FinTech refers to the introduction of technology into the financial sector as a result of the development of digital technology. FinTech uses technology-savvy financial innovations to create business models that are advanced, operations, or new products/services. This has led to the development of new types of services, improved financial markets, and better financial institutions. India is moving towards a powerful environment that provides a platform for FinTech startups to become billion-dollar unicorns. FinTech in India has several goals, from opening new divisions to exploring overseas markets. India's economy, typically money-driven, has seen tremendous growth in FinTech by capitalising on the opportunities presented as a result of growth in e-commerce and greater smartphone penetration rates. Hence, based on a thorough literature review by using exploratory research method, this chapter seeks to study the growth and evolution of FinTech in India, with special reference to the COVID-19 pandemic.
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FinTech, also known as financial technology, essentially refers to the use of technology for providing various financial services. It is mostly implemented through technology start-ups that are on the route to competing with banks and other financial institutions to gain a strong foothold in the financial markets. According to Kukreja et al. (2021) customers today are spoilt for choice with the array of services being provided by FinTechs, right from money transfer to payment solutions, to online portfolio management, among many others. Entrepreneurs as well as established financial institutions are realizing the tremendous scope that FinTech offers and are working towards leveraging the same for building enhanced service quality and customer satisfaction by developing many breakthrough products and solutions. Some of the prominent technologies that are driving the growth of FinTechs are Artificial Intelligence (AI), big data, Machine Learning and Robotic Process Automation.
The word FinTech originated in the 21st century and initially referred to the use of technology in the back-end systems of prominent financial organizations. But today, FinTech covers a broad array of industries such as banking, education, retail and investment management to name a few. Emerging payment methods such as crypto currencies are also now considered within the purview of FinTech. There has also been a rapid shift from providing mere industry-oriented services to a more focused and demanding consumer oriented approach.
India has been emerging as one of the largest FinTech markets globally over the past decade. According to Findexable’s Global FinTech Ranking Report, 2021, India has been ranked 23 in the FinTech Country Rankings. Three Indian cities – New Delhi, Bangalore and Mumbai also found a place among the top 50 of the city rankings. Many factors such as wider internet penetration rate, affordable internet, growth in the number of startups and increasing investments in technology have all contributed to the growth of FinTech in India, Muthukannan et al..(2020). Customers are looking for simple, reliable and safe financial services and FinTechs have been able to provide just that. A recent report by Boston Consulting Group and FICCI has mentions that India is in a good position to achieve a financial sector valuation of USD 150-160 billion by 2025. This indicates an incremental value creation potential of USD 100 billion. To achieve this, over the next five years, India’s FinTech sector will need USD 20-25 billion worth of investments. It is just an indicator of the enormous scope that FinTech has in India. The government has also been supporting the FinTech landscape by coming up with initiatives such as Jan Dhan Yojana, Start-up India, Digital India, Make in India, etc. Digital infrastructure has also seen major updates in the form of technologies such as Aadhaar, UPI, GST, etc. Along with this, the role of regulators such as RBI, SEBI and IRDAI has been vital in ensuring the provision of safe and affordable digital financial systems. At the 2nd Global FinTech Fest 2021, the Union Minister of Commerce & Industry, Consumer Affairs and Food & Public Distribution and Textiles, Shri Piyush Goyal, mentioned that against the global average of 64%, India has the highest FinTech adoption rate in the world at 87%. He also highlighted the role that the Indian FinTech industry played during the Covid-19 pandemic saying that it enabled people to carry out critical activities from the safety of their homes, especially during the lockdown periods. He further mentioned that FinTech does have the scope to bring investments for many digital infrastructures including mobile apps, e-commerce, etc.
The Indian FinTech industry mainly offers the products/services such as payments (which comprises of payment banks, mobile wallets, payment gateways and payment infrastructure) and online financial products (lending, insurance, e-NPS and mutual funds/broking) as depicted in the figure given below.