Financial technology (FinTech), which is the gamut of digitally-enabled banking and financial solutions, is a booming industry in India. According to the India FinTech Report 2019, India has 2,035 FinTech startups, the second largest in the world after the US. Over the course of just four years (2015-2018), the number of FinTech startups grew three-fold. According to NASSCOM, FinTech in India is poised to grow to a $2.4 billion industry by 2020. FinTech is evidently a momentous opportunity for India, not only in terms of the ease and convenience that it lends to financial services but also the fact that it can facilitate financial inclusion for underserved populations on a large scale. So, what are the emerging trends in FinTech in India and what does the future of the industry hold? Let’s take a closer look.
As mentioned earlier, regulatory uncertainty remains a challenge for the FinTech industry in India. In Budget 2019, no particular emphasis has been laid on the need to craft a clear and hospitable regulatory structure for the FinTech ecosystem. Having said that, the Budget has delineated several measures that have the potential to positively impact startups, SMEs and NBFCs, with a clear percolation of benefits to the FinTech industry as a whole.
The Budget has focused on financial inclusion and digital payment systems that bodes very well for India’s FinTech ecosystem. For instance, the Budget proposes an integrated payments platform for micro, small and medium enterprises that can bring large unregulated parts of the MSME industry under the formal economy. To disincentivise cash payments, a 2% TDS has been proposed on cash withdrawal of more than Rs 1 crore in a single year from a bank account.
There’s also a considerable push on investments in innovation and technology which are critical for the FinTech ecosystem to thrive. The Budget proposes training 10 million young people in new-age technologies such as AI (artificial intelligence), IoT (Internet of Things), robotics and big data, in order to plug the skills gap and also ensure that India’s young people are able to meet the demands of the new job market. If this is implemented, India’s FinTech industry could be revolutionised. Apart from this, the government also plans to make considerable investments in innovation research through the National Research Foundation (NRF).