Rise of FinTechs in India

India is the world’s third largest Fintech ecosystem and is one of the fastest growing Fintech Markets worldwide. As of 2024, Fintech Industry in India stands at US$110 bn and is expected to grow significantly, reaching US$420 bn by end of 2029, growing at CAGR of 31%. This rapid growth is driven by landmark innovations such as digital lending, mobile wallets and banking and payment gateways, positioning India as one of the global leaders in the space.

Beginning of Fintech in India

The two main reasons which are the roots of this Fintech revolution are: demonetization in 2016 and the Covid 19 Pandemic. These events significantly increased people’s dependency on digital payments, generating the growth of the Fintech sector. Introduction of United Payment Interface (UPI) marked the beginning of a new digital India, enabling seamless and real-time transactions across bank accounts via mobile phones.

Reserve Bank of India and the Indian Banks Association played a crucial role as well with the launch of their initiative The Nation Payments Corporation of India which provided the necessary infrastructure to payment systems. Since then, payment systems became the leader of Indian Fintech Industry. India has attracted investors around the world. With rising economy and a young enthusiastic population, India has become home for the fintech enterprises.

Drivers for Fintech Growth in India

Several factors have contributed to the rise of Fintech in India. They are:

1. Favourable Demographics: India has a population which are highly adaptive to technological advancements, creating a vast market for fintech to cater.
2. Digital Infrastructure: India’s digital infrastructure, including ‘Indian Slack’ a unified software platform having open AI platforms like Aadhar, UPI, Bharat Bill Payments, GSTN which facilitates paper less and cash less service for the people.
3. UPI Revolution: The widespread acceptance of UPI has revolutionized digital payments, lending, and credit.
4. Financial Inclusion: Indian fintech startups have made significant contributions to financial inclusion by forming user-friendly and inexpensive yet advanced technologies for a wider reach to people.
5. Financial Education: These startups provide financial education on their platforms to help customers make informed decisions.
6. Rural Expansion: Acceptance of digital payments infrastructure and expansion towards the rural areas has been a major contributor to the growth of the Fintech sector.

Regulatory Landscape

The Indian government has introduced several initiatives to boost the growth of Fintech ecosystem. Such as:

1. Digitalizing India: Initiatives take by the government such as Pradhan Mantri Dhan Yojana, Digital India initiative, launch of Aadhar and API setu played a major role in building up the startup ecosystem of India.
2. Cross- border linkages: India has made significant strides in enhancing its global fintech footprint by linking its fast payment systems such as UPI & RuPay with other countries systems, facilitating cross-border transactions.
3. Innovations: Platforms like UPI123Pay and UPI Lite have been introduced allowing the phone user to access low value transactions in offline mode through an on-device wallet.
4. Account Aggregator Framework (AA): This advanced framework enables consent-based sharing of financial information between Financial Institutions, improving access to credit for sectors like MSME.

The Future of FinTech

The future of FinTech in India is in its embryonic stage. With technological advancements such as artificial intelligence, blockchain, and machine learning are anticipated to enable FinTech startups to offer better financial solutions. With financial inclusion expansion to rural areas, there will be a significant rise in opportunities for FinTech companies.

India’s demographic will also play a critical role in the sectors growth. By 2025, 56% of country’s population will be within age group of 20-59 years. Also, an additional 21 million high-income and 140 million middle-income will be added to India , further growing the fintech space.

India is on the second position in terms of smartphone users in the world. With rising internet & smartphone usage, there is an expectation of 46% increase in number of households with internet connections, with the possibility of reaching 233 million households by 2026.

Finally, ongoing technological innovations and the implementation of new business models driven by AI and machine learning will continue to shape the future of Fintech in India. The NPCI Bharat Billpay (NBBL), in collaboration with banks and fintech firms, is exploring the launch of internet-based banking interoperability following regulatory approval, which could further enhance the fintech landscape.

India’s fintech adoption rate is 87% significantly higher than the global average adoption rate of 64%. India is since time immemorial been recognized as a land of possibilities and opportunities. Within the past five years, , more than 1400 companies have been set up in India under the fintech sector.

The average adoption rate of fintech is around sixty four per cent in the world, on the flip side India’s adoption rate is at eighty seven per cent that makes it world’s third largest fintech ecosystem. In the span of the last 5 years, there has been the establishment of around 1400+ companies in India.

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