IMPACT OF FINANCIAL TECHNOLOGY COMPANIES ON INDIAN ECONOMY

Introduction:
The financial services sector has become significantly impacted and influenced by emerging technology-
enabled trends that support innovation. India is changing into a powerful environment offering Fin-tech
startups a stage to possibly develop into billion dollar unicorns. From tapping new Portions to
investigating unfamiliar business sectors, fin-tech new companies in India are seeking after numerous
desires. The traditionally cash-driven Indian economy has responded well to the fin-tech opportunity,
primarily triggered by a surge in e-commerce, and Smartphone penetration. The transaction value for
the Indian fin-tech sector is estimated to be approximately USD 33 billion in 2016 and is forecasted to
reach USD 73 billion in 2020 growing at a five-year CAGR of 22 percent.

India‘s growth wave may still not be of the scale when viewed against its global counterparts, but it is
stacked well, largely due to a strong talent pipeline of easy-to-hire and inexpensive tech workforce.
From wallets to lending to insurance, the services of fin-tech have redefined the way in which
businesses and consumers carry out routine transactions. The increasing adoption of these trends is
positioning India as an attractive market worldwide.
INDIA OVERVIEW:

In India, financial inclusion is projected to be driven largely by creation of an ecosystem where people
get the opportunities to use financial instruments in their daily lives and banks make best use of the
spread of fin-tech and non-financial firms operating in these inaccessible areas.

At present, the financial inclusion penetration in India is low, where 145 million households do not have
access to banking services. In India, rapidly growing penetration of smartphones and internet has led to
the emergence of multiple technologies for replacing cash, providing credit information for screening,
enabling online lending and purchasing of financial products through digital means. Going forward, the
recent provision of payment bank licenses by RBI is likely to aid in monetizing this digital trend and
making technology as the core offering. RBI has also given licenses to 10 entities for setting up Small
Finance Banks. Through this initiative, RBI aims to extend the credit facilities to micro and unorganized
sectors. Alongside this, RBI has also come up with a report on Medium term path for financial inclusion,
which aims to set the path for 90 percent financial inclusion by 2021. The opportunity for fin-tech is
enormous in the areas of government-to-person cash transfer. The Direct Benefit Transfer (DBT) scheme
will enable deeper penetration of financial services and help in achieving financial inclusion goals as per
RBI. Even Government of India's financial inclusion mission is working on the same lines with an aim to
provide following banking services to all households with the following steps:

• Access to bank account with an overdraft facility.

• Unique identifier to every Indian in the form of Aadhar card.

• Rupay-enabled ATM debit card.

• Accident insurance covers of INR 1 lakh.

In the near future, alternative payments are likely to have a significant share of payments and transfers,
which could lead to deeper penetration of financial services, thereby, supporting the overall agenda of
financial inclusion.
EXPLAINATION OF THE TOPIC:

India is transitioning into a dynamic ecosystem offering fintech start-ups a platform to potentially grow
into billion dollar unicorns. From tapping new segments to exploring foreign markets, fintech start-ups
in India are pursuing multiple aspirations.

The Indian fintech software market is forecasted to touch USD 2.4 billion by 2020 from a current USD
1.2 billion, as per NASSCOM.

The traditionally cash-driven Indian economy has responded well to the fintech opportunity, primarily
triggered by a surge in e-commerce, and smartphone penetration. The transaction value for the Indian
fintech sector is estimated to be approximately USD 33 billion in 2016 and is forecasted to reach USD 73
billion02 in 2020 growing at a five-year CAGR of 22 per cent.

The investor attention has been concentrated towards hi-tech cities in 2015, with Bengaluru witnessing
eleven Backed investment deals of USD 57 million, followed by Mumbai and Gurgaon with nine and six
deals, respectively. Bengaluru, the start-up capital of India has benefitted from the same, and is ranked
15 among the world’s major start-up cities.

India’s growth wave may still not be of the scale when viewed against its global counterparts, but it is
stacked well, largely due to a strong talent pipeline of easy-to-hire and inexpensive tech workforce.

From wallets to lending to insurance, the services of fintech have redefined the way in which businesses
and consumers carry out routine transactions. The increasing adoption of these trends is positioning
India as an attractive market worldwide.