Modules for Traders
India's fintech journey
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The future of fintech in India
Although the fintech industry took a while to bloom in India, it is currently one of the largest in the entire world. All of this tremendous growth has happened within the span of just a few years. Currently, the Indian fintech industry is the third largest in the world, with a market size of around $31 billion, behind only the U.S. and China.
Despite being in the third position, the level of penetration of financial services in India remains quite low. However, if the growth projections are anything to go by, the Indian fintech industry is estimated to touch roughly $150 billion by 2025. Also, the fintech transaction value size is set to grow from around $66 billion in 2019 to around $138 billion by the end of 2023. This effectively means that the industry is expected to grow at a staggering CAGR of 20%.
The trends shaping the future of fintech industry in India
The growth of the Indian fintech industry in the near future is likely to be marked by several trends, both existing and new. These trends are likely to be the primary driving factor of the industry. Here’s an overview of a few of these trends.
Although the trend of cashless transactions has already caught on in India, the bulk of the transactions are from tier 1 cities. Tier 2 and tier 3 cities have a long way to go when it comes to the adoption of cashless transactions.
However, efforts are underway from both the Reserve Bank of India and fintech companies to make cashless transactions more accessible to even the most rural areas of India. One of the key steps that are being undertaken to make cashless transactions a reality in rural areas is by providing financial services and payment applications in languages that the populace can understand.
Secondly, the RBI is looking to provide cashless transactions facilities through the offline mode, which doesn’t require a smartphone or internet connectivity. All of these efforts are likely to bear fruit in the near future with tier 2 and tier 3 cities also joining the fray as far as cashless transactions are concerned.
Currently, the future of financial technology - blockchain, is only being used in cryptocurrencies. However, there is potential for the technology to become much larger than cryptos. The Distributed Ledger Technology (DLT) that blockchain is dependent on can be utilized to power financial payment systems.
The immutable nature of blockchain technology can be used to secure financial transaction data, whereas blockchain smart contracts can be used for supply chain management and for processing payments automatically.
Blockchain can enable real-time transaction settlements with little to no delay even when transferring funds from one end of the world to the other, with little to no costs involved. Central banks throughout the world are beginning to experiment with blockchain technology and are coming up with ways to integrate the tech into the financial ecosystem.
Once the proof of concept is strongly established, the Reserve Bank of India and the Indian government may also choose to adopt the technology. If this comes to pass, then the future of the fintech industry in India is likely to reach even higher levels.
Cloud computing has traditionally been used only in the Information Technology sector and has seen very little use case in the financial services industry. However, financial institutions can make use of cloud computing to increase their transaction efficiency, enhance security, and reduce downtimes.
Proper implementation of cloud computing infrastructure by a financial institution can save a lot of costs, since the bulk of IT infrastructure, data centers, and maintenance can be offloaded to the providers of cloud computing. The benefit of cost saving can then be transferred to the customers.
Although artificial intelligence has been introduced by financial institutions, they’re currently used only for providing support services. AI, machine learning, and data analytics are the future of financial technology and can be used to automate different processes ranging from financial transactions to reporting.
By automating processes that are currently being done manually, financial institutions can effectively reduce costs, increase efficiency, and eliminate human errors. And when it comes to automation AI-driven solutions are the perfect way to go.
Verification of identity is becoming increasingly necessary to secure access to financial accounts and to prevent frauds or unauthorized access. Fintech companies are likely to employ biometric security measures such as fingerprint recognition, facial recognition, and voice analysis to help enhance the security of the banking and financial services industry. Through the extensive use of biometrics, fintech firms can replace passwords and PINs, which are comparatively less safer.
Cyber threats are on a rise. And the financial services sector is especially vulnerable. In the near future, cybersecurity is likely to take the center stage as an increasing number of fintech companies devise various methods to safeguard sensitive data.
Seeing as fintech’s future is dependent on how strong the cybersecurity measures are, financial institutions are expected to employ techniques such as decentralization, blockchain technology, multi-cloud data storage, and secure access service edge (SASE) to tackle security threats in the future.
And just like that, we’ve come to the end of yet another module of Smart Money. With this, you must now be aware of a few of the key trends that are likely to shape the next decade of fintech in India.
A quick recap
- Currently, the Indian fintech industry is the third largest in the world, with a market size of around $31 billion, behind only the U.S. and China.
- If the growth projections are anything to go by, the Indian fintech industry is estimated to touch roughly $150 billion by 2025.
- Also, the fintech transaction value size is set to grow from around $66 billion in 2019 to around $138 billion by the end of 2023.
- The growth of the Indian fintech industry in the near future is likely to be marked by several trends, both existing and new.
- Some of the trends that are likely to be the primary driving factor of the fintech industry are - cashless transactions, blockchain technology, cloud computing, AI-driven solutions, biometric security, and cyber security.
Frequently Asked Questions (FAQs)
Does fintech have a future?
Yes. Considering the fact that technology is being integrated even more tightly into the financial services space, fintech’s future looks very bright.
Is fintech the future of finance?
Yes. As we move towards a more technologically connected world and away from traditional financial practices, fintech is the need and the future of finance.
What is new in fintech?
Blockchain technology, cloud computing, AI-driven solutions for automation of financial processes, and biometric security measures are a few of the new fintech trends that we can see more of in the near future.
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