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Growth Prospect of Indian Fintech Market

Ashish M. Shaji

| Updated: Oct 22, 2021 | Category: Fintech

Growth Prospect of Indian Fintech Market

The Indian Fintech Market is presently valued at 31 billion dollars and is expected to grow tremendously in the coming years. In India, the cities where most Fintech companies are headquartered is in Bangalore and Mumbai. These cities are considered to be India’s technological and financial hubs. The Fintech Market in India is poised for a multi-fold growth in the future. Do you know how this has become a reality. Let’s find out.

Growing Significance of Indian Fintech Market

India is hailed as the third largest fintech ecosystem in the world. This can be attributed to the fact that in the last few years, various new firms have been set up. The industry’s total valuation is estimated at 50-60 billion dollars. Indian Fintech Companies is expected to reach valuation of 150-160 billion dollars by 2025.

During the pandemic, India witnessed massive jump in the fintech investments as compared to pre-covid times. The Indian Fintech market remained at the top of its mark with the emergence of 3 new unicorns and 5 Soonicorn since the beginning of 2020.

India’s various start-ups have been offering innovative technologies to reduce the asymmetry of information between financial institutions and investors. In the year 2020, fintech SaaS and Insurtech entities witnessed total investments of 145 million US Dollars and 215 million US Dollars, respectively. It signifies massive growth over their 2015 funding flow.

India has more than 50 fintech entities with beyond 100 million dollars valuation. Further, there are 4 wealth and broking fintech enterprises, 5 insurtechs and 8 SaaS Fintechs.

Major trends in the Indian Fintech Market

While other sectors witnessed losses during pandemic but the growth of fintech never came to a halt. This can be attributed to the increase in requirement of accessing financial services digitally. The customer demand for digital based services is expected to thrive as the outbreak of Covid-19 continues to get forecast.

Some of the major trends in the Fintech Market are as follows:

  • Digital banking

The service platform banking as a service connects fintech enablers to banks so that the bank is able to offer financial services to the customers through a network of fintech developers.

  • Open Banking

Open banking is the practice of banks sharing financial information electronically to third parties through APIs with an objective to improve services and security. In the last year, the open banking ecosystem incorporated non-banking financial companies also. As the banks continue to adopt open banking, this trend is expected to become the new normal.

  • Neo banking

Neo banks are banks without any physical presence and offer digital bank like services. This has also become a major trend in the Fintech Market in India.

  • Autonomous Finance

This is a method of automating financial decisions with the help of cutting edge technologies such as Artificial Intelligence and Machine Learning[1]. It is one of the newest fintech solutions.

The Fintechs were limited to payments and lending only, but with the growth of fintech ecosystem, there has been diversification of new fintech platforms in different segments. In the table made below, we have set out key segments as well as business models within segments adopted by Fintechs in India.

SEGMENTBUSINESS MODELSPROMINENT PLAYERS
  Digital Payments    Payment gateways & Payment Aggregators;Bill payment and money transfer;Payment infrastructure;Digital Wallet  Paytm, Phonepe, Bharat Pe etc.
  Alternative Lending  Digital Consumer Lending;P2P lending;Credit Scoring platforms;Aggregators  Lendingkart, Creditmate etc.
  Insurtech    Aggregators/policy management;Online Insurance;Claims management  Policybazar, Acko, Digit etc.
  Neobanking  Retail neobanks;SME neobanks  Niyo, Jupiter etc.
  Regtech  B2B SaaS;e-KYC, AML, fraud and compliance;Risk Management  Khatabook, ClearTax etc.

Indian Fintech Market reshaping Financial Services

The Indian Fintech Companies addresses some of the critical structural issues that affects Indian financial services. It can help in increasing outreach, improve customer experience, foster adoption and usage of digital channel. Legacy processes and high operating cost models of banks and financial service providers gives edge to Fintech Companies. The Fintechs have a great prospect in expanding the market and bringing in long term changes in the financial industry.

Now let’s understand how Indian Fintech Companies can reshape financial services landscape-

  • Fintech Companies can reduce costs and enhance the quality of financial services. Further benefits of leaner operating models can be enjoyed by customers.
  • The Fintech Industry can put in place unique and innovative ideas to assess risks.
  • Fintech can create more diverse, secured and stable financial services ecosystem. Further, fintech companies can offer great learning templates to improve capabilities and culture.
  • Fintech Companies can adopt best practices revolving around risk and internal controls, operational excellence and compliance culture that withstood testing times.

Conclusion

The Indian Fintech Market has gained from the pandemic as this sector became the forefront of the country’s financial inclusion struggle with the onset of the pandemic. The adoption of digital payments and lending has increased, and during the lockdown, there was a definite increase in the number of digital transactions. Due to the norms owing to the pandemic, people have shifted from traditional financial model to digital model.  Further, the Insurtech segment witnessed enhanced growth as people opted for life insurance and health insurance services. The trend is going to develop substantially and the Fintech market will continue its upward rise.

Read our article:All about The new Cryptocurrency Bill 2021 (The Cryptocurrency and Regulation of Official Digital Currency Bill, 2021)

Ashish M. Shaji

Ashish M. Shaji has done his graduation in law (BA. LLB) from CCS University. He has keen interests in doing extensive research and writing on legal subjects especially on criminal and corporate law. He is a creative thinker and has a great interest in exploring legal subjects.

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