In the fast-paced world of Indian fintechs, the past year has been nothing short of a rollercoaster ride. India’s global-first digital payments systems are a cause for celebration, but Indian fintechs extend beyond payments, with innovation across lending, asset management, and insurance segments poised to demonstrate the industry’s potential to engage consumers profitably in due time.

In the past few months, Indian financial regulators, especially the RBI, have implemented a series of regulations to tighten oversight of fintech operations, with the sector largely adept at navigating these changes and avoiding governance issues that have affected non-finance startups, owing to the proactive stance of regulators. As the industry matures, the true benchmarks of governance and resilience will come to the forefront, highlighting the need for continuous assessment of fintechs’ sustainability and ethical standards, considering their ability to maintain transparency, cultivate consumer trust, and adhere to regulatory compliance. This becomes especially crucial as regulators increasingly favour permitting only regulated and licensed entities to operate within the financial services domain, even for those serving licensed firms. The evolving landscape of emerging technologies and their influence on financial services necessitates that financial regulators enhance their own capabilities, competencies, and talent pool. Until this transformation occurs, traditional financiers will continue to reap the advantages of their regulatory moat, providing them an edge over fintechs.

As fintechs grapple with newer regulations, they face an age-old dilemma: profitability versus scaling. The initial euphoria of rapidly acquiring users and market share is giving way to a sobering reality — sustainable profitability, as investors and stakeholders demand a clearer path to financial viability. The investing winter that set in a few months ago has been a wake-up call for many fintechs, urging them to reassess their business models and cost structures.

In this dynamic landscape, the competition between fintechs and traditional licensed players stands out as a captivating aspect. While fintechs are often lauded as disruptors, traditional banks and financial institutions are responding assertively with their digital transformation initiatives, introducing innovative services and digital platforms. This competitive environment ultimately benefits consumers who now enjoy a wealth of choices. However, the question of consumer loyalty looms large. In a market brimming with options, loyalty is becoming increasingly elusive. Fintechs are making substantial investments in user experience, seamless interfaces, and customer-centric products to both retain and attract users. Nevertheless, the fickleness of consumers who can effortlessly switch between services poses a persistent challenge. To thrive in this environment, all financial brands, whether tintech or traditional, must continuously innovate and adapt to ever-shifting consumer preferences.

competition rife

Over the past year, the competition for talent has intensified significantly within the Indian financial sector, where both fintechs and traditional financial institutions are fervently seeking top-notch professionals. Concurrently, traditional financial institutions have recognised the imperative to fortify their digital capabilities. However, many of these traditional players grapple with the cultural challenge of integrating younger technology and digital talent, necessitating a swift shift in mindset. On the flip side, fintechs, propelled by innovation and a penchant for disruption, have been successful in luring skilled experts with promises of dynamic work environments and opportunities to spearhead digital transformation. Notably, they have shown a penchant for recruiting experienced leaders and talent from regulatory bodies and bureaucracy, building robust boards, advisory teams, and consultant networks. This strategic move aids them in navigating the intricate regulatory landscape with a deeper understanding and proficiency.

Fintechs will continue to play a pivotal role in reshaping India’s financial landscape, but the road ahead is fraught with challenges and opportunities that will test their capital, patience and ability to convince regulators about their long-term business goals.

Srinath Sridharan is an author, policy researcher & corporate advisor