Context- Recently, the Parliamentary Standing Committee on Communications and Information Technology recommended that local fintech players should be promoted.
About Fintech Players
- It is supported through an enabling policy and digital infrastructure framework, making India one among the biggest digital markets in the world.
- Market Overview: The Indian fintech market was valued at about INR 2.30 trillion in 2020 and is predicted to attain INR 8.35 trillion with the aid of 2026, expanding at a Compound Annual Growth Rate (CAGR) of ~24.56% throughout the 2021 – 2026 period.
- As of 2020, India had over 676 million cellphone customers, over 1.2 billion telecom subscribers (wireless + wireline), and 825 million net subscribers.
How are Indian Fintechs different from International Players?
- High Adoption Rate: India’s fintech area has seen a tremendous surge in recent years, with the country boasting the highest fintech adoption rate worldwide at 87%, compared to the global average of 64%.
- Market Size and Growth: The Indian fintech industry’s market size was $50 billion in 2021 and is anticipated to attain approximately $150 billion by 2025.
- This rapid growth rate is much higher compared to many different countries.
- Diverse Fintech Ecosystem: India’s fintech startups have been at the forefront of digital innovation, specially within the areas of bills, lending, and wealth control.
- This diversity in the fintech ecosystem is a distinguishing feature of the Indian marketplace.
- Global Real-Time Transactions: India accounted for 46% of all actual-time transactions worldwide in 2022, indicating the country ’s extensive function in the global fintech landscape.
- Untapped Market: Despite the growth, India nonetheless stays an untapped market due to lower penetration of financial services.
- According to a document, 14.6% of the Indian population stays unbanked compared with that of 6% in the US.
Key Players in India
- India hosts the third largest environment for startups worldwide (after the US and the United Kingdom), with 59,593 startups recognized by DPIIT across 57 unique industries, of which 1,860 startups belong to the fintech sector.
- India has over 17 fintech companies that have won ‘Unicorn Status’ with a valuation of over USD 1 billion, as of early 2022.
- Prominent fintech players in India include PhonePe, Google Pay, and NPCI’s BHIM UPI.
- PhonePe indicates the leading marketplace share in quantity phrases, observed by Google Pay, at 46.91% and 36.39% respectively.
- On the other hand, NPCI’s BHIM UPI’s marketplace percentage (in terms of quantity) stood at a trifling 0.22%.
Roles performed by Fintech Players
- Digital Payments: Fintech companies have revolutionised the payments landscape in India.
- They have facilitated the shift from cash to digital transactions, contributing to the growth of a cashless financial system.
- Digital Lending: Fintech players have transformed the lending landscape by imparting quick, trouble-free loans to individuals and businesses.
- They use technology to assess creditworthiness, thereby enabling loans to sections of the population that were previously underserved by traditional banks.
- Wealth Management: Fintech corporations have democratised access to investment merchandise, allowing individuals to spend money on mutual funds, shares, and other financial instruments with ease.
- Insurance (InsurTech): Fintech players in the insurance area leverage technology to simplify the manner of buying insurance, making it greater accessible and less costly.
- Regulatory Compliance (RegTech): Some fintech agencies specialize in assisting different companies follow regulatory requirements effectively and value-efficaciously.
- Financial Inclusion: Fintech organizations play a big role in promoting financial inclusion in India.
- Government projects like the Pradhan Mantri Jan Dhan Yojana (PMJDY) have been leveraged through fintech startups to construct technology products that cater to a large consumer base in India.
- Customer Engagement: Fintech players have a ‘natural advantage’ when it comes to understanding the customer, various ecosystem participants, the digital public infrastructure, and broader market infrastructure.
- Collaboration with Government: Fintech players are encouraged to have greater engagement with the authorities and its businesses to enhance trust.
Challenges and Concerns
- Cybersecurity and Data Privacy: With the increasing digitization of financial services, cybersecurity threats and information privacy concerns have become more prominent.
- Financial Inclusion: Despite enormous strides, a huge part of India’s population stays unbanked or underbanked.
- Fintech organizations face the challenge of extending their services to these sections of the population.
- Trust Issues: Some consumers nonetheless distrust on-line modes of payment, who prefer coins transactions.
- This can be a barrier to the adoption of fintech solutions.
- Competition: The Indian fintech marketplace is particularly aggressive, with several players vying for a share of the market.
- This could make it difficult for new entrants to establish themselves.
- Technological Challenges: Rapid technological improvements suggest that fintech agencies ought to usually innovate and replace their offerings to live applicable.
- Non-Performing Assets (NPAs): High NPAs and sluggish deleveraging and restore of corporate stability sheets are checking out the resilience of the banking system and retaining returned growth.
- Regulatory Challenges: For example, Paytm, as soon as hailed as India’s fintech champion, faced regulatory demanding situations that highlighted the precarious stability among ambition and compliance within the country’s financial landscape.
Future Prospects of Fintech in India
- The fintech sector in India has big capacity, with segments like WealthTech and InsurTech, which did not see much traction within the past decade, now coming into their own.
- The digital lending market has grown exponentially in India from a modest USD 9 billion evaluation in 2012 to a whopping USD 110 billion in 2019.
- It is in addition projected to acquire a marketplace evaluation of a large USD 350 billion through 2023.
Conclusion
- India’s fintech sector is a swiftly developing market with substantial capacity, pushed by technological development, supportive authorities policies, and increasing digital literacy among the population.
- The upward push of local fintech players is a testament to the sector’s potential and the opportunities it presents for the future.
Source: The Hindu
Practice Question:
Q.Analyse the current condition of local fintech players in India. What are the roles performed by fintech players?
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