It is noteworthy that, despite the fact that India’s fintech business is just a decade old, the country’s adoption rate is 87 percent, compared to the worldwide average of 64 percent.
During the epidemic, fintech played a critical role in disbursing credits and loans through digital payments. The Russian invasion of Ukraine compounded the underlying knightian uncertainty as the world economy was still reeling from the tremors of the COVID-19 outbreak.
Nonetheless, according to the most recent International Monetary Fund (IMF) world economic projection, India will be a $5 trillion USD economy by 2026-27. This is due to the thriving digital infrastructure and regulatory sandbox. With the increase in digital adoption during COVID-19, India has moved to the forefront of the financial revolution. MeitY’s 2019 study also emphasized the significance of fintech in assisting India to attain the 5 trillion dollar threshold. It emphasized India’s potential to generate more than $1 trillion in economic value from the digital economy.
In its 2018 Global Fintech Hub study, Cambridge ranked India second. According to the Ministry of Finance, the Indian fintech business would be worth $150 to 160 billion USD by 2025. It is noteworthy to note that, despite the fact that India’s fintech business is just a decade old, the country’s adoption rate is 87 percent, compared to the worldwide average of 64 percent.
Given the favorable atmosphere established by the government and the Indian economy, fintech has carved out a considerable market share for itself.
It has upended the Banking, Finance, Securities, and Insurance (BFSI) business, clearing the path to El Dorado for India’s $5 trillion economy. Furthermore, the country’s fintech unicorns and valuations are on the rise. According to data, there are around 21 fintech entries in India’s unicorn startup club, with a neo bank serving as the 100th unicorn.
Major stakeholders in the fintech and innovation ecosystem have taken a number of steps. The government’s implementation of the regulatory sandbox framework in 2019 aided in mitigating risks during the crash that followed the epidemic. It protected investments in companies that handle retail payments, mobile banking solutions, and contactless transactions.
It also increased the use of the United Payments Interface (UPI). Because of the increased use of UPI, internet-based banking, and mobile banking, the Reserve Bank of India (RBI) has proposed that credit cards be linked to UPI forums.
Fintech was able to reach the unbanked and underbanked segments of the population that traditional banks were unable to reach. Transparency and financial inclusion were driven by robust, flexible, and multilingual mobile banking interfaces, resulting in an explosion in the customer base and quickening economic growth. As a result, the RBI will establish an internal fintech department in January 2022. The fintech department was established to encourage the orderly expansion of digital lending, to identify obstacles and possibilities, to assist constructive innovation and incubation, and to govern the fintech sector.
Furthermore, under the regulatory sandbox, the RBI has implemented policies to support Small Finance Banks (SFBs) focused on unserved sectors, payment banks, and digital banks focusing on credit facilitation, processing, and invoicing, among other things. The government’s and regulator’s actions reflect the Digital India movement, NITI Aayog’s flagship initiative of the Atal Innovation Mission, and the financial inclusion drive. To achieve the 5 trillion dollar level, the Indian economy must expand at a pace of 12 percent every year, as opposed to 8 percent CAGR. Technology infusion in the financial industry has the potential to fuel diversified growth in wealthtech, insurtech, and banktech.
Recent economic polls for 2020 and 2021 also indicate that fintech will be used more extensively across all banking services. This would enable data-driven loan choices, efficient processing, and cost-cutting measures to help India become a $5 trillion USD economy. With India aiming to become a $5 trillion economy, it must rely largely on knowledge and technology infusion, particularly in the BFSI sector.