What are the factors supporting FinTech growth in India?

FinTech companies essentially belong to the group of business organizations that attach technology and innovation to finance. Through this combination, they produce optimized business outcomes and deliver improved quality products and services to the consumers.
From being not more than a trivial buzzword to totally change the scene of the banking industry and financial services in India, FinTechs have surely come a long way. Currently, there are over 1,500 diversely sized FinTech startup companies, of which more than half have come up during the past couple of years.

Here we delve into the various factors that are contributory in supporting the growth of FinTech startups and incumbents in India.

Augmented technology adoption
India has already effectively proved itself as a thorough technology-driven nation. The rate at which technological innovation is adopted in India has intensified manifold and can be evident from the significantly high smartphone penetration level in the country.

Latest studies indicate that there are more than 300 million smartphone users currently in India. This is expected to touch 337 million by 2018 end. Correspondingly, the estimated growth will hit a world’s highest at 15.6%. Lending thus has become substantially easier with this rapid upheaval in technological espousal, as it facilitates in outreaching a large-scale audience base when compared to an old-fashioned feet-on-the-street approach.

Expeditious Internet penetration
With an estimated population base of 1.35 billion in 2018, India is going digital at an extremely fast-moving pace. It crossed over 500 million internet users by June 2018 and is expected to escalate even further.

This showcases the fact that the internet penetration is not only exhibiting a meteoric rise but also it has ample scope for further growth. With the present Government’s consistent initiatives and efforts in the promotion of digital services through “Digital India” program, there lies a favorable opportunity for the already existing FinTech startups and future prospects.

Beneficial Government policies
The demonetization measure and its endmost ramifications have provided an enormous impetus to the FinTech sector. The speedily evolving Government policies for improving financial inclusion meant for India’s overall population is a crucial factor as well that is rendering a positive backdrop for the development of FinTech.

By fostering digitization, by rolling out Goods and Services Tax (GST), by integrating biometric identification database, by introducing the Unified Payments Interface (UPI), by promoting a generalized and uniform identification process (Aadhaar Card) and through advantageous bank account schemes for every citizen, the Government has undertaken sundry strategies to favourably impact the FinTech ecosystem and subsequently boosting the country’s digital economy.
Several FinTech startups can maximize such possibilities by providing streamlined and systematic transaction services.

Increased financial inclusion
The commencement of various convenient and gainful initiatives by the ruling Government like the Pradhan Mantri Jan Dhan Yojana, Darpan Project, end-to-end digitization of Department of Posts, and the RBI’s committed attention towards the unbanked regions have resulted in bringing a remarkable difference in improving the country’s financial inclusion. RBI targets the financial inclusion to reach 90% penetration by 2021.

Approximately 600 million bank deposit accounts were made open in the 2013-2016 fiscal which is twice the number as in 2010-2013. This is primarily due to Jan Dhan. FinTech can enact a pivotal role in strengthening the financial inclusion. The fillip given by the Government for increasing financial inclusion will aid FinTech lenders because hitherto underserved customer segment can now be targeted by digital lending platforms.

Heightened interest among investors
Venture capitalists, high net worth individuals, angel investors, and private equity firms think about FinTech as a profitable investment option. As the Indian FinTech domain expands to achieve an estimated figure of $2.4 billion by the end of 2020 from a figure of $1.2 billion in 2016, 2018 will be a vital year in that journey.
India comprises of more than 1800 angel investors, with 231 active angel investors being added in H1 2018. There is a prodigious upsurge in the interest exhibited by the angel investors to put resources into the FinTech Sector, that is reflected in the closure of a record-breaking number of 323 deals securing funding in Q1 2018, up by 37 as compared to Q4 2017.

Transition to ‘data rich’ from ‘data poor.’
Around 500 registrations of tech startups happened in 2017, taking the total from 4750 in 2016 to 5,200 in 2017. India is currently the world’s third-largest country in the startup ecosystem. According to a report from NASSCOM India is poised to be covering over 10,500 startups by the end of 2020 leading to the generation of approximately 2.1 lakh employment opportunities.

The startup boom along with the tremendous investment will adequately support the FinTech sector which boasts of entrepreneurs who have the propensity towards innovation, the readiness for experimentation and are not bound by the stereotyped approaches of getting things done.