India’s fintech industry has raised a cumulative funding of $27.6 billion and is expected to be valued at over $150 billion by 2025, Amitabh Kant, CEO, NITI Aayog said at Razorpay’s FTX 2021 event.
He also noted that there are over 2,100 fintech companies in the country with more than 67 per cent of them set up in the last five years. “The industry has seen tremendous growth in the past couple of years, establishing itself as a vibrant fintech hub on the global stage,” Kant said.
He noted that India’s fintech ecosystem has reached here because of a systematic approach, with the government playing a key role as a facilitator. He tracked the growth story of the fintech ecosystem to India’s larger Digital India initiative and the development of UPI and India Stack.
Building ecosystem
“The first requirement that had to be addressed was that of a digital identity system, with a built-in authentication mechanism. With the development of the Aadhaar stack or India stack, we built the first building block of the fintech ecosystem. After taking the first challenge, the emphasis shifted to the digital infrastructure layer for peer-to-peer transfer of money. This took the shape of the unified payment interface (UPI), and National Payments Corporation of India (NPCI) was established to oversee its functions. Through UPI, we have created one of the largest growing digital payments platforms in the world,” said Kant.
The NITI Aayog CEO also noted that India has a clear shot at cementing its position in the global landscape with the responsive policies in India’s dynamic entrepreneurial ecosystem. “Through our regulatory sandboxes, agile and responsive approach to policies, we are not only creating space for innovation, but we are also exploring newer ways to solve old problems in partnership with start-ups in the private sector,” he said.
Key role for government
He added that the role of the government is going to be key, not just from the regulatory standpoint but also to work on ensuring that critical enabling support is provided whether it is the broadband infrastructure to enhance internet access in rural areas or digital literacy and financial programs, which can allow a greater number of citizens to access and benefit from fintech programs.
In November, 4.18 billion transactions were processed through the UPI.
A collaborative approach to UPI allowed the private sector to build apps on the top of the underlined digital infrastructure to enable payment services. This has allowed the whole ecosystem of payment start-ups to flourish. With payments problems solved, the fintech ecosystem would shift focus towards lending where there has been emphasis towards both consumers as well as MSMEs-based lending, he said.
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Fintech has allowed innovations in the space allowing for new models to come up such as flow-based lending. Now there is greater intention that is directed towards personal finance and money management. A plethora of entities have come up recently in the space, with wider acceptance of wealth-management products, their ecosystem is also able to tackle some of the more traditional financial products which are more complex, capital intensive and have a longer innovation cycle. Initially, aggregator startups emerged which helped other retailers. Now the new insurance tech companies are manufacturing as well as distrubuting products covering the end to end.