When Sir Steve Jobs passed away in 2011, there was a picture that did rounds across the internet for a long while. While most of us couldn’t relate to it at that time, little did we know that it was soon too become a reality for most of us within a decade’s time. Lo and behold, 2021 has just begun and if I ask you to name 5 tasks which cannot be done through some app available on the playstore/ App store, I am sure you would have a really hard time answering that question.
And of course our beloved money is no exception to the phenomena. Currently, there are a plethora of apps which are willing to track your expenses, digitize your journeys, investments and what not. So today, we deep dive into how we started, what is the quantum of this boom and what is the way forward. A dipstick into fintech industry in India.
What is Fintech and it’s History?
Fintech or short for financial technology is that domain of tech which seeks to improve and automate the delivery of financial services. This is primarily achieved by usage of software tools and Artificial Intelligence on computers and on phones. So, a bank application like ICICI, SBI Yono would also fall under the category of fintech. You are essentially doing away with the process of visiting the bank for your deposits/withdrawals etc. using the technology.
In the initial phase of fintech, it was first used to automate key processes involved in banking like cheque punching, clearing, deposits etc. That is the time when government banks went digital for the first time and employees were being handed over VRS. All physical records were being moved to digital, thus improving the transaction speed, transparency and accuracy.
Soon enough, it was realized that the consumer side of the industry is yet to be explored and has a much bigger revenue play. Hence, we saw a surge in the banks coming up with the apps. Soon digital wallets rose up to the occasion only to let UPI take the center stage. Today, you have an app for every aspect of finance. Starting from budgeting, expense tracking, goal planning to investing, tracking, trading, you name it, they got it.
Pivotal Points in Adoption of Fintech:
Indians love their piles of cash. Every household in India has a locker in banks. We store our gold and cash in physical format in there. So how did we come from that to world’s fastest growing markets in terms of fintech adoption? Here’s what I think:
When hell broke lose back in 2016, our cash rich population had to go through a lot. Long queues at ATMs, banks, it was straight out of a nightmare. I believe that is the point when a lot of us were forced to go digital. As a matter of fact PayTM emerged as the leading platform at that time and posted it’s highest transactions at that time. While the overall envisaged benefits of demonetization may not have been realized, India definitely set it’s first step to boost the fintech industry in our nation.
B. Jio and Smartphone Revolution:
Last month, our society was sealed yet again due to a surge in Covid 19 restrictions. I couldn’t go to ATM to get some cash. When it was the time to pay our maid, she very casually said, “Bhaiya Google Pay Kar Dijiye” (You can pay using GPay). All this wouldn’t have been possible without Jio changing the way we consume our internet. Reliance handed over a smartphone and world’s cheapest internet in every other person’s hand. As a result, everyone got into comfort mode and fintech industry saw new potential.
Covid left no other option for people than relying on fintech platforms for their money matters. Therefore, we saw a significant surge in the usage of these platforms.
Other factors that have boosted the growth of Fintech in India are:
- Widespread identity formalization (Aadhar): 1.2 bn enrolments
- High level of banking penetration through the Jan Dhan Yojana: 1+ bn bank accounts
- High smartphone penetration: 1.2 bn mobile subscribers
- India Stack: Set of APIs for businesses and startups
- Growing disposable income
- Key government initiatives such as UPI and Digital India
- Wide middle-class expansion: By 2030, India will add 140 mn middle-income and 21 mn high-income households which will drive the demand and growth on the Indian FinTech space
The industry can be bifurcated into four key areas:
A. Credit/Lending: With paper less approvals, low documentation, lending space is becoming hotter each day. Startups like LazyPay, Early Salary are hustling in this space.
B. InsurTech: Millennials want to do their research first hand rather than believing an agent. Hence there is a rise in insurance tech. Policy Bazar, Navi and Ditto (by finshots) are key players in this industry.
C. Payments: Ease of payments, digital transfers are key propositions. PayTM, Google Pay and PhonePe are leading this industry from the front.
D. Wealth Management and Personal Finance: Wealth management is soon becoming newest trend where people are relying on algorithm based recommendations for investing in financial instruments. Scripbox, IndMoney are key players in this industry. Similarly, people like to see gamified versions of goal planning along with real time tracking.
In order to give you all a perspective in terms of the size and growth the fintech industry, here are some fun facts. These facts also throw some light on what future has in store for us.
- India is world’s biggest hub of fintech startups with 2655 startups operating currently. This number was only 714 in 2014
- All Indian startups combined raised a total of $11.5bn out of which $2.1bn was raised by startups playing in fintech industry
- FinTech in India is expected to increase at a CAGR of 20.2% during 2017-21 to reach $92 bn
- India will contribute 2.2% to the world’s digital payments market by 2023, and the value of such transactions is expected to reach $12.4tn globally by 2025.
My ears pop open and my eyes gleam whenever I hear the word fintech from someone. It is essentially an amalgamation of two things I love the most. Money and Technology. I would be covering 25 fintech platforms, their proposition and relevance to you within this month. You might be using some of those platforms and may end up knowing more about them. I am excited. Are you?
Got questions? Want to take it to the next level? Reach out to me using your preferred platform from the links below
Until next time..
This Blogpost is in association with Blogchatter’s #BlogChatterA2Z Challenge.
17 thoughts on “Fintech Industry in India: A Dipstick Analysis”
This is very enlightening and definitely, well researched. Thank you, Raghav!
Thanks for stopping by Don. Glad I could help. 🙂
Very well researched.. in fact cleared so many questions I had in my head.
Thanks Deepika Ji. Glad you liked it. 🙂
Thanks for putting things in language which common person can understand!!!
Thanks Adi for stopping by. That is the entire aim indeed. Doing away with jargon loaded finance
Fintech has become a part of our lives now and is convenient and easy. A well-written post.
Thanks for reading Varsh. 🙂
I agree that though by force we are catching up, in terms of fintech revolution in our daily life. I remember seeing my Australian friend using her smartwatch to make the payments and think that it will take Eons of years to happen in India.
Well put Neha. I agree with you. However, it’ll happen sooner than we think. I already pay by tapping my phone at card machine using NFC. I think within an year we would see something like this coming up. Thing is that watches need to have NFC capabilities. Currently, only Apple Watch has that feature it and that is not supported by our ecosystem.
As someone who has also been vocal about the damage done to the environment by economic exploitation, I will be interested to know how technology can do some damage control on that count. Apart form digitization of knowledge and cash transfer of course.
That’s an interesting perspective Durga. Mind connecting on some social media to discuss more?
Sure. Actually I have written a series of posts on this issue as part of Blogchatter’s CausAChatter. Wish to write more after the AtoZ challenge.
Wow, now this is indeed a very informative post. Fintech Companies are taking the world by storm with every new product launch. I agree, who would have thought 10 years back that, even common would be doing his daily transactions through a touch button from his phone. Demonetization indeed was the first and most important step. Now with various smartphones having in-built features, things are again taking a huge turn. I am so excited to read the rest of your posts. It will surely enlighten me!
Thank you so much Amritha for your kind words. Glad to add value. 🙂