to the increasing trend of online payments mode and rising
platforms which support digital transactions in the country. Furthermore, the
growing number of FinTech startups and various government initiatives for FinTech
companies is expected to significantly contribute to the growth of India FinTech
market.
India FinTech Market Scope
FinTech businesses utilize technology to enhance
and automate the supply of financial services. Moreover, FinTech mainly uses
specialized software and algorithms that are deployed on different platforms. Significantly,
the market is being aided by the increasing usage of smartphones to assist
business transactions, with ease to business owners and individuals in managing
their financial operations, processes, and activities are the factors
influencing the digital transaction trend. The India FinTech market is segmented
into PayTech, InsurTech, LendTech, and WealthTech. The payments which involve
technology such as online payments through UPI, mobile wallets, POS is referred
to as PayTech. The term ’InsurTech’ refers to technical advances developed and
used to boost the effectiveness of the insurance sector. Furthermore, LendTech involves
lending through digital platforms and WealthTech deals in wealth management
through multiple digital platforms.
Among these, the PayTech market is witnessing high demand
owing to the changing phase of offline payments to online payments in India. As
after demonetization, people started using payment apps for day-to-day payments,
the country witnessed a significant shift towards digital transaction. Hence, these
are the certain factors contributing toward the market growth.
India FinTech Market Overview
The FinTech market in India is witnessing high
demand owing to the changing preference in India toward technologically derived
services and products and growing government initiatives. According to the data
provided by National Investment Promotion and Facilitation Agency, India
already has the second highest number of smartphone users globally and will be
the second largest Internet user market of around 1 billion internet users by
2026. Moreover, the number of households with internet connections will
increase by 46%, reaching 233 million households by 2026, compared to 160
million in 2021. Thus, with the rising smartphone and internet penetration, the
India FinTech market is expected to experience a significant growth during the
forecast period.
According to the website of India Development
Gateway, which is backed by Ministry of Electronics and Information Technology
of India, the National Payments Corporation of India (NPCI) created Bharat QR,
the first interoperable Quick Response (QR) code acceptance system, to hasten
India's transition to a cash less society. The RBI came up with its
Payments Vision 2018, which identifies innovation, interoperability, and
security as the three pillars to support India's transformation to a less
cash-dependent society, served as the foundation for Bharat QR's design.
India FinTech Market Drivers
The India FinTech market is experiencing a
significant growth owing to the rising online payments in the country. According to the data provided by National
Payments Corporation of India (NPCI), around 74 billion transactions worth USD 1.52
trillion were conducted using UPI in calendar year 2022. In India, the use of
digital payments expanded significantly post the period of demonetization, which
was implemented by the Indian government in 2016. As a result, the market
witnessed a sudden surge in the usage of digital wallets and payments, and this
trend has since taken control of the nation's payment system.
To promote investment flows into the FinTech
sector, the government has taken numerous measures such as the Pradhan Mantri
Jan Dhan Yojana (PMJDY) that aims to increase financial inclusion in India by
assisting beneficiaries in opening new bank accounts so they can receive direct
benefits transfers and have access to a variety of financial services offering
applications. Thus, this kind of support from the government has made possible
for FinTech companies to develop technological products that will serve India's
large consumer base.
India FinTech Market Trends
The India FinTech market is growing at an
exponential rate owing to the rising number of startups in the FinTech market.
According to the data provided by Economic Diplomacy Division (ED) which was
developed as the economic arm of the Ministry of External Affairs, Government
of India, stated that India is having a total of 7,460 FinTech companies, which
ranks third in the world after the US which has about 22,290 number of FinTech
companies and China which has around 8,870 FinTech companies. With the
propelling FinTech investment within India, the market is also witnessing
growing market value, status and recognition to the FinTech companies across
the globe. As 23 FinTech startups that have achieved "Unicorn Status"
with a worth of over USD1 billion as of July 2022.
Moreover, the government of India's ‘Startup India’
initiative, which was launched on January 16, 2016, aims to create a robust
ecosystem for fostering innovation and entrepreneurs in the nation. It is
fueling sustainable economic growth and creating a significant number of job
possibilities. As of November 26th, 2021, the Department for Promotion of
Industry and Internal Trade (DPIIT) had certified more than 59,000
startups. Thus, with the ease of doing business in India, the FinTech market in
India is expected to experience surge in investment activities with respect to FinTech
market.
India FinTech Market Challenges
Incompetency in security of data and payments,
issue of data breach, difficulty for end-user to understand the functioning,
integrating with legacy systems such as banks, and assuring user retention are
some of the major challenges in the India FinTech market. Moreover, strict
guidelines, lengthy processes, time taking approvals from India’s central bank known
as Reserve Bank of India, are some restraining factors for FinTech companies.