1. Home
  2. Blog
  3. UPSC

Report on Local Fintech Players


Why is it in the news?

  • Recently, the Parliamentary Standing Committee on Communications and Information Technology expressed concerns about the dominance of foreign-owned fintech apps in the Indian market.
  • The committee recommended promoting local fintech players to strengthen India’s fintech ecosystem.

 

About Fintech Players

  • India boasts a conducive policy environment and robust digital infrastructure, positioning it as one of the largest digital markets globally.
  • The Indian fintech market witnessed substantial growth, valued at INR 2.30 trillion in 2020 and projected to reach INR 8.35 trillion by 2026, with a Compound Annual Growth Rate (CAGR) of approximately 24.56%.
  • As of 2020, India had over 676 million smartphone users, over 1.2 billion telecom subscribers (wireless + wireline), and 825 million internet subscribers, reflecting the vast potential of the market.

 

How Indian Fintechs Differ from International Players

  • India boasts the highest fintech adoption rate globally, standing at 87%, significantly surpassing the global average of 64%.
  • The Indian fintech industry’s market size was $50 billion in 2021 and is anticipated to reach around $150 billion by 2025, demonstrating rapid growth compared to other countries.
  • Indian fintech startups excel in various domains such as payments, lending, and wealth management, contributing to the diversity of the fintech ecosystem.
  • India accounted for 46% of all real-time transactions globally in 2022, underscoring its pivotal role in the global fintech landscape.
  • Despite significant growth, India remains an untapped market, with 14.6% of the population still unbanked, compared to only 6% in the US, highlighting opportunities for further expansion.

 

Key Players in India

·       India hosts a burgeoning startup ecosystem, recognized by the Department for Promotion of Industry and Internal Trade (DPIIT), with 1,860 fintech startups among 59,593 recognized startups across 57 industries.

·       Over 17 fintech companies have attained ‘Unicorn Status,’ indicating a valuation exceeding USD 1 billion, as of early 2022.

·       Notable players include PhonePe, Google Pay, and NPCI’s BHIM UPI, with PhonePe leading in market share, capturing 46.91% of the volume.

 

Roles Played by Fintech Players

  • Fintech companies have played a transformative role in revolutionizing the payments landscape, facilitating the transition from cash to digital transactions, thereby contributing to the growth of a cashless economy.
  • They have disrupted the lending sector by providing quick and hassle-free loans to individuals and businesses, leveraging technology to assess creditworthiness and serve underserved populations.
  • Fintech firms have democratized access to investment products, enabling individuals to invest in mutual funds, stocks, and other financial instruments with ease.
  • In the insurance sector, fintech players have simplified the process of purchasing insurance, making it more accessible and affordable through technology-driven solutions.
  • Some fintech companies specialize in Regulatory Technology (RegTech), assisting businesses in complying with regulatory requirements efficiently and cost-effectively.
  • Fintech firms have played a pivotal role in promoting financial inclusion, leveraging government initiatives such as the Pradhan Mantri Jan Dhan Yojana (PMJDY) to cater to a large consumer base in India.

Challenges and concerns

 Cybersecurity and Data Privacy:

  • With the increasing digitization of financial services, cybersecurity threats have become more prominent.
  • Fintech companies must prioritize data privacy to ensure the security of customer information.

Financial Inclusion:

  • Despite significant progress, a large portion of India’s population remains unbanked or underbanked.
  • Fintech companies face the challenge of extending their services to these underserved populations to promote financial inclusion.

Trust Issues:

  • Some consumers still distrust online modes of payment, preferring cash transactions.
  • This lack of trust can act as a barrier to the widespread adoption of fintech solutions.

Competition:

  • The Indian fintech market is highly competitive, with numerous players vying for market share.
  • Intense competition can make it challenging for new entrants to establish themselves and for existing players to maintain their positions.

Technological Challenges:

  • Rapid technological advancements necessitate continual innovation from fintech companies to stay relevant.
  • Keeping up with evolving technologies and customer preferences can pose challenges for fintech firms.

Non-Performing Assets (NPAs):

  • High NPAs and slow deleveraging of corporate balance sheets pose challenges to the banking system.
  • NPAs can hinder growth and stability in the financial sector, impacting fintech companies as well.

Regulatory Challenges:

  • Fintech companies face regulatory challenges that can impact their operations and growth prospects.
  • For example, Paytm, once considered India’s fintech champion, faced regulatory hurdles, highlighting the delicate balance between ambition and compliance in the financial landscape.

Future Prospects

  • The fintech sector in India holds immense potential, particularly in segments like WealthTech and InsurTech, which are gaining traction.
  • The digital lending marketplace has witnessed exponential growth, projected to reach a market valuation of USD 350 billion by 2023.

Conclusion

  • India’s fintech sector is characterized by rapid growth, underpinned by technological advancements, supportive government policies, and increasing digital literacy among the populace.
  • The emergence of local fintech players signifies the sector’s resilience and the opportunities it presents for the future, driving India’s transition towards a digitally inclusive economy.

Get free UPSC Updates straight to your inbox!

Get Updates on New Notification about APPSC, TSPSC and UPSC

Get Current Affairs Updates Directly into your Inbox

Discover more from AMIGOS IAS

Subscribe now to keep reading and get access to the full archive.

Continue reading

WhatsApp Us

Exit mobile version