The Rapid Rise of FinTech in India

The Rapid Rise of FinTech in India

From the growing youth population to customer-centricity, here’s a look at what’s driving the FinTech boom in India.

India is one of the world’s fastest-growing economies and speedily emerging FinTech hubs. As of June 2022, the country had around 4,200 FinTech startups, 17 of which were unicorns, i.e. companies that reached a valuation of US$1 billion without being listed on the stock market. In comparison, China is home to only 13 FinTech unicorns. There are many more Indian startups on the brink of the US$1 billion dream, dubbed “soonicorns”, a testament to India’s flourishing FinTech industry. 

In fact, India has the world’s highest FinTech adoption rate of 87%, ahead of expected players like China and the United States. However, the nation’s FinTech boom is relatively recent, with nearly 67 per cent of all FinTechs in the country established in the past five years alone. 

So what’s driving this growth?

1. Sizable youth demographic and internet users

India is the world’s second-most populated country, which has increased demand for FinTech solutions. Moreover, it has a sizable youth demographic, with an average age of 29, making the population as a whole more likely to use emerging FinTech and innovate new technologies.

From the end of December 2020 to the end of March 2021, the country’s total number of internet users has increased tremendously from 795.18 million to 825.3 million, at a quarterly growth rate of 3.79 per cent, according to the Telecom Regulatory Authority of India (TRAI). India’s active internet user count is expected to grow even more in the coming years. Estimates indicate that the growing number of middle and high-income households are likely to continue to drive ‌demand in the Indian FinTech industry, as more people are likely to need such services.

2. Government support

Government support has also been a key to India’s success in the FinTech industry, encouraging an innovative FinTech landscape through various government programs and committees. Some government programs include Startup India, Digital India, India Stack, E-RUPI, licenses for payback banks, Jan Dhan Yojana, RBI’s regulatory sandboxes and National Common Mobility Card (BCMC). The government has also implemented an Inter-Ministerial Steering Committee (IMSC) on FinTech, established bilaterally between India and the U.K., and a Joint Working Group (JWG) on FinTech, established between India and Singapore, to “promote FinTech solutions, interoperability standards, and payment linkages”.

The Reserve Bank of India (RBI), India’s main financial regulatory body, has also played an important role in pushing the growing use of digital payments to help establish a cashless society. In 2019, the RBI composed a framework to provide structure for regulators to better engage with the FinTech ecosystem. Then, in January 2022, the RBI announced the creation of a new FinTech department to oversee matters related to the FinTech industry’s inter-regulation and international coordination. Later, in March, the RBI inaugurated an innovation hub aiming to boost innovation in the financial sector. 

3. A consumer-centric approach

The Indian FinTech industry has adopted a consumer-centric approach, thus creating a permanent niche for itself by offering automated tailor-made services depending on consumer preference. Across the country, especially in tier 2-3 cities and smaller towns, consumers have jumped directly to smartphone banking without ever touching cards or wire transfers. 

Moreover, the convenience of superapps, like Paytm or Jio, that bring a diversified set of services under one umbrella has drastically increased the ease with which consumers can conduct financial transactions. 

Lastly, while every other sector’s growth slumped during the COVID-19 pandemic, the FinTech sector has thrived due to restrictions that curtailed physical movement and encouraged contactless transactions. The future will likely see consumers adopting FinTech even more, as its convenience and accessibility make it super appealing.

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Header Image Courtesy of Unsplash


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