India’s Booming Fintech Sector

A look at how the country’s fintech industry is doing in the pandemic-hit nation?

Fintech is the one of the most buzzing words these days but if you are someone who has always been confused about what it means, here is a simple explanation for you.

Fintech or Financial Technology, is the term used to describe any technology that delivers financial services via software, like online banking, mobile payment apps or cryptocurrency. Fintech is not something that popped up a couple of years back, but we have been using it for years. For example, when ATMs were created, they were considered as the cutting edge of fintech innovation during that time.

Since the arrival of ATMs to until now, the industry has come a long way and India is amongst the fastest growing fintech markets in the world. The country’s fintech software market size is worth $2.4 billion and between 2016–2020, India saw $10 billion worth investments in the sector.

Despite the pandemic, the industry continued to grow. According to Invest India, online transactions grew by 80% in 2020 in India against 2019. A report by Boston Consulting Group (BCG) and Ficci stated that, between March 2020 and January 2021, UPI payments (by value) has jumped to 3x of their pre-pandemic value.

India is also seeing a sharp jump in the number of fintech companies in a short span of time. According to a report by KPMG published in February 2021, India witnessed the second-best year for fintech funding in 2020, attracting $2.7 billion in investment despite pandemic struggles. Since January 2020, 4 new fintech unicorns — Pine Labs, Razorpay, Digit Insurance, CRED — have been created in India.

To encourage the industry, the government has also come up with several measures. In the Union Budget 2021–22, the Centre proposed the set-up of development finance institutions (DFIs), which will streamline and simplify business lending. The budget also created a corpus worth ₹1500 crore to expedite the adoption of digital payments. This fund will incentivize fintech companies and traditional BFSI players to introduce new-age digital solutions.

These measures will definitely help India’s fintech industry to reach ₹6.2 lakh crore by 2025, an estimate which was said by RBI Governor Shaktikanta Das, while speaking in India Economic Conclave 2021. He also said that India is on the way to becoming Asia’s top fintech hub.

At the end of the day, more traditional banks should slowly incorporate fintech tools in their systems as fintech is the way to go in the future. Apart from adopting this technology, banks and finance companies should also make everything more secure so that more people will move towards digital payments and more in the upcoming years.

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