Financial technology in India
[citation needed] The Indian market has witnessed massive investments in various sectors adopting FinTech, which has been driven partly by the robust and effective government reforms that are pushing the country towards a digital economy.
[4] This rapid growth in the number of startups has been a result of a large talent pool, conducive regulations, and an increased venture capital flow in the past decade.
[5] An increased smartphone and internet penetration coupled with a demand for tailored services and superior customer experience by the public, has helped as well.
[7] The regulations developed by the Reserve Bank of India (RBI), IRDAI and SEBI has ensured increased accountability and the uninterrupted availability of secure and affordable digital financial systems.
[1][4] The use of digital payments increased significantly in the past few years, with the key reasons being the demonetization initiative announced by Indian Government in 2016 and the outbreak of COVID-19 in 2020.
Similar effects were seen with the onset of the COVID-19 pandemic when people started preferring contactless payment methods to curb the spread of infection.
They address the gap by focusing on improving customer experience and gain operating efficiencies, by implementing both conventional and alternative credit scoring models, and digital workflows.
According to Tracxn database obtained by EY, alternative lending as the second biggest receiver of investment in FinTech after Payments sector, at 29% of the total share.
[12] Though it has increased at a CAGR of 20% in last 4 years, the actual number is low keeping in mind India's credit card eligible population.
[13] This shows that round 190 million Indians above the age of 15 don't have a banking account and thus no access to credit or any kind of loan.
[15] The Indian financial ecosystem encourages non-bank finance companies (NBFCs) to provide these alternate options to consumers by leveraging innovation and technology.
In addition to improving experiences, some NBFCs like Revfin, DMI Finance, FlexiLoans and LendingKart also digitise underwriting so as to provide real-time offers for consumers.
Similar to any lending product, the primary revenue source for BNPL is the income through interests and the fees incurred when customers don't pay back on time.
Until 2019, monthly 22 million Indian consumers were looking for credit and a 70% of them dropped their applications mid-way due to various intricacies in the traditional process.
Cab aggregators (Uber, Olacabs) and e-commerce platforms (Flipkart, Amazon) have also started providing “pay later” options to their customers.
Lenders who want to make higher returns from their surplus funds lend to borrowers seeking low-cost and quick unsecured loans.
However, the insurance market in India has tremendous potential to grow due to its population majorly in the middle-class income category, and favorable regulatory policies.
The market is experiencing a sudden increase in demand for small premium bite-size insurance, microinsurance, remote claims management capabilities, and chat bots for enhanced customer service.
