Fintech In India: Opportunities And Challenges

Sep 28, 2020 15 min read

Fintech In India: Opportunities And Challenges

Fintech refers to the novel processes and products that become available for financial services because of digital technological advancements. Innovation and therefore the FinTech Landscape identified the subsequent nine technologies or technology-enabled trends that, individually or collectively, facilitate current and future FinTech innovations:

1. Cloud technology

2. Method and service externalization

3. Robotic process Automation (RPA)

4. Advanced Analytics

5. Digital Transformation

6. Block chain

7. Smart Contracts

8. Artificial intelligence (AI)

9. Internet of Things

Fintech In India

According to the report of (KPMG 2016), India is transitioning into a dynamic system providing fintech start-ups a platform to doubtless grow into billion-dollar unicorns. Fintech start-ups in India are following multiple aspirations, from tapping new segments to exploring foreign markets. The Indian Fintech software system market is at 1.2 billion USD and is forecasted to touch 2.4 billion USD by mid of 2021, as per NASSCOM

The transaction worth for the Indian fintechsector was estimated close to 33 billion USD in 2016 and is predicted to achieve 73 billion USD by mid-2021 growing at a five-year CAGR of 22%. Investor attention has been focused on technologically advanced cities in 2015, with Bengaluru witnessing eleven VC-backed investment deals of 57 million USD, followed by Gurgaon and Bombay with six and nine deals, respectively. Bengaluru, the start-up capital of India has benefitted from a similar and is ranked fifteen among the world‘s major start-up cities.

India‘s growth wave should still not be of the dimensions when viewed against its international counterparts, however, it's stacked well, mostly because of a powerful talent pipeline of the easy-to-hire and cheap technical school workforce. From wallets to lending to insurance, the services of fintech have redefined the method within which businesses and customers perform routine transactions. The increasing adoption of those trends is positioning India as an attractive market worldwide.

The Future of FINTECH In India

As we understood, Fintech has already caused a revolution, and Fintech entrepreneurs have begun to disrupt the monetary services industry in various forms. allow us to currently explore the Fintech system and also the sectors in Fintech which can roll a subsequent set of innovations. 

Blockchains- Traditionally, transactions required a third-party validation to take place. Then came blockchains that did away with third half reconciliation and provided cryptologic security. However, blockchains are expected to go way on the far side simply bitcoins, payment transactions, the banking system and intrude on numerous different sectors like media, telecom, travel, and hospitality, etc.

Alternate lending- ancient banking system found it unprofitable to lend to little entrepreneurs. Fintech entrepreneurs took advantage of this chance by diving into Peer to peer (P2P) primarily based on lending and building internet platforms to gather the lenders and borrowers at lower interest rates. This trend is about to continue and other alternate lending avenues like crowdfunding are set to emerge further. 

Robo advisory- Earlier intermediaries played a crucial role between the securities market and the investors. repeatedly this led to non-traceable and inefficient transactions. Robo consultatory will make the securities market easier to access, clear and traceable, and give a lot of worth in addition to the smarter investors. 

Digital payments- Fintech start-ups have propelled the rate and convenience of transactions. Mobile wallets have already replaced conventional wallets in a lot of places and can penetrate further with better and quicker payment options. And yes, ATMs will become obsolete tech too. 

Insurance sector- Currently, we are able to notice numerous on-line marketplaces where customers can compare their insurance policies and make prudent decisions. Fintech will further bring in a technological revolution within the insurance value chain through automation driven by information and thereby not solely scale back the cost of operations however increase the length and breadth of product out there within the market.

Challenges and Future Perspectives 

In India, acceptance of varied cashless modes payments was seen after demonetization notes. the govt. itself inspired everybody towards cashless technologies like digital wallets, net banking, and the mobile-driven point of sale (POS). 

Linking with the Mobile number with Aadhaar card, eKYC, UPI and BHIM had restructured the financial sector of India. After demonetization, it had been reported that digital transactions raised up to 22% in India. FinTech start-ups like PayTM saw 435% of additional traffic to the websites and Apps. This led to the expansion of many FinTech start-ups in India as there are vast opportunities to grow. 

Digital Finance corporations have benefited from many government‘s start-up policies. Reserve Bank of India also allowed a simple way to start a FinTech start-up. The government is additionally providing financial help for start-ups up to one crore. Customers started accepting the digital currency for each personal and industrial use. 

Due to numerous changes in the Indian economy, the financial structure of Indian banks and financial establishments were modified and digital wallets became a compulsory channel for the transfer of payments. 

Integration of IT with finance led to the rise in the worth of digital cash like Bitcoins. Cryptocurrency, Blockchain system led to quicker transactions of digital payments.

Banks like HDFC, Federal Bank, etc. linked their official digital transactions with the little startups in India like Startup Village which led to the expansion even in small FinTech start-ups.

Modernization of the traditional sector of banking and finance had increased a lot of customers, reduced the time, and were ready to offer quick and fast services to the customers.

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