Fintech- The Future of Finance in India

Authors: Priyanshi Rastogi, Amit Kumar Chauhan

Institution: IMS Ghaziabad UC Campus
Abstract- Financial technology, often shortened to fintech, is the technology and innovation
that aims to compete with traditional financial methods in the delivery of financial services. It is
an emerging industry that uses technology to improve activities in finance.
Fintech, a withdrawal of money related innovation, speaks to the most recent emphasis of the
embeddedness of innovation inside the conveyance of budgetary administrations. What
recognizes the present influx of the marriage of monetary administrations and innovation isn't so
much the variety of new money-related items and plans of action that have been contrived all
things considered about who conveys them (for example not simply occupant money related
foundations) and their accessibility at the retail and discount levels. Likewise recognizing the
purported 'fintech upset' is the usage of quickly creating data and correspondence advancements
in the conveyance of money related administrations. It has been evaluated that the installments in
India made through computerized implies which was USD 50 billion out of 2016, would surpass
USD 500 billion by 2020. The development of the fintech division in India can be credited to the
development of versatile innovation and the portable availability. fintech was the introduction of
the Unified Payments Interface (UPI)-based payment system. The UPI, developed by the
National Payments Corporation of India, provides for instant and real-time mobile to mobile
money transfer between participating banks. The banks and the administration likewise
supported the utilization of these administrations and pushed towards a cashless economy. A
noteworthy stimulus to fintech's development was the November 2016 choice by the
Government of India to end the utilization of INR 500 and INR 1,000 money notes in its
demonetization drive.

Keywords: Fintech, Unified Payment Interface, Financial technology

Introduction:
Financial technology often referred to as ‘Fintech’, is that the technology and innovative
financial methods used on the delivery of monetary services. It’s an emerging industry that uses
technology to reinforce or automate the financial services and process. Fintech by utilizing
specialized software and algorithms that are used on computers and increasingly, smartphones
helps consumers, companies, business concerns to enhance their financial operation and
activities. Right from using smartphones for mobile banking, insurance, investing services, and
cryptocurrency are a number of the simplest samples of technologies won't to for creating
financial services more accessible to the overall public.
The impact of technological innovation on the financial sector, an industry commonly known as
Fintech. The focus of the paper is on how Fintech has expanded access to finance for millions of
people in developing economies, with a specific interest in the role of regulatory frameworks in
facilitating that process. The paper is a qualitative analysis of three case studies that have utilized
technology in the pursuit of inclusive finance: cashless payment systems in India and Kenya, and
peer-to-peer lending in China.
By inductively probing the varying degrees of success across cases, the argument will be
advanced that designing appropriate regulatory architecture is critical to maximizing the benefits
of technological innovation. More precisely, a light regulatory touch is required in the early
phases to encourage innovation and experimentation. As successful sectors and companies grow,
regulators must adapt the architecture to impose stricter controls and oversight without weighing
the sector down with overly burdensome compliance requirements. Excessive or poorly planned
state intervention at any point in the process can be counter-productive.

Some Definitions:
1. After reviewing quite 200 scientific papers citing the term “fintech,” a study on the definition
of fintech concluded that “Fintech could also be a replacement financial industry that applies
technology to reinforce financial activities.”
2. Fintech is that the new applications, processes, products, or business models within the
financial services industry, composed of one or more complementary financial services and
provided as an end-to-end process via the web.
3. Fintech can also be considered as “any innovative ideas that improve financial service
processes by proposing technology solutions according to different business situations, while the
ideas could also cause new business models or maybe new businesses.”

GROWTH OF FINTECH IN INDIA:

India’s FinTech sector may be young but is growing rapidly, fueled by an outsized market base,
an innovation-driven startup landscape, and friendly government policies and regulations.
Several startups populate this emerging and dynamic sector, while both traditional banking
institutions and non-banking financial companies (NBFCs) are catching up. This new disruption
within the banking and financial services sector has had a wide-ranging impact.
In a recent report given by the National Association of Software and Services Companies
(NASCOM) around about 400 Fintech companies are operating in India which is mostly raised
by foreign investment in fintech-focused startup accelerators and incubators. Accelerators and
incubators tapping the startup ecosystem include PayPal’s Star Tank, Yes Bank’s collaboration
with T-Hub, among others.
Besides thereto NASCOM predicts that the transaction value for the Indian fintech sector was
approximately $33 billion in 2016 and slated to succeed in $73 billion in 2020 growing at a five-
year compound annual rate of growth (CAGR) of twenty-two.
The Indian FinTech landscape can be segmented as follows: 34% in payment processing,
followed by 32% in banking and 12% in the trading, public and private sector market.
 Indian Fintech Industry

Payments Online financial product

Bank Mobile Payments Payments

Payments Wallets Gateway Infrastructure

MF-
Lending Insurance E- NPS
Broking

ATM mPOS

Technology and Financial Services in India:

Although new business organizations and enterprises offer new creative fintech administrations
to their clients, customary organizations and banks additionally contending by continually
refreshing fintech administrations for their motivations. Here is a glance at how the business is
both disturbing and improving a few territories of account.
1. Most of the major banks are increasingly offering digital access to their bank accounts through
mobile banking, like account transfer, payment, and check deposits.
2. Neo banks, a new age banking, are banks without any physical branch location, serves the
customers entirely with mobile and digital infrastructure. They provide a wide range of services
including checking, savings, payment services, and loans. Some of the neo banking platforms
operating in India are NiYO, 811 by Kotak, Open, Yono by SBI, InstantPay.
3. Different advances that praise fintech organizations are digital money and blockchain, together
they supplement one another and convey numerous creative budgetary administrations.
4. As of late due upheaval of many contributing and reserve funds applications like policy
bazaar, clear tax, capzest, the blockades to contributing are being broken-down and little cash
putting are acquainted with shoppers in the business sectors.
5. After the emergence of payment companies like Paytm, M-Pesa, Google Pay, Amazon Pay,
BHIM, Phone Pe there is great change in the way people do business. The new phrase of
business is “I’ll pay you later.” Now it's easier than ever to send money digitally anywhere in the
world.
6. As far as the Insurance sector, many startups are collaborating with traditional companies to
ease the insurance process by automating and expanding the horizons. Recently Insurance sector
is emerging as its Insuretech industry and some of the insurance companies to keep an eye on
include policy bazaar, Coverfox, digit insurance, and Acko general insurance.
7. The fintech by streamlining the risk assessment, speeding the approval process, and making
access easier has made the consumers get loans easily through their mobile devices. BankBazaar,
Finopaytech, PaySense, NeoGrowth are some of the prominent fintech companies which are
operating in India.
8. The scope of fintech is rapidly diversifying at both macro and micro levels, from providing
online accounting software to creating specialized digital platforms connecting buyers and sellers
in specific industries. Examples include Catalyst Labs within the agriculture sector, AirtimeUp
which provides village retailers the power to perform mobile top-ups, FTcash that permits SMEs
to supply payments and promotions to customers through a mobile-based platform, Profitbooks
(online accounting software designed for non-accountants), StoreKey, and HummingBill.
9. Crowdfunding platforms like Ketto, Wishberry, and Start51 enable the funding of a project or
business venture by raising funds from a large number of people. These online platforms are
gaining popularity and are particularly targeted at the early stages of business operation.
10. In India compared to other western countries, where digital financial transaction such as
‘bitcoin is grown, is still dominated by cash transaction. However a few bitcoin exchange
startups present in India which includes Unocoin, Coinsecure, and Zebpay.

Scope of Fintech in India:

Fintech service firms have brought a radical change in which business transactions are conducted
by companies and consumers daily. In India, there is a steady growth in fintech ventures, and the
investment in the Fintech industry has grown 282 percent between 2013 and 2014 and reached
US$ 450 million in 2015. According to the report given by the Nasscom, it predicts that the
Indian fintech software market is estimated to cross $2 billion by 2020, representing a 2x growth.
In total there are around 200 fin-tech start-ups, almost 60 percent are focused on the payment
processing segment.
Even though 87 percent of payment is still made in cash, with the increase in mobile usage and
internet penetration climbing steadily, the growth rate of fintech in India cannot be overstated. In
the coming years Government, Defence, Media &entertainment, Telecomm industries will
generate more demand for the Fintech solution. Moreover, by some estimates, as much as 90
percent of small businesses are not linked to formal financial institutions. These gaps in access to
institutions and services offer important scope to develop FinTech solutions (such as funding,
finance management) and expand the market base.

Incentive Schemes and Regulation of Fintech in India:

Government of India and RBI has initiated many schemes to develop and support the innovative
start-ups in India.
The Government has propelled the 'Start-up India' activity to build up an eco framework
favorable for the development of new businesses and to give help with financing. In Feb 2019,
out of 16000 new businesses perceived by the Department of Industrial Promotion and Policy,
129 startup got help with the deference of financing. Moreover, many Tax alleviation plans
including three years charge exception for perceived new businesses has been propelled by the
Government. The Government to make favorable conditions for detail ups has additionally
propelled the Digital India and Smart urban communities activities to increment remote venture,
and to make and create a framework in India.