Indian Fintech Industry
If you have ever paid for something with your phone, transferred money using an app or checked your bank statement online, then you are already a part of multi- billion dollar industry- Fintech. Fintech is changing economies around the world.
What is Fintech
Fintech stands for “financial technologies.” It refers to everything from cashless payments, to croudfunding platforms, to virtual currencies eg. Bitcoin. Fintech companies have changed the way we borrow and lend money.
The term fintech includes a huge range of products, technologies and business models that are changing the financial service industry. This all-encompassing term refers to the technologies used in the financial services sector, from the world’s top financial institutions to small banks to insurance companies and more.
Recently, fintech has come to be associated with customer-oriented technologies that are disrupting traditional financial services, including financial advice and education, wealth management, lending and borrowing, retail banking, fundraising, money transfers/payments, investment management and more.
Understand Fintech – Business Model
Initially fintechs were mostly focused on lending and borrowing, however with the growth of fintech ecosystem, new and different segments for fintech platform are gaining pace. Below are few business models that have been adopted by fintech in India:
Digital Payments- Paytm, PhonePay, BharatPay and many more
Wealthtech - Paisabazzar, Zerodha, Bankbazaar
Insurtech- Policybazaar, Easypolicy, Toffee Insurance and many more
India- A fintech superpower
India’s fintech market is the world’s fastest growing market- 87 percent with more than 2100 companies in existence today. India’s fintech market is now valued at US$31 billion, projected to grow to US$84 billion by 2025. Increasing growth of this sector can also be observed through increasing trust of investors and rising investments in recent years.
How Indian fintech companies can reshape the financial services landscape in India:
As per the report of Deloitte, Indian FinTech companies have the potential to reshape the financial services landscape in three ways:
The FinTech startups are likely to reduce costs and improve quality of financial services. Not being burdened with legacy operations, IT systems, and expensive physical networks, benefits of leaner operating models can be passed on to customers.
The FinTech industry will develop unique and innovative models of assessing risks. Leveraging big data, machine learning, and alternative data to underwrite credit and develop credit scores for customers with limited credit history will improve the penetration of financial services in India.
FinTech will create a more diverse, secured, and stable financial services landscape. FinTech companies are less homogenous than incumbent banks and offer great learning templates to improve, both, capabilities and culture.
Indian banks are becoming serious about how they collaborate with fintech companies and drive the maximum value out of these partnership.
Kotak Mahindra bank Ltd. acquired a 9.99 percent equity stake in KFin Technologies Pvt. Ltd, which is largest integrated solutions and services provider for investor and issuer services, HDFC Bank Ltd purchased a 5.2 percent stake in Mintoak Innovations, a digital payments platform, State Bank of India in June invested in payment gateway company Cashfree Payments, ICICI Bank Ltd has bought stakes in fintech start-ups by investing in digital payments firm CityCash and Thillais Analytical Solutions Pvt. Ltd.
Banks are acquiring stakes in the fintech companies with the dual purpose of earning return on their investments and for the strategic benefit aligned to their partnerships with the startup.