Fintech in India

Syllabus: GS3/Economy

Context

The Prime Minister addressed the Global Fintech Fest (GFF) 2024 at the Jio World Convention Centre in Mumbai.

GFF is jointly organized by the Payments Council of India, the National Payments Corporation of India and the Fintech Convergence Council.
It aims to showcase India’s strides in Fintech and bring together key stakeholders of the sector.
800 industry experts, including policymakers, regulators, senior bankers, and academicians from India and other countries, will participate in the GFF.

The fintech sector in India refers to the use of technology to enhance, innovate, and streamline financial services.
This sector encompasses a wide range of financial products and services, including digital payments, lending, insurance, wealth management, and personal finance, all powered by technology.

The Indian fintech industry is estimated to be around USD 110 billion in 2024 and is projected to reach about USD 420 billion by 2029.
Indian fintechs were the 2nd most funded startup sector in India in 2022.
From just 1 Mn transactions in 2016, UPI has since crossed the landmark 10 Bn transactions.

Digital Infrastructure: Open Application Programming Interface (API) Platforms i.e. Aadhar, UPI, Bharat Bill Payments, GSTN.
Technological Innovation: Implementation of new business models driven by technologies such as Artificial Intelligence and Machine Learning
Increasing internet & smartphone penetration: India already has the 2nd highest number of smartphone users globally and is the 2nd largest Internet user market.
Favourable Demographics: 68% of India’s population is young and 55% of its population is in the age group of 20-59 (working population) in the year 2020 and is estimated to reach 56% of the total population by 2025.
- By 2030, India will add 140 Mn middle-income and 21 Mn high-income households which will drive the demand and growth of Indian FinTech space.
Financial Inclusion Initiatives: Financial inclusion programmes such as PMJDY, DAY-NRLM, Direct Benefit Transfer, Atal Pension Yojana among others have accelerated the digital revolution and brought more citizens, especially in rural areas, within the ambit of digital financial services.

Regulation Complexity: The fintech sector is regulated by multiple agencies (e.g., RBI, SEBI), leading to a complex regulatory environment.
Cybersecurity Risks: The increasing use of digital platforms raises concerns about data breaches and cyberattacks.
- Ensuring robust security measures to protect sensitive financial data is crucial.
Lack of Digital Literacy: A significant portion of the population still lacks digital literacy and access to technology, which limit the reach and effectiveness of fintech solutions.
Customer Trust: Building trust in digital financial services, especially among older demographics and those new to technology is challenging.
Policy Changes: Changes in economic or financial policies, including taxation and interest rates majorly affect the fintech ecosystem.
Innovation and Scalability: Keeping pace with rapid technological advancements and ensuring that systems can scale effectively as user demand grows is a tough challenge.

Pradhan Mantri Jan Dhan Yojana (PMJDY): Aims to increase financial inclusion by facilitating the enrollment of new bank accounts for direct benefit transfers and access to financial services.
India Stack: A societal initiative to build public digital infrastructure that supports both public and private digital initiatives, particularly in the finance sector.
Aadhaar Enabled Payment System (AePS): Allows individuals to conduct financial transactions using their Aadhaar number and biometric verification (fingerprint or iris scan) on Micro-ATMs.
Central KYC (Know Your Customer): A central repository designed to reduce the need for multiple KYCs across different financial institutions.
Unified Payments Interface (UPI): A scalable platform that supports digital payments across India.
Bharat Bill Payment System (BBPS): Enhances consumer convenience by enabling bill payments across various utilities and sectors, covering all recurring billers except prepaid recharges.
National Digital Health Mission (NDHM) and Related Initiatives: Government-led efforts, including NDHM and DISHA, aim to transform the insurance and healthcare sectors through digital infrastructure.
Fintech Hub at IFSC, GIFT City: A world-class fintech hub developed in Gandhinagar, Gujarat, to promote India as a global fintech leader.

The fintech sector in India is vibrant and rapidly evolving, playing a significant role in the country’s financial ecosystem by enhancing accessibility, efficiency, and inclusion.

Source: TH

Previous article Cyclone Asna

Next article GDP Growth Rate to Five-Quarter Low of 6.7%