Evolution of Fintech in India and Emerging Trends

Fintech, which refers to the use of technology in the financial services industry, has rapidly evolved in India due to high smartphone penetration and the government’s push towards digitalisation. India has emerged as a major player in the global fintech landscape, with a rapidly growing ecosystem of startups, investors and regulators. The industry is fuelled by investments totalling more than USD 8 billion recorded in 2021, making India the third- largest fintech ecosystem in the world, home to more than 2,100 fintech companies.

Fintech startups in India offer a range of innovative services, including mobile wallets, payment gateways, peer-to-peer lending and robo-advisory services. These startups are leveraging technologies, such as artificial intelligence, blockchain and big data analytics to provide faster, more efficient and more affordable financial services to millions of Indians who were previously excluded from the traditional banking system.

Digital-only banks are providing better customer experiences, attractive rates and convenient accessibility. These banks are giving their brick-and-mortar counterparts a run for their money, and many traditional banks are now undertaking digital transformation journeys to maintain their customer base. As more banks go digital, they will undoubtedly s.hift to leading-edge technology, such as AI/ML and deep learning to give their customers a more personalised banking experience.

The collaborative efforts of accounting and innovation have resulted in a significant shift in banking, venture, trading and digital money. With improved access to credit aided by technology trends, fintech startups today are exploring the feasibility of DeFi (Decentralised finance) and how it can benefit the banking world. Given its functionalities in transparency, accessibility and security, the question is not if but when DeFi becomes a part of everyday banking. Here are some of the technologies to track in the Indian fintech industry.

Paytech: 

Payment technology is a growing sector in India’s fintech industry. Fintech companies are entering this market by offering services, such as payment gateways, card networks, application programming interfaces (APIs) and payment security.

There are a range of consumer-centric services available, including third-party application providers (TPAP), prepaid cards/wallets, bill payments, QR code payments, payment aggregators and point-of-sale systems (POS). Business-centric services include corporate cards, B2B payments and invoice payments.

The biggest players in the Paytech sector in India include Paytm, PhonePe, Mobikwik and Google Pay. These companies are leveraging technology to provide faster, more efficient and more secure payment options to consumers and businesses alike, contributing to the growth and development of the fintech industry in India.

Lendtech: 

Lending technology encompasses a variety of services in the fintech industry in India. It includes lenders and providers of Buy Now Pay Later (BNPL) services, as well as technologies, such as AI and anti-fraud tools, data interchanges, marketing services and insurance offerings, such as personal loans, salary loans, gold loans, vehicle loans, school loans and peer-to-peer lending.

Some of the prominent players in the Indian Lendtech space are Google Pay, M-Swipe and 

Razor Pay. These companies are positioning themselves as leading financing systems for both customers and retailers, using technology to offer faster, more efficient and more accessible lending options. Lendtech is becoming an increasingly important sector, offering a wide range of services to meet the needs of consumers and businesses.

Insurtech: 

The use of technological advancements to increase efficiency and cost savings in the traditional insurance business. It not only provides digital communication channels but also offers carriers the ability to manage schedules and improve the productivity and effectiveness of their adjusters, whether they are direct-hire employees or third-party contractors.

Fintech plays a key role in insurtech by providing a range of services, such as claims processing, sales platforms, underwriting risk management, insurance infrastructure API and policy administration systems. Policy Bazaar is a market leader in this category, offering innovative solutions to the insurance industry using technology.

With nsurtech, insurance companies can leverage the latest technologies, such as big data analytics, machine learning and blockchain to streamline operations, enhance customer experience and reduce costs. It has led to the emergence of new business models and innovative insurance products that are tailored to meet the evolving needs of customers.

Wealthtech:

The intersection of finance and technology, where digital solutions are used to enhance personal wealth management, investing and portfolio management. The advent of digital payment methods, e-KYC through Aadhar and online investment reports has led to the emergence of a fully automated asset management system. Innovations, such as big data, artificial intelligence and deep learning are being used to analyse investment alternatives, improve portfolios and manage risks. In the fintech market, Zerodha and Small case are two notable companies in the Wealthtech space, offering advanced digital tools for managing personal investments and portfolios.

Regtech:

The use of technology to manage regulatory processes in the financial industry, with a focus on regulatory monitoring, reporting and compliance. The increasing use of digital products has led to a rise in data breaches, cyber-attacks, money laundering and other fraudulent activities. Regtech companies leverage big data and machine learning technology to provide real-time data on suspicious activities and reduce the burden on compliance departments. It enables financial institutions to efficiently monitor and report on their compliance with regulatory requirements, while also improving their ability to detect and prevent fraudulent activities. As the use of digital products continues to grow, the importance of regtech in maintaining the integrity of the financial system is likely to increase.

Digital payments: 

Currently, digital transactions make up 98.5 percent of non-cash payments, with UPI suppliers in India reporting 2.8 billion digital payment transactions valued at over five trillion Indian rupees in June 2021. Neo banks have made various banking solutions such as payment gateways, payment processing, cash delivery, and online payments easier and faster. Fintech services like API providers and aggregators, banks with open APIs, banking as a service, and core banking are all examples of digital banking services. Paytm, PhonePe, RazorPay, and other fintech organizations are leading the way in digital payments in India.

Overall, the fintech industry in India is poised for continued growth and innovation in the years to come, as more and more Indians embrace digital technologies and as the government continues to promote startups for a more inclusive and cashless economy.

India’s increasing smartphone usage and digitisation of services has resulted in the surge of many tech industries. Among these industries, FinTech is making waves using technology to streamlining all financial services. 

India has emerged as a major player in the global fintech landscape, with a rapidly growing ecosystem of startups, investors and regulators. The industry is fuelled by investments totalling more than USD 8 billion recorded in 2021. India became the third-largest fintech innovation ecosystem in the world, with more than 2,100 fintech companies.

Fintech startups in India offer a range of innovative services –

  • Mobile wallets
  • Payment gateways
  • Peer-to-peer lending
  • Robo-advisory services

These startups are leveraging multiple technologies to provide faster, more efficient and affordable financial services to all Indians. These technologies include artificial intelligence, blockchain, and big data analytics.

Digital-only banks are providing better customer experiences, attractive rates and convenient accessibility. As more banks go digital, the shift to leading-edge technology (AI/ML) offers customers a more personalised banking experience.

Decentralised Finance

With improved access to credit aided by technology trends, fintech startups today are exploring the feasibility of DeFi (Decentralised finance) and how it can benefit the banking world. Given its functionalities in transparency, accessibility and security, the question is not if but when DeFi becomes a part of everyday banking. Here are some of the technologies to track in the Indian fintech industry.

Paytech

Payment technology is a growing sector in India’s fintech industry. Fintech companies are entering this market by offering services, such as payment gateways, card networks, application programming interfaces (APIs) and payment security.

There are a range of consumer-centric services available in this innovation ecosystem such as –

  • Third-party application providers (TPAP)
  • Prepaid cards/wallets
  • Bill payments
  • QR code payments
  • Payment aggregators
  • Point-of-sale systems (POS).

Business-centric financial services include corporate cards, B2B payments and invoice payments.

The biggest players in the Paytech sector in India include Paytm, PhonePe, Mobikwik and Google Pay. These companies are leveraging technology to provide faster, efficient and highly secure payment options to consumers and businesses alike. Thus, contributing to the growth and development of the fintech industry in India.

Lendtech

Lending technology encompasses a variety of services in the fintech industry in India. It includes lenders and providers of Buy Now Pay Later (BNPL) services. Along with this, this ecosystem includes technologies such as –

  • AI and anti-fraud tools
  • Data interchanges

Additionally, lendtech offers marketing services and insurances such as –

  • Personal loans
  • Salary loans
  • Gold loans
  • Vehicle loans
  • School loans
  • Peer-to-peer lending

Some of the prominent players in the Indian Lendtech space are Google Pay, M-Swipe and

Razor Pay.

These fintech companies are using technology to offer faster, more efficient and more accessible lending options. Lendtech is becoming an increasingly important sector in the innovation ecosystem. A sector that offers a wide range of services to meet the needs of consumers and businesses.

Insurtech

Fintech plays a key role in insurtech by providing a range of services, such as –

  • Claims processing
  • Sales platforms
  • Underwriting risk management
  • Insurance infrastructure API
  • Policy administration systems

Policy Bazaar is a market leader in this category, offering innovative solutions to the insurance industry using technology.

With Insurtech, insurance companies can leverage the latest technologies to enhance customer experience, reduce costs and streamline operations. The latest technologies include big data analytics and machine learning.

Insurtech has paved the way for new business models and products in the innovation ecosystem to meet the customers’ evolving needs.

Wealthtech

Wealthtech is the intersection of finance and technology. An intersection where digital solutions are used to enhance personal wealth management, investing and portfolio management.

The advent of digital payment methods, e-KYC through Aadhar and online investment reports has led to the emergence of a fully automated asset management system. Innovations, such as big data, artificial intelligence and deep learning are being used to analyse investment alternatives, improve portfolios and manage risks.

In the fintech market, Zerodha and Smallcase are two notable companies in the Wealthtech space. These companies offer fintech services such as advanced digital tools for managing personal investments and portfolios.

Regtech

Technology is also required to manage regulatory processes in the FinTech industry focusing on regulatory monitoring, reporting and compliance.

The increasing use of digital products has resulted in more data breaches, cyber-attacks, money laundering and other fraudulent activities.

Regtech companies in the startup ecosystem leverage big data and machine learning technology. By doing so, they provide real-time data on suspicious activities and reduce the burden on compliance departments. This data enables financial institutions to efficiently monitor and report on their compliance with regulatory requirements. Ultimately, improving their ability to detect and prevent fraudulent activities.

As the use of digital products continues to grow, the importance of regtech in maintaining the integrity of the financial system is likely to increase.

Digital Payments

Currently, digital transactions make up 98.5 percent of non-cash payments. UPI suppliers in India reporting 2.8 billion digital payment transactions valued at over five trillion Indian rupees in June 2021. Neo banks have made various banking solutions such as payment gateways, payment processing, cash delivery, and online payments easier and faster.

Fintech services like API providers and aggregators, banks with open APIs, banking as a service, and core banking are all examples of digital banking services. Paytm, PhonePe, RazorPay, and other fintech organizations are leading the way in digital payments in India.

To conclude, the fintech industry in India is poised for continued growth and innovation in the years to come. By embracing digital technologies, the government and people continue to promote startups. By doing so, India’s innovation ecosystem will foster and boost fintech services for better financial management.