Fintech paves India's digital growth

India is transitioning into a dynamic ecosystem offering fintech start-ups a platform to potentially grow into billion-dollar unicorns. From tapping new segments to exploring foreign markets, fintech start-ups in India are pursuing multiple aspirations.

By Sandhya D'Mello

Published: Tue 26 Jan 2021, 3:50 PM

Last updated: Tue 26 Jan 2021, 6:17 PM

Fintech in India has brought in huge dis­ruption paving way for digital transfor­mation. The trend was accelerated dur­ing the Covid-19-outbreak and now is spiralling towards more innovation bringing ease to masses.

The nation currently has around 2,174 finTech startups, according to a report India Finch Report 2020 by Medici. The report indicates that Ben­galuru and Mumbai lead the momentum in fin­tech, and together, these cities represent 42 per cent of the start-up headquarters. Apart from the top five fintech destinations, which include Mum­bai, Bangalore, New Delhi, Gurugram, and Hy­derabad, the rest of India accounts for 738 fintech start-ups.

Abhishant Pant, founder, Yatra Angel Network (YAN), said, "I believe fintech disruption in India has finally come of age, which got catalysed by three mega events that were driven by the govern­ment via Jan Dhan Yojana. It provided access to bank accounts and debit cards to 700 million plus in last six years. Demonetisation led to greater consumer appreciation and adoption of digital modes; and GSTN, pushed majority merchants towards accountability, leading to a better mer­chant end point digitisation number."

Fintech has been on a tear in India over the last decade, the journey of wallets from a recharge service to becoming banks followed by demonis­tisation that provided a major thrust to payments both from government as well as new products from fintechs, the roll out and scale up UPI meant multi-millon dollar businesses got built on top of a new infrastructure.

"Fintechs over the past couple of years have been developing new and efficient methods to lend to consumers as well as on the investments side, both in capital markets as well as PFM space fintechs have carved out a niche and have really scaled in to multiple billion dollar businesses. We are now witnessing the rapid evolution of embed­ded finance with more brands integrating financial services as part of their offerings to their custom­ers," said Madhusudanan R, Co-founder and CEO, M2P Fintech.

"In 2021, we believe that there will be height­ened action around small and medium enter­prises (SME)/ micro, small and medium enter­prises (MSME) lending, it is anticipated that several Neo Banks, both on consumer and SMEs, will be launched and are expected to challenge status quo of incumbents. In 2021, we will also see the imminent entry of several global fintech companies that having been eyeing this lucrative market and crypto may find some regulatory pal­atability and will evolve into controlled rollout," added Madhusudanan.

Similarly, Phi Commerce takes digitally chal­lenged businesses up the digital payments curve, Jose Thattil, CEO and co-founder, PhiCommerce, said, "Increased financial inclusion where even the hitherto unbanked population has started benefiting by having government subsidies and insurance payments, etc. getting credited direct­ly into their accounts in a matter of days instead of months.

"Beyond online and in-store payments, door­step payments, which has been an emerging cat­egory so far, will come to the forefront. Especial­ly in markets like India, Middle East, Latin America, where cash on delivery is popular, such cash transactions will get converted to 'Digital at Doorstep' transactions

Contactless and QR based transaction volumes will increase drastically in the post-Covid-19 era. This will mean a shift to more SoftPOS based pay­ment applications that can run on NFC mobile phones at merchant stores over conventional POS terminals. We see an uptake in electronic transac­tions within B2B payments. There is a clearly vis­ible trend from cheque to electronic."

Digital payment methods are well accepted by

Contactless and QR based transaction volumes will increase drastically in the post-Covid-19 era. This will mean a shift to more SoftPOS based payment applications that can run on NFC mobile phones at merchant stores.


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Source: Abhishant Pant

Indian households and are not just the preserve of the rich or well-educated, finds a study con­ducted by People Research on India's Consumer Economy (PRICE) in partnership with the Na­tional Payments Corporation of India (NPCI).

Covering 5,314 households across 25 states with a sample designed to represent states and households across the income spectrum, the sur­vey was aimed at understanding the awareness, adoption and use behaviour of households with respect to digital payments.

The study showed that, while one of two of In­dia's richest 20 per cent households use digital payments, as many as one out of four households in the poorest 40 per cent also use it. In addition, there is a suppressed demand of people who say they desire to use it but need someone to show them how to, and a smaller group who used it ear­lier and discontinued.

If this 'ready' demand is enabled through effec­tive training and education, then over half of all Indian households (54 per cent or 151 million households) will become digital payment users - 55 million of these households will come from the poorest 40 per cent of Indian households, 61 million will come from middle India or middle 40 per cent income band and only 36 million will come from the richest 20 per cent.

The report also points to the fact that that smart phone ownership is no longer a bottleneck for the adoption of digital payments with 68 per cent of the respondents (those in charge of look­ing after banking and payment work for the household, typically the chief wage earner) own­ing smartphones. As expected, smartphone users are near-universal at 90 per cent for the richest 20 per cent of Indian households, but also as high as 57 per cent of India's poorest households have a smartphone.

The report revealed a very high level of aware­ness of UPI and payment apps and that house­holds which are using UPI as a platform may not be completely aware about interoperability of the platform. There is a potential to create the aware­ness that any bank or payment app can be used to make UPI payments to any UPI user and users should know their UPI ID. The RuPay card vol­umes have also witnessed a rise not only in urban areas, but also in remote PIN codes that had hitherto remained silent.

According to the study, the banking system is also very well connected digitally to respondents via Aadhaar linkages and SMS facility even at the lower income groups. The report finds 87 per cent of the respondents are aware of the fact that they get SMS from the banks, which gives them the confidence to manage their money safely.

As per the report, the Direct Benefit Transfers (DBT) delivery system has worked exceedingly well for the respondents and got even better dur­ing lockdown as around 85 per cent of the house­holds received DBTs on their bank accounts.

"India went through a host of events as part of the makeover of the 'financial eco-system', in the last few years and one such event was 'demoneti­sation'; a huge chunk of currency was banned overnight. This led to a situation where even the most digitally naive users had to adapt to technol­ogy-based payment options to keep up with chang­ing times and this led to the birth of what I define as the 'financially comfortable digital Indian', surprisingly this was not just the younger audience but even the elderly who were left with no choice. Armed with a mobile phone and a host of Finance apps; payment, loans, banking, etc., Indians went about their life one OTP at a time," said Paurush Sonkar, Founder, Digital Stallions Forum UAE & BFSI Digital Stallions Forum.

He added, "I define 2021 as the year when 'virtual' shall finally overtake 'physical interac­tions', in the financial services sector in more ways than one. I foresee quite a few fintech trends but here are the three most important ones from my perspective and they are; percentage of peo­ple above the age of 35 shall outnumber millen­nials when it comes to adopting to fintech offer­ings; Compare is passe, presenting 'come and pair' - financial products shall go from being pure compare online to a more come online, ex­perience the product virtually and then via arti­ficial intelligence and machine learning get paired to the correct product.





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