1.

1 INTRODUCTION

1.1 Introduction On Fintech:

The word FinTech is a combination of the terms "financial” and “technology” and is
intended to denote the use of technology to deliver a financial and managerial solution.
Interest in FinTech business has been growing. Financial technology, or Fintech for
short, refers to technology-enabled financial solutions. It is often described as the
union of financial services and information technology. The interlinkage of finance and
technology might seem like something fairly recent but has actually evolved over
distinct eras. We could actually say that finance & technology have been intertwined
ever since we can speak of modern society. The term Fintech has appeared recently
in business journals to describe the disruptive challenge to the financial sector of the
introduction of faster, cheaper and human-centered financial and managerial services.
The term has become a buzzword among private and institutional investors who
invested more than 50 billion dollars into the sector between 2010 and 2015. The
visionary statement made by Bill Gates in 1994 that “banking is necessary, banks are
not” has become a self- reinforcing prophecy, with 6,000 – 7,000 Fintech companies
across the world now trying to obtain a slice of the banking industry’s profitable
business. Strategic advisory firms have already put the emerging fintech trend at the
top of their agendas, with the goal of providing universal banks with a better
understanding of likely future scenarios. The growing interest in fintech will soon be
visible in the academic literature, but there is currently a large knowledge deficit about
this field. Fintech is an evolving concept which has so far created little historical
evidence or statistically significant time-series data for analysis, leaving researchers
only secondary data with which to work, or sponsored research carried out by large
advisory companies. As signs are already emerging that such financial technologies
have the ability to significantly impact the use of cash and current banking and financial
practices and may empower individuals living at the bottom of the pyramid, the validity
of research into the various areas of Fintech and the financial and managerial sector
is apparent.

Fintech company stands for any business that uses technology to modify, enhance, or
automate financial services for consumers or businesses. A few examples of Fintech
companies are peer-to- peer payment services (like Cash App, Venmo), mobile
banking, automated portfolio managers (like Betterment, Wealthfront), or trading
platforms like Robinhood. It also applies to developing and trading cryptocurrencies
(like Ether, Dogecoin, Bitcoin). These companies incorporate technologies like
Blockchain, data science, and AI into conventional financial sectors, making them
faster, safer, and more efficient. FinTech is the fastest-growing tech sector where the
firms innovate in virtually every finance area, from loans and payment to stock trading
and credit scoring. FinTech is not a new industry; it has just evolved pretty quickly.
Technology, in actuality, has always been a part of the finance world, be it the
introduction of credit cards in the 1950s or electronic trading floors, ATMs, personal
finance apps, or high-frequency trading in the following decades. Nowadays, the
newest finance technologies use blockchain, machine learning (MI) algorithms, and
data science to process credit cards and run hedge funds

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Now we think of fintech in terms of cryptocurrencies and start-up banks, but its roots
can be traced back to the late 19th century when money could be moved around by
telegrams and morse code – though this probably wouldn’t get many investors excited
today. Technology has always been a part of finance starting from the invention of
credit cards in the 1950s to the emergence of ATMs in the 1960s, electronic trading in
the 1970s, rise of personal computers in the 1980s and the upsurge of e-commerce
business models in the 1990s. A frequently asked question is whether the FinTech
revolution was born out of the financial crisis. Even though being a debatable topic, we
cannot ignore the fact that online money transfer companies like PayPal and peer to-
peer lenders like Zopa, Prosper and Lending Club were out in the market in 1998, 2005
and 2006, respectively, before any sign of the crisis. FinTech is not a new industry; it
has just evolved pretty quickly. Technology, in actuality, has always been a part of the
finance world, be it the introduction of credit cards in the 1950s or electronic trading
floors, ATMs, or high-frequency trading in the following decades. Nowadays, the
newest finance technologies use blockchain, machine learning (MI) algorithms, and
data science to process credit cards and run hedge funds. Startup companies are
creating products and services to penetrate new areas of the financial system and to
change the competitive landscape. These new forces are motivating traditional
financial firms to invest in technology and to pay attention to changing trends among
their customers. All new and incumbent players will be impacted by the changes we
see happening in the marketplace today. But understanding the space and focusing
on key developments amid all the hype can be a challenge.

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This primer outlines key segments of the fintech industry and institutions operating in
the space, highlighting sub-sectors that are experiencing the most rapid change. S&P
Global Market Intelligence includes the following sectors within the financial
technology industry. There’s even an entire subset of regulatory technology dubbed
regtech, designed to navigate the complex world of compliance and regulatory issues
of industries like — you guessed it — fintech.

As fintech has grown, so have concerns regarding cybersecurity in the fintech industry.
The massive growth of fintech companies and marketplaces on a global scale has led
to increased exposure of vulnerabilities in fintech infrastructure while making it a target
for cybercriminal attacks. Luckily, technology continues to evolve to minimize existing
fraud risks and mitigate threats that continue to emerge. Fintech companies use a
variety of technologies, including artificial intelligence (AI), big data, robotic process
automation (RPA), and blockchain. AI algorithms can provide insight on customer
spending habits, allowing financial institutions to better understand their clients.
Chatbots are another AI-driven tool that banks are starting to use to help with customer
service. Big data can predict client investments and market changes in order to create
new strategies and portfolios, analyze customer spending habits, improve fraud
detection, and create marketing strategies. Robotic Process Automation is an artificial
intelligence technology that focuses on automating specific repetitive tasks RPA helps
to process financial information such as accounts payable and receivable more
efficiently than the manual process and often more accurately

Digital technology continues to inspire a dizzying array of new companies, business

models and products, transforming financial services value chains in the process.
While many fintechs claim to advance financial inclusion, the link between specific
innovations is often assumed rather than proven. For all the buzz around fintech, the
reality is that it is hard for funders, investors and social entrepreneurs know which
innovations matter for low-income, underserved customers. The excitement around
fintech can also obscure risks it poses to systems and low-income customers. Broadly,
the term "financial technology" can apply to any innovation in how people transact
business, from the invention of digital money to double-entry bookkeeping. Since the
Internet revolution and the mobile Internet/smartphone revolution, however, financial
technology has grown explosively. Fintech, which originally referred to the use of
computer technology applied to the back office of banks or trading firms, now describes
a broad variety of technological interventions into personal and commercial finance.

Fintech now describes a variety of financial activities, such as money transfers,

depositing a check with your smartphone, bypassing a bank branch to apply for credit,
raising money for a business startup, or managing your investments, generally without
the assistance of a person. According to EY's 2017 Fintech Adoption Index, one-third
of consumers utilize at least two or more fintech services and those consumers are
also increasingly aware of fintech as a part of their daily lives.

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Blockchain is an emerging technology in finance which has driven significant
investment from many companies. The decentralized nature of blockchain can
eliminate the need for a third party to execute transactions. While some business
models are more relevant to financial inclusion than others, the overall impact of
fintech innovation has been to unbundle value chains in ways that could prove
beneficial for low-income customers and providers who serve them. On the consumer
end, this means customers gain access to a rapidly growing range of financial service
providers, often with innovative models that offer products in a different way, at lower
cost, with fewer preconditions and less administrative red tape. On the back end, it
means that providers themselves are able to rely on a growing range of third-party
fintechs who offer highly specialized, value-adding, and cost-effective solutions to core
banking processes. In both cases, highly scalable innovators are redefining how
banking works.

1.1.2 HISTORY OF FINTECH

Let’s take a look at each of the significant stages in the growth of fintech.
Fintech 1.0 (1886 – 1967) is about infrastructure.
This stage involves building the infrastructure that will support globalized financial
services. The first transatlantic cable (1866) and Fedwire (1918) in the USA enabled
the first electronic fund transfer system using technologies such as telegraph and
Morse code. It was basic by today’s standards, but at a time of developing
infrastructure and transportation, the ability to make financial transactions over a more
considerable distance was revolutionary.

Fintech 2.0 (1967-2008) is about banks.

This period marks the shift from analog to digital and is led by traditional financial
institutions. It was the launch of the first handheld calculator and the first ATM installed
by Barclays bank that marked the beginning of the modern period of fintech in 1967.
There were various significant trends that took shape in the early 1970s, such as the
establishment of NASDAQ, the world’s 1st digital stock exchange, which marked the
beginning of how the financial markets operate today. In 1973, SWIFT (Society for
Worldwide Interbank Financial Telecommunications) was established and is to this
day the first and the most commonly used communication protocol between financial
institutions facilitating the large volume of cross border payments.
The 1980s saw the rise of bank mainframe computers and the world is introduced to
online banking, which flourished in 1990s with the Internet and e-commerce business
models. Online banking brought about a major shift in how people perceived money &
their relationship with financial institutions.
By the beginning of the 21st century, banks’ internal processes, interactions with
outsiders and retail customers had become fully digitized.

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Fintech 3.0 (2008-Current) is about start-ups
As the origins of the Global Financial Crisis that soon morphed into a general economic
crisis become more widely understood, the general public developed a distrust of the
traditional banking system. This and the fact that many financial professionals were
out of work, led to a shift in mindset and paved a way to a new industry, Fintech 3.0.
So, this era is marked by the emergence of new players alongside the already existing
ones (such as banks). The release of Bitcoin v0.1 in 2009 is another event that has
had a major impact on the financial world and was soon followed by the boom of
different crypto currencies (which, in turn, was followed by the great crypto crash in
2018).
Another important factor that shaped the face of fintech is the mass-market penetration
of smart phones that has enabled internet access for millions of people across the
globe. Smartphone has also become the primary means by which people access the
internet and use different financial services. 2011 saw the introduction of Google
Wallet, followed by Apple pay in 2014.

Innovation and technology have brought about a radical change in traditional financial
services. FinTech may be defined as technology-based businesses that compete
against, enable and collaborate with financial institutions.

1.1.3 Definition of Fintech

The fintech sector is evolving fast, but a great variety of definitions of the concept
exist in academic practice and business journals. Meanwhile, even if stakeholders
agree about the core elements of the term, its scope has not been clearly defined.
Opinions vary about whether only newly emerging technology-based financial
companies can be referred to as fintech, or if incumbents may also be regarded as
fintech, if they are innovating a new technology-based service or product.

According to Arner, DW; Barberis, JN; Buckley, RP “Financial technology or FinTech

refers to technology- enabled financial solutions. The term FinTech is not confined to
specific sectors (e.g., financing) or business models (e.g., peer-to-peer (P2P) lending),
but instead covers the entire scope of services and products traditionally provided by
the financial services industry.”

According to Farha Hussain “Financial innovation can be defined as the act of creating
and then popularizing new financial instruments as well as new financial technologies,
institutions and markets. It includes institutional, product and process innovation.”

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FinTech's in India can be broadly categorized into seven types on the basis
of solutions theyoffer:

Digital payments – Electronic payment solutions covering both remittances and

merchant payments; these also include enterprise payments. 46 per cent of Indian
fintech are focused on payments and trade processing. Payment initiative such as UPI
are expected to define the future of payments.

P2P lending - P2P lending enables individuals to obtain loans directly from other
individuals, cutting out the financial institution as the middleman P2P on the verge of
entering the regulatory paradigm. Technology-enabled solutions for alternative credit
scoring (for credit workflows) to provide loans to underserved MSME and retail
consumers.

InsurTech – Insurtech refers to the use of technology innovations designed to squeeze

out savings and efficiency from the current insurance industry model. Solutions using
a new technology to expand the distribution of insurance products and re-imagine
them according to the unique requirements of different types of customers.

Robo-advisory – Robo-advisor are digital platforms that provide automated,

algorithm-driven financial planning services with little to no human supervision.
Technology solutions for significantly greater ease of investing and personal wealth
management; these include robo-advisory solutions that use artificial intelligence
technologies for the automation of investment advice.

Blockchain – Blockchain is a distributed digital ledger system where transactions of

various types i.e., not only monetary between parties are recorded redundantly in a
multiple of databases which are slow but secure.

Security and biometrics -The rapid development of biometric recognition

technology has led to biometric security systems being used increasingly more for
physical access control. Not just in high- security locations such as banks, but also
in environments needing lower security levels such as office complexes.

RegTech – Regtech is the management of regulatory processes within the financial

industry through technology. The main functions of regtech include regulatory
monitoring, reporting, and compliance. Technology solutions for the improved
automation of regulatory compliance.

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Growth of Fintech in India

The year 2015 was a formative year for The Indian Fintech sector, which saw the
emergence of numerous fintech start-up, incubators and investments from public
and private investors. It was clearly reflected that a right mix of technical skills,
capital investing, governments policies, regulatory framework and entrepreneurial
and innovative mind set could be the driving force to establish fintech as a key
enabler for financial services. India's evolution as a progressive FinTech nation is
due to its ability to solve for identity in the form of Aadhaar for formalization, getting
everyone a bank account or equivalents to store money, building scalable platform
to move money and allowing banks and FinTech companies and wealth/insurance/
lending players also to access platforms like UPI, GSTIN, and Digi locker to innovate.

Initiatives led by the government and regulators for digital India like demonetization,
Jan Dhan Yojana, Aadhaar, aided by the growing internet and smartphone
penetration, have led to the adoption of FinTech. As more and more customers
get on the digital board, FinTech will have to focus on building trust and consumer
engagement. Especially given the time when cybersecurity is extremely vulnerable
It is necessary to focus on security along with making the procedure simple for
consumers. India has around 2174 FinTech startups as of June 2020. Over the past
few years, India has essayed several guidelines and reforms such as granting
multiple licenses for differentiated banking to small finance banks, payment banks
and introduced the unified payment interface to include the unbanked population
of India in the formal financial services folder, strengthening the major FinTech
segments such as payments and lending ecosystem. In India, building a robust
fintech ecosystem where startup firms engage in external partnerships agencies is
expected to be a key enabler for growth and innovator in the Fintech sector. With
the global FinTech ecosystem continuing to grow at a rapid pace, hundreds of new
startups are being founded every month across the globe. The US has been leading
destination in terms of the numbers of home grown FinTech startups with a massive
contribution toward global VC funding of which they are on top every year. However,
in recent years, India has come out of the shadows to emerge as one of the fastest-
growing FinTech hubs. Bengaluru and Mumbai lead the momentum in FinTech and
together these cities represent 42% of the startup's headquarters. The top five
Fintech destinations which Mumbai, Bangalore, New Delhi, Gurugram and
Hyderabad, the rest of the India accounts for 738 FinTech startups.
Visakhapatnam, also known as Vizag, is the most populous city and financial capital
of the Indian state of Andhra Pradesh. It is one of the 100 fastest growing cities in
the world with its output gross domestic product of usd $43.5 billion in its ninth largest
contributor to India’s overall GDP in 2016-2017, the IT Sector in the city had
tremendous growth with increase in turnover.
India's Fintech sector may be young but is growing rapidly, fueled by a large market
base, an innovation- driven startup landscape, and friendly government policies
and regulations. FinTech refers to the scope of financial services that can be
available on digital platforms. This new disruption in the banking and financial
services sector has had a wide-ranging impact. 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.

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TOP FINTECH COMPANIES IN INDIA

Company Name Business category City

Paytm Mobile wallet, E-Payments Chennai
Bharatpe Money transfer New Delhi
Cleartax tax solutions and services to Bangalore
its customers
CRED Credit card payment app Bangalore
Fyle Modern expensem anagement Bangalore

Groww Stroke broking Bangalore

INDwealth AI driven financial
advisory engine.
BankBazaar Online market place providing Chennai
loans

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1.1.4 Demonetization

On 8 November, the Government announced the demonetization of `500 and `1000

notes with immediate effect, giving little time for hoarders or small-time savers to
convert their stock of henceforth illegal tender money into legal tender money. This
was followed by subsequent policy announcements from the Reserve Bank of India
(RBI) to ease the hardships faced by the citizens. However, even after 50 days of the
announcement, the long queues of people outside ATMs to withdraw their savings
continue. Small traders, especially in the informal sector, are facing a tough time with
a decline in sales, and small units have shut down, unable to meet their working capital
expenditure. Setting aside the hardships faced by the common man, how much black
money or unaccounted money was disclosed or turned into white money is yet to be
announced. Prior to the demonetization announcement, under the Income Declaration
Scheme 2016, the Government was able to unearth `65,250 crores of undisclosed
income through 64,275 declarations upto 30 September, 2016. More such undisclosed
income would be made public with the Income Tax department identifying 67.54 lakh
potential non-filers of income tax, who had conducted high-value transactions in 2014-
15 but have not filed their returns. What are the developments in the money market
after demonetization? In India, where almost 50% of the sector is informal, it is but
natural that money supply in the form of ‘currency with the public’ is the most important
medium for conducting economic transactions. Out of the money supply, referred to
as M1, consisting of currency with the public, and demand deposits and other deposits
with the RBI, ‘currency with the public’ accounted for almost 61% of the total supply,
prior to the announcement of demonetization. As per the Weekly Statistical
Supplement of the RBI for the week ending 9 December 2016, the share of ‘currency
with the public’ in the total money supply 'M1' was reduced to 39.1%. In actual terms,
between 28 October and 9 December 2016, there was a decline of `9204.3 billion
rupees, indicating that almost 54% of the currency with the public was absorbed from
the economy.

Demonetization is the generations ‘memorable experience and is going to be one of

the economic events of our time. Its impact is felt by every Indian citizen.
Demonetization affects the economy through the liquidity side. The Demonetization of
high denomination notes (of Rs1,000 and Rs500) has put over 85% of currency out of
circulation. This has resulted in shortterm disruptions in transactions in agriculture and
households and among professionals. Since injection of liquidity is slow, incomes in
both formal and informal sectors have been affected with the intensity of adverse
impact being greater for the informal sector. Since self-employed and casual workers
dominate in the overall economy, their incomes may suffer a setback. While some may
view it as deferring expenditure and income, a part of it may actually be revenue and
income forgone forever. Product demonstrations generally aim to increase sales for
specific merchandise in a target market. Product demonstrations are a form of sales
promotion that involves interactive sales presentations such as providing test samples
and showing video presentations of a product. This marketing technique is used to
introduce new products into retail markets, such as mass-merchandise outlets, by
attracting prospective customers to demonstration booths.

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1.1.5 Issues Affecting Fintech in India After Demonitisation

Fintech despite of having huge opportunities has still a tough path to walk on. Below
is the probable roadblocks list in the path of Fintech enterprises-

1. It
is not very easy to enter into the Indian market and perform due to the restrictive
regulatory framework designed to prevent frauds. It acts as a huge barrier for the new
entrants. They need to fulfil lot of formalities before the start of its operations itself.

2. Unbanked population, Poor infrastructure in terms of Internet Connectivity and low

literacy level are the other hindrances. Still a huge Indian population (48 percent) do
not have bank accounts which are a must for conducting online transactions. Even
though the people have bank accounts they still face the issues of poor internet
connectivity which takes more processing time to finish the transaction. So, people
tend to prefer a cash transaction rather than online transaction. Keeping aside, the
point of having a bank account and internet connectivity the majority of the Indian
population still do not have enough financial literacy level suitable to go for it.

3. It
is very tough to change the conservative approach of merchants and users who
deal the daily transactions with cash. Majority of the aged people have been doing
these transactions in cash from a long time and it’s hard to suddenly change their old
habits and introduce them to new avenues at this age.

4. Different
frauds leading to loss of money in online transactions is a very hard bite to
swallow for the customers. People's money is looted by the fraudsters by using
technology and this has been a great challenge in front of the fintech firms. So, the
firms indeed have to work hard for bringing improvements in infrastructure and being
more consumer friendly.

5. Fintech in India is deprived of lack of government support and Incentives for

protecting their interests. At a very basic level this demoralizes the entrepreneurs.
They were not provided the right guidance and support to start though it is something
for the betterment of the country’s economy as well.

6. Likein any industry gaining investors trust is very difficult in these days for the
Fintech industry too. Getting the required seed capital and other investment on time is
becoming very difficult and this is going to reflect negative on the operations and
functioning.

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1.1.6 Key Growth Drivers of FinTech in India

1. Widespread identity formalization (Aadhar): 1.2 bn enrolments.

2. High level of banking penetration through the Jan Dhan Yojana: 1+ bn bank
accounts.
3. High smartphone penetration: 1.2 bn mobile subscribers.
4. India Stack: Set of APIs for businesses and startups.
5. Growing disposable income of Indians.
6. Key government initiatives such as UPI and Digital India.
7. Wide middle-class expansion: By 2030, India will add 140 Mn middle-income
and 21 Mn high- income households which will drive the demand and growth in
the Indian FinTech space.

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 1.2 Research Methodology

1.2.1 Source of Data

The Study is based on Primary Data and Secondary Data which was collected by
circulating a questionnaire and through referring the books. A well- structured
questionnaire was prepared to collect the perception of the respondents.
Data Collection:

Primary data
Primary Data are collected through well designed questionnaire and detailed
discussion with the respondents though Google Forms to Limited Respondant Of
Different Age And Gender About There Perspective About the Change in Fintech
Industry After Demonetization

Secondary Data
The secondary data were taken from Newspaper and Library Books , Google And
Wikipedia which were published till date from Different Website and Links Related to
the Topic

(A) Sampling Design

The researcher is a scientific way toward the achievement of the objectives of the
study. The researcher has undertaken this study based on the Descriptive Design.
Descriptive design had helped the researcher to describe the existing phenomenon of
preferences given to the impact of the demonstration on consumer buying behaviour.

(B) Sample Size

The total sample size decided by researcher was 116 respondents in Mumbai City. All
clusters namely housewife, students, service class, self -employed, business class
and professional were considered for the same. Researcher had made an attempt that
the sample adequate representative and estimate elements or consumers of online
shopping were identified as follows; the convenient sample was divided into the
following clusters namely housewife, students, services class, and business class,
self- employed and professional

(C) Questioner Method

The primary data was collected through a self-administered questionnaire that
contained questions related to the objectives. Sample size There are Approx 116
respondents to the questionnaire circulated among people. Responses are fair and
includes variation of age, gender, occupation etc. Efforts were made to collect
maximum response

Sample size
There are 116 respondents to the questionnaire circulated among people.
Responses are fair and includes variation of age, gender, occupation etc. Efforts were
made to collect maximum response.

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 1.2.2 Objectives of the Study

1. To analyze what is the role of Fintech in India.

2. To Identify key Fintech themes which are shaping the industry.
3. To address the key issues, opportunities and challenges in India's Fintech
market.
4. To identify the motivators for adopting financial technologies.
5. To study awareness of Fintech among customers.
6. To evaluate and study Blockchain and Robo-advisory-Investment
through Machines in detail.
7. To Promote, communicate and develop cooperation and dialogue
between Fintech companies
8. To speak with one voice for the Fintech sector and highlight the
significant developments in the Fintech fields and provide pragmatic
solutions

1.3 Scope of the Study

1. This Research aims to provide insights on the Indian Fintech markets.

2. To know about various Themes offered by Fintech in India.
3. To give a detailed insight on Blockchain and Robo-advisory investing
through machines.
4. To study about the limitations, opportunities and challenges for Fintech in
India.

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 1.3.2 Limitations of the study

1. Only a limited sample size had been considered for the study and therefore,
the conclusion drawn based on this may not be a reflection of the entire
population. The sample size chosen for the questionnaire was only 116 and
that may not represent the true picture of the Fintech landscape in India.
2. Some of the respondents were reluctant to give their responses.
3. Most of the responses were from Mumbai city-state research had geographical
limitations.
4. Lack of awareness about the Fintech services.
5. As Fintech market in India is still growing the information collected could be
biased.
6. Some of the respondents were not fully aware and do not acquire the
full information on FinTech.
7. All themes of Fintech could not be studied due to lack of time.

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 CHAPTER 2 Review of literature

"Fintech in India– Opportunities and Challenges" Author - Dr. C. Vijai Year-2019 In this
research paper analysis how, the Fintech provides alternative solutions for banking
services and non- banking finance services. It attempted to show how the Fintech is
an emerging concept in the financial industry. The main purpose of this paper
accesses the opportunity and challenges in the fintech industry. It explains the
evolution of the fintech industry and present financial technology (fintech) in the Indian
finance sector. How the fintech provide digitalization transaction and more secure for
the user and also the various emerging sectors of FinTech in India. The highlighted
the benefits of fintech services reducing operation costs and friendly user. The fintech
services India fastest growing in the world. the fintech services are going to change
the habits and behavior of the Indian finance sector. This paper also shows how India
is adopting FinTech in various sectors, the regulators for FinTech in India and the
innovations, Product and Technology.

FINANCIAL INCLUSION: THE ROLE OF FINTECH AND DIGITAL FINANCIAL

SERVICES IN INDIA
Author - Vinay Kandhal and Rajat Mehrotra Year-2019 This Research paper attempted
to understand the cashless transaction system is achieving its growth day by day, as
soon as the market becomes globalized and the development of the banking sector
more and more the people move from cash to a cashless system. It also showed how
Over the past few years, efforts to drive financial inclusion in India have delivered
mixed results. In this context it showed the recent initiatives by the Government around
demonetization and the move to cashless transactions will further drive innovation and
new entrants into the industry. The Aim is the study was to understand how Building
Trust within the industry paramount to India’s further growth will be, newer
technologies pose different challenges to the banks and regulators, with security being
a key concern. It also highlighted how a strong push from the Government of India has
given the non-banking population easy access to financial products. Report on
comprehensive financial services for small businesses and low- income households”
This case study focused on the provision of Financial Services to small businesses
and low-income households. The main findings of the report highlighted the following
key issues. First, the majority of the small businesses were operating without the help
of formal financial institutions. Second, more than half of the rural and urban population
did not have access to the bank account. Third, savings in terms of GDP have declined
in 2011-12. To address these issues, the report recommended that each individual
should have a Universal Electronic Bank Account while registering for an Aadhar card.
The report also proposed for setting up of payments banks with the purpose of
providing payments services and deposit products to small businesses and low-
income households.

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"Report of the Technical Committee on Mobile Banking" This report presented study
to various challenges and evaluate alternatives in the domain of technology that can
help the large-scale expansion of mobile banking across the country. The report
divided the challenges into 2 broad categories – Customer enrollment related issues
and technical issues. The report has a detailed comparison of four channels of mobile
banking - SMS, USSD, IVRS and Mobile Banking Application, and evaluates each
one of them based on accessibility, security, and usability. To resolve the different
problems identified, the report suggests developing a common mobile application,
using SMS and GPRS channels, for all banks and telecom operators.

"The emergence of a Fintech Ecosystem: A case study of the Vizag Fintech Valley in
India" Author- Priyadarshini Muthukannan This report shows how the Fintech
ecosystems are characterized by heterogeneous, non-linear, dynamic and complex
network of agents that interact with each other to provide a wide array of financial
products and services to end customers. As new players are emerging little is known
about how such an ecosystem emerge. Toward addressing this knowledge gap, this
research paper draws on complex adaptive systems (CASs) theory to examine the
emergence of a global self-sustaining ecosystem: The “Fintech Valley” in Vizag, India.
In doing so, this report offers insights into the dynamics of FE emergence that is
transforming the financial landscape globally and may be helpful to practitioners who
are looking to effect organization-wide cultural change and the 'compliant by design'
approach. It also discusses a process model of FE emergence, Theoretical
implications, limitations and implications for policy and practice.

"FinTech and the Younger Generation" Author-Gunendra Nath Bhardwaj, Gauri Sinha
and Soumi Pal.This report how the future-savvy firms are now including FinTech for
augmentation of the financial structure of their companies. It highlights how the
Government of India has spent around $19 bn for encouraging FinTech start-ups.
However, the main concern is now to adapt a transformative approach rather than
additive. In this paper, they have examined the feasibility of the technologies being
used in the present generation they have also scrutinized the future scope of FinTech
in India from a post-demonetization perspective. Awareness level of young generation
about FinTech was accessed through a structured questionnaire and its future scope
predicted.

"Cash based to cash less FinTech is here to stay."Author-Acharya S Rathana Aruna,

P Uma V R Kumar This paper attempted to examine the possibility of converting the
Indian economy from cash based to cash less economy through the indolent of
FinTech innovations. However, the study pointed some of the major issues that
possess challenge for FinTech to build revolution in financial services industry. The
study pointed toward the solutions that FinTech provided to some of the problematic
issues in Indian banking Industry like NPA's, financial inclusions and security
challenges.

16
"Fintech, Digitalization and Blockchain: Possible Applications for Green
Finance"Author-G Dorfleitner The objective of this report is to delineate the potential
of fintech and blockchain to unlock the mobilization of green finance and to overcome
respective barriers by explaining the key functionalities of applications including their
key benefits and limitations. Fintech and blockchain facilitate access to new sources
of finance and investment, from a larger investor base—especially from private
investors. In addition, they operate in decentralized systems, bypassing traditional
intermediaries such as banks or other financial institutions, decreasing costs and
inefficiencies. It shows how Blockchain technology further enables effective monitoring,
reporting and verification increases transparency and accountability and reduces the
risk of greenwashing. It concludes with how still uniform standards and definitions for
green finance as well as adequate legal and regulatory frameworks are still required.

"To FinTech and Beyond" Author - Itay Goldstein, Wei Jiang, G Andrew Karolyi
Year- 2019 FinTech is about the introduction of new technologies into the financial
sector, and it is now revolutionizing the financial industry. In this article, they describe
the recent FinTech phenomenon, and the novel editorial protocol employed for this
special issue following the Registered Reports format. they also discuss what they
learned from the submitted proposals about the field of FinTech and which ones
are selected to be completed and ultimately come out. they also provided several
observations to help guide future research in the emerging area of FinTech

"Fintech and the Future of Finance" Author-James Guild Year-2017 This report
assesses the application of technological innovations to the finance industry (Fintech)
has been attracting tens of billions of dollars in venture capital in recent years the
successful adoption of Fintech to increase financial inclusion is highly dependent on
competent regulatory oversight. It concludes by examining varying degrees of success
in the adoption of Fintech services in Kenya, India and China this paper argues that
adopting a responsive regulatory approach, rather than an overly interventionist one,
is the most suitable framework for boosting financial inclusion through technological
innovation.

"Growth potential and Challenges of FinTech in India" Author - Dr. Jatinder kaur Year-
2019 The paper starts with how the boom in India's digital payments has paved the
way for Intech revolution in India. It discusses that the digital technology has
transformed the payment scenario. In 2017, the percentage of adults making digital
payments was 52% as compared to 42% in 2014.It shows how the system has a huge
potential to grow in India but at the same time it also has a lot of obstacles that needs
to be overcome in order to be successful. The paper concludes with a discussion that
put forward various growth potentials and challenges for Fintech industry in India

"Digital Financial Services in India: An analysis of Trends in Dital payments" Author-

Rajesh Kumar, Vagish Mishra and Somraj Saha Year-2019 The paper reports next-

17
and servicing capabilities. It also highlights the merits of DFS can be implemented on
payments, credit, savings, remittances, insurance and accessing financial information.
The “digital pathways” mentioned earlier refer to the digital infrastructure like the
Internet, mobile phones (both Smartphone and digital feature phones), ATMs, POS
terminals, NFC- enabled devices, chips, electronically enabled cards, biometric
devices, tablets, and any other existing digital communication system. The paper
focused on the trend of digital transaction and road ahead to increase the digital
transaction.

“The Evolution of FinTech: A new Post-Crisis Paradigm” Author-Douglas W Arner,

Janos Barberist and Ross P BucleyThis paper shows the interlinkage of finance and
technology has a long history and has evolved over three distinct eras, during which
finance and technology has evolved together: First in the analogue context; then with
a process of digitalization of finance from the late 20th century onwards and since 2008
a new era of fintech in both evolving and evolved countries. The paper discusses the
latest evolution of Fintech, led by startups, poses challenges for regulators and market
participants alike, particularly in balancing the potential benefits of innovations with
possible risks of new approaches. They conclude by analyzing the evolution of Fintech
over past 150 years and on the basis of this analysis argue against its too early or rigid
regulation at this juncture.

"Fintech and Regtech in a nutshell, and the future in a sandbox. Research Foundation
Briefs" Author
- Janos Barbiers Year – 2017 This paper gives a brief overview of Fintech and the how
Fintech evolved in different countries. It highlights how the 2008 global financial crisis
represented a pivotal moment that separated prior phases of the development of
financial technology (Fintech) and regulatory technology (Regtech) from the current
paradigm. It showcases how Fintech has entered phase of rapid development marked
by the proliferation of the startups and the other entrants, such Information technology
and ecommerce firms that have fragment the financial services market. It also shows
how regulators must develop a robust new framework that promotes innovations and
market confidence, aided by the use of regulatory "sandboxes."

"Unfolding FinTech: A paradigm shift in Indian banking" Author - Khusboo Srivastava

Year – 2019 This research paper has used data from Report of working group on fintech
and digital banking (2017) by Reserve bank of India, this paper aim is to proffer the
role of Financial Technologies or Fintech in the financial industry in banking sector in
particular. The paper extensively highlights of recent trends in FinTech for Indian
banking. FinTech is now an integral part of Indian banking system, it has transformed
challenge into an open door for more adaptability, better serviceability in some areas
of the bank. This study also suggests a pathway for the evolution of a Fintech in
changing the business and customers. It will probe deeper into the structured evolution
of FinTech- based innovations and also relationship between fintech and financial
inclusion. The analysis recommends that there can be frontier in creation of value in
further exploration of the new insights on upcoming financial technology and its
consequences on banking industry.

18
"Robo-Advisors: Investing through Machines" Author-Abraham, Facundo, Schmukler,
Sergio L, Tessada, Jose. Year- 2019 This report gives insights how Investing through
online automated platforms, known as robo-advisors, is increasingly popular. It
highlights two things; First: Robo- advisors expand access to wealth management
services by making it easier and less costly to open investments accounts and receive
financial advice, as well as plan and automate investment decisions. Second: the rise
of robo-advisors requires consumers to understand the limitations of these services
and to get proper financial education. It concludes with what Policy makers need to
grapple with the impact of robo-advisors on the overall financial system, as well as
reassess their regulatory and supervisory practices.

"The promises and pitfalls of robo-advising". Author - D’Acunto, F., Prabhala, N &
Rossi, A. G. Year – 2017 The report studies the introduction of a wealth-management
robo-adviser that constructs portfolios tailored to investors holdings and preferences.
It gives 3 main insights; 1st: Investors adopting robo-advising experience
diversification benefits. 2nd: undiversified investors increase stock holdings and hold
portfolios with less volatility and better returns. 3rd: Already well-diversified investors
hold fewer stocks, yet see some reduction in volatility, and trade more after adoption.
All investors increase attention based on online account logins. The reports results
emphasize the promises and pitfalls of robo-advising tools, which are becoming
ubiquitous all over the world.

FinTech is a company that is using technology to provide financial solutions using the
internet and automated processing of information (Gabor & Brooks, 2017; Milian,
Spinola, & de Carvalho, 2019; Zavolokina et al., 2016; Alt, Beck, & Smits, 2018;
Gomber, Kauffman, Parker, & Weber, 2018; Puschmann, 2017). This innovation in the
financial industry has led to cost reduction, high efficiency, rapidity, innovation,
flexibility and improvement in the business processes (Zavolokina et al., 2016; Lee &
Shin, 2018; Thakor, 2020). FinTech also embeds innovations in financial education
and literacy, investments, retail banking and cryptocurrencies (Gomber et al., 2018).
The business models have transformed to provide customized services to the
consumers without geographic or time-zone barriers as most of the services are
automated. In addition, FinTech has helped in disintermediation (Thakor, 2020) and
provided online platforms for trading, lending (crowdfunding and peer-to-peer, P2P)
and asset management, for instance, robo-advising (Gomber et al., 2018; Alt et al.,
2018; Lee & Shin, 2018; Puschmann, 2017). This intermediation is also achieved by
infrastructure development, data analytics, big data and mobile devices (Lee & Shin,
2018).

"Artificial Intelligence in FinTech: understanding robo-advisors adoption among

customers. Industrial Management & Data System" Author - Belanche D., Casaló, L.
V., & Flavián C Year- 2018 The Paper mainly consists of the Purpose Considering the
increasing impact of Artificial Intelligence (AI) on FinTech, the purpose of this paper is

19
wide range of potential customers Findings Consumers’ attitudes toward robo-
advisors, together with mass media and interpersonal subjective norms, are found to
be the key determinants of adoption. Marketing tactics applied should consider the
customer’s level of familarity with robo operations. This research identifies the key
drivers of robo-advisor adoption and the moderating effect of personal and
sociodemographic variables. It concludes to understanding consumers’ perceptions
regarding the introduction of AI in FinTech.

“The big promise of FinTech” Author - Bofondi, M. and Gobbi, G Year – 2017 Fintech
is introducing in the financial landscape new products, new business models, new
players. In this paper They elaborate on the relationship between Fintech and banks,
bearing in mind that in the past innovation triggered widespread financial instabilities.
They argue that Fintech represents a serious challenge for the traditional banking
business model. However, we build on the evidence on the development of shadow
banking to caution against early predictions of an irreparable decline of banking
institutions. They conclude that a flexible, pragmatic and open-minded approach to
Fintech regulation is the second best in a world of huge uncertainty about technology
and consumer preferences.

"FinTech and financial innovation: Drivers and depth" Author - Schindler, J. W. Year –
2017 This paper answers two questions that help those analyzing FinTech understand
its origins, growth, and potential to affect financial stability. First, it answers the
question of why "FinTech" is happening right now. Many of the technologies that
support FinTech innovations are not new, but financial institutions and entrepreneurs
are only now applying them to financial products and services Second, this paper
answers the question of why FinTech is getting so much more attention than traditional
innovation normally does. The answer to this question has to do with the 'depth' of
innovation, a concept introduced in this paper. The deeper an innovation, the greater
the ability of that innovation to transform financial services. The paper shows that many
FinTech innovations are deep innovations and hence have a greater potential to
change financial services.

"Fintech: Ecosystem, business models, investment decisions, and challenges" Author

-Lee, I., & Shin Year – 2018 Fintech brings about a new paradigm in which information
technology is driving innovation in the financial industry. Fintech is touted as a game
changing, disruptive innovation capable of shaking up traditional financial markets.
This article introduces a historical view of fintech and discusses the ecosystem of the
fintech sector. They then discuss various fintech business models and investment
types. This article illustrates the use of real options for fintech investment decisions.
Finally, technical and managerial challenges for both fintech startups and traditional
financial institutions are discussed.

EZ Milian, MM Spinola, MM de Carvalho - Electronic Commerce Research …, 2019 –

Elsevier Although the fintech subject has been widely discussed in the press and
communications media, the key research topics and trends. Aiming to narrow this gap,
the objective of this study is to investigate the concept of fintech, to map the literature
and point out new routes and opportunities in the field. For this purpose, a Systematic

20
Literature Review (SLR) is performed, attempting to describe the areas of fintech
activities, propose a categorization

This thematic paper divides FinTech into three themes, i.e. financial industry,
innovation/technology and law/regulation. The paper suggests that a thorough
impact of FinTech on various stakeholders can be understood using three
dimensions, namely, consumers, market players and regulatory front. It is noted
that FinTech is in its nascent phase and is undergoing continuous development and
implementation through product and process innovation, disruption and
transformation.

The paper reports that FinTech promises huge potential for further study by various
stakeholders in the FinTech industry – from academia to practitioners to regulators.
The paper summarizes lessons that could be of significance for FinTech users,
producers, entrepreneurs, investors, policy designers and regulators. The paper is
believed to add value to the understanding of FinTech in light of the emerging threats
and opportunities for its various stakeholders.

Among many theories that the author used in researching IT, Theory Acceptance
Model (TAM) is believed as the most frequent employed method. TAM and
Extended TAM dominate the basic model used in studies for 48 percent (Karsen et
al., 2019). TAM is based on TRA. This theory explained how psychology can affect
the level of acceptance of a certain technology. According to (Davis, 1989),
Perceived usefulness (PU) and 11 perceived ease of use (PEOU) counted to be the
most significant for IT acceptance. Other theories mentioned by researchers, among
others, are Theory of Reasoned Action (TRA) and Theory of Planned Behavior
(TPB). TAM adapted and evolved from the Theory of Reasoned Action. A research
about digital payment services by (Tan et al., 2019) used TAM as one of the
measurements in developing the framework for assessing the FinTech landscape.
Perceived usefulness and perceived ease of use factors were adopted and analyzed
along with other factors including innovatism, optimism, discomfort, and insecurity.
Research by Pikkarainen (2004) used both TRA and TAM accordingly to measure
the effects of PU and PEOU, as well as perceived enjoyment, security and privacy,
quality of internet connection, and information on online banking to assess the
acceptance level of users on online banking. The result indicated that usefulness
factor as the most influencing factor of online banking service. This is in line with
other research that used TAM as their measurement. Surprisingly, privacy and
security were found to have a weak relationship with the acceptance level. Many
studies about acceptance of emerging technology utilized TAM and extended TAM.
That studies will be one of the sources in finding variables that will later on be
considered in the Benefit-risk framework.

With the advent of information technology, the financial system started to redefine
its routines and processes through technological innovations (Muhuri, Shukla, &
Abraham, 2019). Thus, financial operations underwent periodic innovations in their
process patterns to fulfill operational gaps presented in the financial system
(Breidbach & Tana, 2021;Milian, Spinola, & de Carvalho, 2019. However, despite its

21
relevance, it is still in its embryonic stage and requires more exploration by financial
market managers and technology professionals (Thakor, 2020). As a modern
research field, this economic agent has awoken multidisciplinary interest, paving the
way for analyses pertaining to different fields of research (Milian, Spinola, & de
Carvalho 2019;Puschmann, 2017), such as shared economy (Netto & Tello-
Gamarra, 2020;Liu, Wu, & Yu, 2019), legislation (Irwin & Dawson, 2017), technology
(Chen et al., 2017), finances (Trivedi, Mehta, & Sharma, 2021;Wang et al., 2020),
organizational management (Chen & Bellavitis, 2020) and innovation (Bukhtiarova
et al., 2018). As such, many theoretical and empirical analyses need to be developed
to better structure information and trends connected to fintechs.

"India emerging a hub for fintech start ups."Author -Shivani Shinde Nadhe Year –
2016 This article mainly focuses on how India as a country is emerging as a hub for
Fintech startup. The article throws light on how global Fintech software a $ 45 bn
opportunity by 2020.It also highlights that how Government, Defense, media and
telecom industry will generate more demand for fintech solutions Importantly, the
Indian fin-tech industry too is expected to grow by 1.7x by 2020. At present the total
Indian fin-tech market is about $8 billion with fin-tech software market at $1.2 billion.
Top verticals that the Indian fin-tech start-ups are targeting include BFSI and next-gen
commerce. Transaction gateways and platforms, mobile banking and ATM & POS are
emerging horizontals.

The research on FinTech topic remains nascent although growing state, and it has a
foothold between scholars, beside to academic courses and research that show a
rising interest; moreover, the students are more attentive to attend schools that teach
this topic (Pullaro, 2017, pp. 25-26). The FinTech has conducted a hot discussion on
application of innovations and more in the financial and business fields. In fact, this
term is still ambiguous for two parts, the insider who deals with it in his/her working life
and the outsider who will be affected by it (Zavolokina, et al., 2016, p. 2).

Further, Zavolokina et al. (2016, p. 2) noticed that there are two characteristics in the
FinTech, which are dynamic and extended evolution of innovations. While Schindler
(2017, p. 1) stated that “Financial innovation is a constant process, and yet now the
financial industry has a set of innovations that share a common link of being enabled
by technology and that have been given a special name”. However, all that makes the
term of FinTech a very broad phenomenon due to the technology entities that are still
entering and taking an action in the financial industry by changing its norms and
revolutionizing it. In addition to this point, Dorfleitner et al. (2016, p. ii) remarked that
the financial industry is in moving and dynamic phase, since the FinTech companies
hold multitude BMs and due to the large number of start-ups.

Some scholars define FinTech as “marriage of finance and technology” (Zavolokina,

et al., 2016, p. 1) and “a contraction of financial technology” (Puschmann, 2017, p.
70). Therefore, the term of FinTech is tangled with financial innovation due to the
facts that it creates new products and services, new processes and new companies
(Frame & White, 2014, p. 4). In other words, it builds and promotes “new financial
instruments, as well as new financial technologies, institutions, and markets” (Lerner

22
& Tufano, 2011, p. 7). As well as, it invents a new BM (Fichman, et al., 2014, p. 329).
Similarly, this term is heavily connected to IT, since it applies the technology in
services or products in the financial industry to innovate and recast our perception
about money and banking (Baur, et al., 2015). Hence, FinTech leads to transform
the influence in favor of people by prompting them with the opportunities to slash the
intermediaries, lower the cost and enhance the transparency (Zavolokina, et al.,
2016)

As a term, the FinTech company is a parasol that embodies the applications of

information technology innovations, which contribute to submit an appropriate and
innovative financial solutions (Puschmann, 2017, p. 70); in order to fulfill the needs
to improve business process, cut cost, increase both effectiveness and flexibility,
boost rapidity and develop the innovations (Dapp, et al., 2014, p. 33). The FinTech
could be seen as a service or as a company in general or start-up in particular
(Zavolokina, et al., 2016, p. 2). Moreover, four studies (Shim & Shin, 2015; Lee &
Teo,2015; Lee & Kim, 2015; Arner, et al., 2015) confirmed that FinTech companies
are a combination of financial and technology to provide a new type of financial
services by using technology innovations, but Arner et al. (2015) considered
FinTech as start-ups; some other studies proceed further by associating FinTech
with digitalization on global scale of banking sector as Cuesta et al. (2015), while
others linked it with digital innovation as Fichman, et al. (2014, p. 330).

Both Schindler (2017, p. 2) and Pullaro (2017, p. 4) agreed that there is no a unified
widely definition for FinTech and both accepted the Financial Stability Board (FSB,
2017) definition of FinTech companies which is “technologically enabled innovation
in financial services that could result in new business models, applications,
processes or products with an associated material effect on financial markets and
institutions and the provision of financial services”, because it considers the
technology that permits this financial innovation to hold a material effect on the
financial institutions and their services (Schindler, 2017, p. 2). Besides, it is divided
into two parts, the first part is unambiguous (technologically enabled innovation in
financial services) while the second is more theoretical (Schindler, 2017, p. 2). Thus,
the FinTech company is more than automating the traditional transaction of
financial services and its processes, the FinTech company is innovations that
diminish the classical and radical ways of finance. Cortada (2004) and Pullaro (2017)
asserted that these innovations (FinTech companies) will not only modify the relation
between employees, but it will reshape the rules in the market place and financial
system because FinTech company has entered a high-level phase, and the market
and public have captured it with passion and ease.

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 CHAPTER 3 CONCEPTUAL FRAMEWORK

3.1 INTRODUCTION

Fintech is a portmanteau of financial technology that describes an emerging

financial and managerial services sector in the 21st century. Originally, the term
applied to technology applied to the back end of established consumer and trade
financial institutions.

To dive a bit deeper into this definition, FinTech can be defined as the technology
industry that has evolved from traditional financial services to reduce all frictions in
transaction, security and compliance.

The term FinTech (Financial Technology) refers to software and other modern
technologies used by businesses that provide automated and improved financial
services. The fast and innovative progresses such as Mobile Payments changed the
way we manage our finances. Tech- savvy customers, especially millennials expect
money transfer, lending, loan management and investing to be effortless, secure and
scalable, ideally without the assistance of a person or the visit of a bank. Established
bank products find themselves increasingly displaced and for both businesses and
customers banking has largely become more convenient, efficient and ease of access.
In contrast to traditional banks, FinTech startups operate flexible and fast when it
comes to implement new services based on changing demands.

Hallmark examples of FinTech in our daily life are Mobile Payment apps,
Cryptocurrency and Blockchain like Bitcoin and Gemini. In the future the range of
FinTech services is predicted to transform the market even more with AI and machine
learning and will make FinTech products an integral part of our digitalized life.

FinTech began to flourish in the 1990s when the Internet and e-commerce business
models arose and in the following decade banking in most parts was already
completely digitalized. The Global Financial Crisis in 2008, in which many people lost
their trust in traditional banking systems, security and transparency has become more
important than ever. This shifting mindset and the technology of cloud computing made
it possible to invent new customized solutions and standard procedures such as
providing access to banking profile, payment and transfer of money with automatically
converted currencies. Due to regulation and high expectations on customers side
FinTech companies' main goal is to create services and implementations with long-
term potential. The traditionally cash-driven Indian economy has responded well to
the fintech opportunity primarily triggered by a surge in e-commerce, and
smartphone penetration. It is estimated that to meet this ambition, India's FinTech
sector will need investments of $20-25 billion over the next five years. India's FinTech
industry valuation estimated at $150-160 bn by 2025.

24
 Emergence of fintech companies in India is a prelude to the transformation in
payments, lending and personal finance space that has manifested in significant
investor interest in the recent times. Fintech is enabling the entire value chain of the
traditional financial institutions to establish better connects with customers and to
provide new offerings in the market. There are numerous start-ups cutting across
multiple business segments and functions, predominantly in payments and lending
space. Fintech can harm low-income consumers if not properly regulated. For
instance, CGAP’s research has raised serious questions about the digital credit boom
in East Africa. See resources below for policy makers and regulators.

Financial technology (FinTech) in promoting the real economy is a topic attracting

much attention. This paper adopts a threshold regression model to solve the
endogenous problem well and make up for the lack of empirical evidence of scientific
models in existing research in this area. The empirical results show that FinTech has
a significant promoting effect on real economic growth, manifested as a U-shaped
relationship and double threshold effect. In the early stage of FinTech development, it
will restrain economic growth. The continuous improvement will positively impact
economic growth, and the result shows a law of marginal decline. Moreover, there are
significant regional differences in the nonlinear characteristics. Our research has solid
practical significance and contributes to the literature on the effects of FinTech on real
economic growth. FinTech stimulates the development of the digital economy by
promoting technological innovation and weakening the financial decentralization of
local governments. Local financial regulatory resources have a positive regulatory
effect on the impact of FinTech in promoting the development of the digital economy.

Fintech streamlines the loan application process, allowing borrowers to obtain loans
more quickly, perhaps improving SMEs’ ability to deploy cash at the right time.

3.1 Impact on Fintech industry

Demonetisation is the generations ‘memorable experience and is going to be one of

the economic events of our time. Its impact is felt by every Indian citizen.
Demonetisation affects the economy through the liquidity side. The demonetisation of
high denomination notes has put over 85% of currency out of circulation. This has
resulted in shortterm disruptions in transactions in agriculture and households and
among professionals. Since injection of liquidity is slow, incomes in both formal and
informal sectors have been affected with the intensity of adverse impact being greater
for the informal sector. Since self-employed and casual workers dominate in the overall
economy, their incomes may suffer a setback. While some may view it as deferring
expenditure and income, a part of it may actually be revenue and income forgone
forever. Product demonstrations generally aim to increase sales for specific
merchandise in a target market. Product demonstrations are a form of sales promotion
that involves interactive sales presentations such as providing test samples and
showing video presentations of a product. This marketing technique is used to
introduce new products into retail markets, such as mass-merchandise outlets, by
attracting prospective customers to demonstration booths.

25
With the demonetisation, and through successive steps taken since then, we've seen
the Indian government attempting to make the economy less cash-dependent and
more digitized, and the banking system more accessible. Going digital is the fastest
way to hasten financial inclusion and ensure that more people are brought under the
ambit of the formal banking system, and they can then also benefit from the linked
benefits of insurance and investment. At a time when most sectors involved with the
digital economy — including e- commerce, ride sharing, food technology — are trying to
find stable ground, the booster shot provided by demonetisation to financial technology
sector has allowed companies in this area to indulge in expenditure for expanding their
activities. The Fintech space in India is becoming more exciting and as per Kalaari
capital's recent report there are more than 800 start-ups working in this space whom
they surveyed that will further accelerate the process of digitizing the economy. While
large e-commerce companies such as Snapdeal have let go of close to 600 of their
employees to control its rising cost and to restructure its business, companies like
Paytm have announced investment of Rs 600 crore to expand its QR code-based
payment network. The right measures which are being taken right now is to modify the
current offerings in a way that it enables the customers to adopt the product in such
crisis situations. Fintech players are launching new products for the customers that
might be useful. They have passed the benefits to customers by providing them with
the moratorium, and in some cases, the products itself are designed in a way, that
flexible payment is possible. Over the past two years, India’s financial services sector
has been undergoing a shift in structure with new payment banks, small finance banks
and insurance players entering the field. So, besides sales agents, banks, distributors
and financial services firms are using digital and mobile platforms to enhance their
investor reach. Consumers, in urban and rural India alike, will have little option but to
run their lives with ‘less-cash’ and accept digital transactions.

The Indian financial services sector has undergone a significant transformation over
the last few years. The sector, which has for decades been dominated by big banks
and other major financial services players, is witnessing a growing popularity of
financial technology (fintech) firms. Not only are the Fintech startups spearheading
innovation but many banks and financial institutions are also looking to explore new
technologies and investing heavily in digital service delivery channels. Government of
India’s demonetization move in November 2016 and the ‘Digital India’ initiative
launched in 2015 have provided substantial boost to the country’s growing digital
ecosystem. With the thrust on creating $1 trillion digital economy by 2020, the
Government aims at building a conducive ecosystem for a ‘cashless economy’. The
initiatives to enhance digital transactions, such as introduction of Unified Payments
Interface (UPI) and Bharat Interface for Money (BHIM-an internet based mobile
application) will help support faster adoption and transition to digital payments. With
demonetization, millions of Indians have enrolled for digital payments, with mobile
payments being the most preferred mode. However, given the scale and pace for
making India a “less-cash” economy, far-reaching, innovative and bold decisions are
required to facilitate behavioral change amongst the common people in moving
towards the digital platform. A robust regulatory framework, effective customer
redressal framework, enhanced security measures to enable confidence and trust,
incentives for larger participation and benefits similar to cash transactions are some
measures that can further help ensure long-term success for digital payments. India is
poised to emerge as a global innovation hub on fintech with a large market of
underserved or un-served customers. All it requires is multiple sections of industry to

26
activate and leverage this potential to make India a “less-cash” economy. The key
challenge in the global fintech sector is that often existing regulations are not able to
keep pace with rapid technological developments. The purpose of this report is to take
a brief look at the merits and gaps in existing regulations and provide suggestions for
the way forward in 'Making India a Global Fintech Hub'.

For all the pros and cons being argued around demonetisation and what has followed,
there is absolutely no doubt that the move has been a big positive for the fintech sector
in the country. This is particularly true for mobile wallet companies, with every player
reporting a huge surge in volume and number of users. Unexpected as it may be, the
demonetisation of Rs 500 and Rs 1000 from the economy has given a fillip to the very
nascent fintech sector in the country. Fintech is hardly half a decade old in the country
and most startups in the sector entered the business to disrupt, provide an alternative
to banks and make life simpler. While disruption is a function of innovation, fintech in
India has been able to provide an alternative to banks and at the same time make life
simpler for countless Indians facing a cash crunch. Fintech is much like the social
networking site. If there are only 100 people using a financial solution, there would be
very less incentive for someone to transact or use the system. As more and people
start using it, the value proposition becomes better for everyone. What demonetisation
has done is get many more people, who would have been otherwise averse to using
many of these solutions, to try things out. It has suddenly become easier to find a
person who is using a mobile wallet and carry wrong billing and opaque dispute
resolution. Demonetisation is a very big move, which will surely have profound impact.
In the coming months we would know how it pans out, but the fintech industry should
only consider this as a trigger. Management books are flush with lessons on why the
"pull" strategy of getting customers is a much better way of expanding your business
as compared to "push". Pull towards a product or service happens when customers
find value in what is being offered. On the other hand the push strategy is not a good
indiccator of value being created and can be, for example, because of discounts or
marketing initiatives.For us in the fintech sector, it is important to understand that a
large majority of people looking at fintech solutions today have been forced into its
adoption.

Fintech developments of relevance to the payment aspects of financial inclusion

This section provides an overview of selected advances in technology considered to

be relevant to payments and describes their application to new payment products and
services as well as new access channels. Application programming interfaces (APIs),
big data analytics, biometric technologies, cloud computing, contactless technologies
(including quick response (QR) codes), digital identification, distributed ledger
technologies and the internet of things have been identified in this report as the most
relevant new technologies in this context. They facilitate the delivery of new products
and access modes. Prominent examples of new products are instant payments,
central bank digital currencies (CBDCs) and stablecoins. New technologies not only
offer new modes of accessing these new products by means of electronic wallets,
open banking and super apps, but also allow payments to be initiated via traditional
transaction accounts and/or payment instruments.

27
It is worth noting that new technologies can also be applied to existing products and/or
access channels in a variety of combinations (eg initiation of card payments via
electronic wallets leveraging contactless technologies). On the other hand, new
products and access modes do not necessarily rely on advances in technology, but
can simply use existing technologies in an optimised way (eg instant payments can be
offered based on traditional technologies and initiated via online banking rather than
electronic wallets). 11. The “PAFI fintech wheel” (Figure 2) directs focus onto new
technologies in the centre. These new technologies are not indispensable for the
product and access layer, but are in many cases harnessed to improve the provision
of these new products and access modes.
Up until now, financial services institutions offered a variety of services under a single
umbrella. The scope of these services encompassed a broad range from traditional
banking activities to mortgage and trading services. In its most basic form, Fintech
unbundles these services into individual offerings. The combination of streamlined
offerings with technology enables fintech companies to be more efficient and cut down
on costs associated with each transaction.

If one word can describe how many fintech innovations have affected traditional
trading, banking, financial advice, and products, it's 'disruption,' like financial products
and services that were once the realm of branches, salesmen, and desktops move
toward mobile devices orsimply democratize away from large, entrenched
institutions. For example, the mobile-only stock trading app Robinhood
charges no fees for trades, and peer-to-peer lending sites like Prosper Marketplace,
Lending Club, and OnDeck promise to reduce rates by opening up competition for
loans to broad market forces. Business loan providers such as Kabbage, Lendio,
Accion, and Funding Circle (among others) offer startup and established businesses
easy, fast platforms to secure working capital. Oscar, an online insurance startup,
received $165 million in funding in March 2018.

Such significant funding rounds are not unusual and occur globally for fintech startups.
Entrenched, traditional banks have been paying attention, however, and have invested
heavily into becoming more like the companies that seek to disrupt them. For example,
investment bank Goldman Sachs launched consumer lending platform Marcus in 2016
and recently expanded its operations to the United Kingdom. That said, many tech-
savvy industry watchers warn that keeping apace of fintech- inspired innovations
requires more than just ramped-up tech spending. Rather, competing with lighter- on-
their-feet startups requires a significant change in thinking, processes, decision-
making, and even overall corporate structure.

The growth of FinTech is due in large part to the opportunity it affords small players to
compete on the same field as traditional banks and financial institutions. Thanks to
FinTech, it’s no longer about who is biggest, but who is fastest and most responsive at
effectively addressing the ever-changing consumer demands. Additionally, the
solutions offered by FinTech companies are no longer “one size fits all.” Instead, they
offer targeted – often niche – services that fill the gap of a particular financial need,
sometimes at much lower costs than those offered by traditional financial providers.
As consumers become even savvier and more connected, the FinTech companies that
succeed will be the ones that continue to successfully innovate in bringing new
solutions to old problems. Development funders have an important role to play in
helping fintechs at all stages – early, growth, and mature – reach their full potential to

28
serve low-income customers. In developing their fintech strategies, funders should
carefully assess which fintechs have real potential to improve the lives of low-income
customers. It is also important for funders to align goals and approaches with the stage
of fintech they are targeting, and to nurture the broader fintech ecosystem with support
for infrastructure, policies and regulations, and local capital markets.
Fintech is hardly half a decade old in the country and most startups in the sector
entered the business to disrupt, provide an alternative to banks and make life simpler.
While disruption is a function of innovation, fintech in India has been able to provide
an alternative to banks and at the same time make life simpler for countless Indians
facing a cash crunch.

If you land at Heathrow airport in London, chances are, you can carry out a day's
transaction of getting to the city, getting food and sundry without having to pay in cash.
London, with its big banks and innovative startups, is at the heart of the fintech
revolution. Wide adoption by the banking system, which considers the sector as a
value add and enthusiastic response from consumers have meant startups ranging
from robo advisors, marketplace lenders and blockchain technology firms have
flourished. Fintech is much like the social networking site. If there are only 100 people
using a financial solution, there would be very less incentive for someone to transact
or use the system. As more and people start using it, the value proposition becomes
better for everyone. What demonetisation has done is get many more people, who
would have been otherwise averse to using many of these solutions, to try things out.
It has suddenly become easier to find a person who is using a mobile wallet and carry
out transactions compared to two weeks back. With greater adoption, there would be
greater understanding of technology and thus greater avenues for innovative products
to spin out.

Demonetisation is a very big move, which will surely have profound impact. In the
coming months we would know how it pans out, but the fintech industry should only
consider this as a trigger. Management books are flush with lessons on why the "pull"
strategy of getting customers is a much better way of expanding your business as
compared to "push". Pull towards a product or service happens when customers find
value in what is being offered. On the other hand the push strategy is not a good
indicator of value being created and can be, for example, because of discounts or
marketing initiatives.

For us in the fintech sector, it is important to understand that a large majority of people
looking at fintech solutions today have been forced into its adoption. When cash in the
economy returns to normal, would the same people stop transacting on the fintech
platforms? The question we need to ask is how do we provide them value so that they
see benefit in what we have to offer. This is a great windfall for the Fintech industry,
but 'Pull" can only be generated if we start investing in building trust to retain these
new customers. External push or a landmark situation as the one we find ourselves in
is welcome, but the sector should be driven with an aim to provide value. If you show
value, people would adopt.
For starters, our assumptions, as a sector, have been validated. Fintech platforms can
form a new financial system that can supplement and run parallel to existing monetary
systems. What demonetisation should provide is further impetus to that thought and
the need to innovate.

29
Advances in digital Fintech can be leveraged to drive desired social outcomes,
including financial inclusion and sustainability. In the area of financial inclusion,
technology helps expand access to financial services. The proliferation of mobile
devices has allowed banking platforms to become more readily available to low-
income segments. For middleincome groups, QR payment processes, artificial
intelligence, machine learning, and big data have laid the groundwork for innovations
in wealth management. Fintech has encouraged the creation of alternative collaterals
for individuals who lack access to formal financial institutions. Fintech companies have
helped tokenize livestock, for instance, to extend credit to smaller marginal farmers
who do not have traditional forms of collateral. Blockchain and tokenization are
boosting efforts toward enhanced financial inclusion. These technologies are also
helping to foster micro pension systems—an area with a large unmet need because
middle and low-income segments tend to lack pensions coverage. Fintech companies
innovating in this space include Finbox, a company working to provide pensions for
the poorest of the poor. Broadly, fintech is an umbrella term for innovative technology-
enabled financial services and the business models that accompany those services.
In simpler terms, fintech can be used to describe any innovation that relates to how
businesses seek to improve the process, delivery, and use of financial services.
Entrenched financial institutions have been paying close attention to the fintech growth
story.

3.1.2 Fintech Firms: Emerging Areas

P2P lending firms primarily act as market place and connect borrowers to lenders.
Unlike banks they do not incur interest cost associated for raising funds. So their
primary source of revenue is not spread but fee income charged from both
borrowers and the lenders. The borrowers are charged a fee based on their risk
profile whereas lenders are charged administration fees and for other services
provided by the P2P lending firm. Given the attractive return for lenders and the
ability to cater to borrowers who are not often serviced by the banks, there has
been a great deal of interest in this sector with over 30+ firms operating in this
space in India in 2016. The sector is at inflection point and the market for P2P
lending is expected to reach over $5 billion by 2020. Besides economic viability,
there are several challenges with regards to customer maturity as well as financial
literacy. The issues around customer protection with respect to KYC, interest rates,
etc. are paramount for regulators globally in terms of increased systemic threat.

30
 Fintech Firms - Emerging Areas

There has been an increase in the use of the internet, smartphones, and the
introduction of a myriad of digital payment applications offered by the banking
sector (BHIM UPI) as well as a non - banking sector (Paytm and, Phone Pe).
Along with this, there have been government schemes like Jan Dhan Yojana,
which have included more people in the formalised banking system. However, the
access, adoption, and usage of digital financial services for transactions such as
payment of bills, transferring money, making online payments at retails stores have
been relatively low in rural areas. In 2018, digital payments uptake stood at just 14
percent in rural areas, as compared to 44 percent in urban areas.4 While the users
of digital. financial services are certainly increasing, the substantial ground is yet to
be covered. In this regard, a study was undertaken by Consumer Unity & Trust
Society (CUTS International) on user perspectives on digital payments, that
revealed while there has been an increase in avenues and tools for enhancing digital
financial inclusion, these are not optimally designed and integrated in a way to
ensure seamless adoption by users. Some of the issues that came out of the study
were lack of awareness and low level of financial literacy, connectivity and

31
infrastructure limitations, interoperability issues, transaction failures, user
unfriendliness, and low level of trust of users on these services. These adversely
affect the uptake of digital payment tools by consumers and small merchants.
Additionally, Micro, Small, and Medium Enterprises (MSMEs) also face a high cost
of integrating digital payments due to absence of appropriate incentives, limited
access to technical knowledge and infrastructure limiting their adoption.
Furthermore, while there is a surge of fintech start-ups there is limited competition
in the digital payments space. This is evident from the recent data released by the
National Payment Corporations in India, which revealed that 90 percent of the digital
payments through Unified Payments Interface (UPI) concentrated with three major
players (Google Pay, Phone Pe, and Paytm).5 While some disruption is expected
soon on account of recent investment by Facebook in Reliance Jio, such
concentration leads to suboptimal competition, which has the potential to reduce
the quality of services for consumers, increase the cost of access and limit
innovation.

Privacy and Data Protection

There are increasing data protection concerns as Fintech companies collect and
process sensitive data like bank account information, spending pattern, credit
ratings, debt-related information, and transaction details. A PwC fintech survey
reported that 56 percent of survey respondents were concerned about information
security while using fintech services.7 There have been instances of security
breaches within companies like Credit fair and Chqbook.8 In this regard, an
investigation9 conducted for assessing the privacy policies and norms of 48 fintech
companies revealed that a lot of companies are not fully compliant with the
Information Technology Rules 2011. 10 It was pointed that the majority of privacy
policies lacked compliance as they did not state clear opt-out options for its users,
did not specify the type of data that will be collected, and provided inadequate
details regarding retention of information. Moreover, privacy policies were not
stipulated in regional languages, which made it difficult for consumers to
comprehend and make an informed decision. 11 There is a change expected in this
regard with the forthcoming Personal Data Protection Bill 2019 (PDPB). 12 The
PDPB categorises financial data as sensitive data and prescribes for notice and
consent frameworks, purpose and storage limitation, data localisation (DL) among
other obligations on service providers. Along with this, there is an existing RBI
circular on the storage of payment system data (2018), which prescribes DL norms.
Concerning PDPB, fintech companies have raised concerns regarding the
additional burden on them for categorising data and 3 the adverse impact of DL
norms. In this regard, a study conducted by CUTS International on the impact of
DL observed that it could adversely affect consumers’ privacy, increase cyber-
security risks through making honeypots of data, thereby possibly reducing
consumers’ uptake of data-driven services. 13 Furthermore, a lot of fintech
companies have overseas offices, and compliance with DL may affect their
business and hamper innovation.

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Fraudulent Practices and Consumer Redress
The usage of digital payments and fintech services is gradually increasing,
particularly in urban areas. Many first-time users have started to board the fintech
bandwagon. However, a significant issue currently faced by the fintech sector is
regarding emerging fraudulent practices and the absence of accessible grievance
redress options. A scam was reported on one of the most popular digital payments
application ‘Paytm’ when funds were incorrectly transferred to another account
without the user’s permission. 15Another incident was reported on ‘CashApp’,
where hackers used fake accounts to get people to give their account details for
winning an offer.16 Such scams have also emerged during the COVID-19 pandemic
with people making fake UPI accounts asking for donations.17 Hence, an increase
in the usage of fintech services has also escalated fraudulent practices in the sector.
Furthermore, since consumers are new to such services, there is a lack of
awareness regarding digital frauds, identity thefts, fraudulent digital payments, fake
donations, and online money laundering. At the same time, there is also a lack of a
robust consumer grievance redress mechanism. At present, there exists an
ombudsman, which covers both bank and non-bank services, and RBI recently also
launched its digitised Complaint Management Systems18 for lodging complaints
online. However, there are procedural gaps, as most complaints do not reach the
ombudsman, high cost of handling complaints19 , and lack of timely redressal.

Favourable Government Initiatives to Aid Digital Economy and Financial

Sector Boosting theMarket Growth
Governments around the world are supporting the use of fintech to increase financial
inclusion, increase efficiency through the use of real-time payments and open
applications programming interfaces and blockchains, among others. For instance, the
United Kingdom government has created a taskforce to explore digital bank currency
to form a more open, greener, and technologically advanced financial services sector.
Similarly, the introduction of a regulatory sandbox scheme by the South Korean
government to commercialise innovative fintech solutions and promote competition
and growth in the fintech industry. Furthermore, the increasing investments by various
governments to aid the digital economy are also leading the market growth. In addition,
the rising adoption of digital payments and open banking is further enhancing the
growth of the fintech industry.

The increasing internet penetration and the rising ownership of smartphones around
the globe, along with the rising adoption of cashless currency, have revolutionised the
payment and money transfer segment. Moreover, the increasing attempts for fintech
companies to adopt the latest technologies and improve user-friendliness is increasing
its demand among the technology-driven millennials and Gen-Z, which is also
invigorating the industry growth. Moreover, the plethora of start-ups and established
companies provide various opportunities for the economic growth of various small and
medium-sized enterprises (MSME) by providing them with a variety of rich funding
options and other services, such as marketplace lending, invoice finance, and
merchant and e-commerce finance, among others.

33
Fintech Landscape:
North America still produces most of the fintech startups, with Asia a relatively
close second, followed by Europe. Some of the most active areas of fintech
innovation include or revolve around the following areas (among others):

 Cryptocurrency (Bitcoin, Ethereum, etc.), digital tokens (e.g., NFTs), and

digital cash. These often rely on blockchain technology, which is a distributed
ledger technology (DLT) that maintains records on a network of computers
but has no central ledger. Blockchain also allows for so-called smart
contracts, which utilize code to automatically execute contracts between
parties such as buyers and sellers.
 Open banking, which is a concept that proposes all people should have
access to bank data to build applications that create a connected network of
financial institutions and third-party providers. An example is the all-in-one
money management tool Mint.
 Insurtech, which seeks to use technology to simplify and streamline
the insurance industry.
 Regtech, which seeks to help financial service firms meet industry
compliance rules, especially those covering Anti-Money Laundering and
Know Your Customer protocols which fight fraud.
 Roboadvisors, such as Betterment, utilize algorithms to automate
investment advice to lower its cost and increase accessibility.
 Cybersecurity. Given the proliferation of cybercrime and the decentralized
storage of data, cybersecurity and fintech are intertwined.

3.1.3 Fintech Users

There are four broad categories of users for fintech: 1) B2B for banks and 2) their
business clients, as well as 3) B2C for small businesses, and 4) consumers. Trends
toward mobile banking, increased information, data, more accurate analytics, and
decentralization of access will create opportunities for all four groups to interact in
heretofore unprecedented ways.As for consumers, as with most technology, the
younger you are the more likely it will be that you are aware of and can accurately
describe what fintech is. The fact is that consumer-oriented fintech is mostly targeted
toward millennials given the huge size and rising earning (and inheritance) potential of
that much-talked- about segment. Some fintech watchers believe that this focus on
millennials has more to do with the size of that marketplace than the ability and interest
of Gen Xers and baby boomers in using fintech. Rather, fintech tends to offer little to
older consumers because it fails to address their problems. When it comes to
businesses, before the advent and adoption of fintech, a business owner or startup
would have gone to a bank to secure financing or startup capital. If they intended to
accept credit card payments they would have to establish a relationship with a credit
provider and even install infrastructure, such as a landline-connected card reader.
Now, with mobile technology, those hurdles are a thing of the past.

34
Regulation and Fintech
Financial services are among the most heavily regulated sectors in the world. Not
surprisingly, regulation has emerged as the number one concern among governments
as fintech companies take off. As technology is integrated into financial services
processes, regulatory problems for such companies have multiplied. In some
instances, the problems are a function of technology. In others, they are a reflection of
the tech industry's impatience to disrupt finance. For example, automation of
processes and digitization of data makes fintech systems vulnerable to attacks from
hackers.

Recent instances of hacks at credit card companies and banks are illustrations of
the ease with which bad actors can gain access to systems and cause irreparable
damage. The most important questions for consumers in such cases will pertain to the
responsibility for such attacks as well as misuse of personal information and important
financial data.

The fintech company is not an intermediate financial institution because the fintech
company provides financial solutions for connecting peer-to-peer customers. For
example, the P2P lending company provides the platform for lenders and borrowers
to connect directly to a decentralized exchange market of cryptocurrencies and mobile
money. The peer-to-peer transaction and the decentralized exchange market without
authorities' monitoring create new risks and threaten the finance industry's
sustainability. We explore that there is a difference from the national regulations or
policies for the fintech company development. It is the critical factor of the fintech-
outside. Hong Kong, the UK, and Singapore are pioneering regulations to facilitate
fintech companies' development called the “regulatory sandbox”. However, in
developing countries, the “specified sandbox” has not yet attracted policymakers'
attendance. Sangwan et 401 al. (2019) indicated the lower regulatory is the cause of
the P2P lendings development and the credit risk increasing. Moreover, there is a
difference in mobile payment development between countries because of the national
regulatory factor's impact. Furthermore, we explore that the license and other legal
requirements for the fintech company operation are also the vital components of the
fintech regulator. The bank faces more regulatory burden than the fintech company;
thus, the fintech company has the condition for growing (e.g., the regulation of issuing
loans, capital requirements, mortgage servicing rights, mortgage-related lawsuits, and
the transfer channel - the transfer money of the bank must be monitored by the central
bank, but there are not any rules applicable for the fintech companies) (Buchak et al.,
2018). Therefore, the price of products of the fintech company is more competitive
than of the conventional bank. We consider that it is a positive factor of the fintech
platform. Consequently, we propose that the fintech regulation consists of a “regulatory
sandbox”, national regulation, license, and other legal requirements, crucial for the
fintech outside.

There have also been instances where the collision of a technology culture that
believes in a "Move fast and break things" philosophy with the conservative and risk-
averse world of finance has produced undesirable results. San Francisco-based
insurtech startup Zenefits, which was valued at over a billion dollars in private markets,
broke California's insurance laws by allowing unlicensed brokers to sell its products
and underwrite insurance policies. The SEC fined the firm $980,000 and they had to
pay $7 million to California's Department of Insurance. Regulation is also a problem in
the emerging world of cryptocurrencies. Initial coin offerings (ICOs) are a new form of

35
fundraising that allows startups to raise capital directly from lay investors. In most
countries, they are unregulated and have become fertile ground for scams and frauds.
Regulatory uncertainty for ICOs has also allowed entrepreneurs to slip security tokens
disguised as utility tokens past the SEC to avoid fees and compliance costs. They have
established fintech sandboxes to evaluate the implications of technology in the sector.
The passing of General Data Protection Regulation (GDPR), a framework for collecting
and using personal data, in the EU is another attempt to limit the amount of personal
data available to banks. Several countries where ICOs are popular, such as Japan and
South Korea, have also taken the lead in developing regulations for such offerings to
protect investors.

Indian FinTech companies could address a few of the critical structural issues afflicting
Indian financial services-increase outreach, improve customer experience, reduce
operational friction, and foster adoption and usage of the digital channel. Legacy
prone processes and higher operating cost models of incumbent banks and financial
service providers will give digital FinTech companies an edge, as banks play catch-up
with these more nimble and innovative start-ups. The opportunity for FinTech lies in
expanding the market, shaping customer behavior, and effecting long term changes in
the financial industry.

Indian FinTech companies have the potential to reshape the financial services
landscape in three ways:

 The FinTech startups are likely to reduce costs and improve quality of
financial services. Not being burdened with legacy operations, IT
systems, and expensive physical networks, benefits of leaner
operating models can be passed on to customers.

 The FinTech industry will develop unique and innovative models of

assessing risks. Leveraging big data, machine learning, and
alternative data to underwrite credit and develop credit scores for
customers with limited credit history will improve the penetration of
financial services in India.

 FinTech will create a more diverse, secured, and stable financial

services landscape. FinTech companies are less homogenous
than incumbent banks and offer great learning templates to
improve, both, capabilities and culture.

Fintech companies can learn and adopt best practices around risk and internal
controls, operational excellence, compliance culture, and employee engagement, that
has stood the test of time for most the banks, and financial services providers in India.

36
 3.1.4 Fintech industry in India: A closer look

Banks have conventionally served as the gateway to payment services in India.

However, with the rapid advancement of technology, this no longer appears to be the
case, as the monopoly of banks in this area is gradually weakening. In recent years,
India's payments infrastructure has seen substantial improvements, particularly with
the introduction of new payment mechanisms and interfaces such as Immediate
Payments Service Unified Payments Interface (UPI), Bharat Interface for Money
(BHIM), and others. The government's "Make in India" and "Digital India" projects also
played a significant role in accelerating the adoption of Fintech. It is commendable that
the Reserve Bank of India (RBI) has also pushed the growing use of electronic
payments to establish a truly cashless society in recent years.

Furthermore, government actions such as the implementation of demonetization and

GST have also created a subst substantial growth opportunity for fintech projects all
over the country. Although demonetization resulted in a lot of chaos and frenzy,
especially among the common folk, ultimately, it was the driver for a shift away from a
paper-based, cash-based economy toward digital, electronic, technology-driven
platforms that boosted the nation's already-existing FinTech revolution. And it's only
reasonable to assume that the COVID-19 pandemic has hastened this digitalization
across various categories, with contactless and cashless payments promoted to
encourage social distancing.

“Digital payments have become a way of life in India and we have seen 10-15 million
new customers coming on to the digital bandwagon over the last 12 months. Two
factors that led to this change were demonetization and Covid-19 pandemic. There is
a massively complex ecosystem at the backend but the reimagining at the backend
has led to fantastic experience for the customers, triggering a massive adoption," says
Hemant Gala, VP - Financial Services and Payments at PhonePe, an Indian digital
payments and financial services company founded in 2015. The report also states that
67 percent of the more than 2100 FinTechs in India today were founded in the last five
years.

With the advent of breakthrough platforms such as PayTM, PhonePe, MobiKwik, etc.,
digital payment systems have undeniably been the flag bearers of the Indian FinTech
market. Additionally, Facebook and Reliance Jio's global partnership is expected to
significantly change India's digital payments sector, with a particular focus on
hyperlocal digital commerce that will reach tier 2 and 3 cities and rural areas.

37
 3.1.5 PILLARS OF A FINTECH ECOSYSTEM

University and research institutions - Institutions support the fintech community by

mentoring and assisting early-stage companies and producing a more talented
workforce.

Government and Regulators - The government is naturally the prima facie catalyst for
the success or failure of fintech in a heavily regulated financial industry. The
Government of India along with regulators such as SEBI and RBI are aggressively
supporting the ambition of the Indian economy to become a cashless digital economy
and emerge as a strong fintech ecosystem via both funding and promotional initiatives.
They protect consumers through appropriate rules and provide supportive incentives
to help Fintech grow.

Start-ups - Evolution of start-ups is imperative for a successful fintech ecosystem. The

flourishing effect of fintech start-up has been catalyzed by an increasing demand for
digital financial products by consumers, rampant rise of connected devices and
support of venture capitalists.

38
Investors - Angels, VCs and PE houses are all looking at Fintech as a viable
investment.

Financial Institutions - Financial institutions are the strategically closest partners to

fintech that are discovering core sector talent and codeveloping platforms, products
and solutions, along with providing funding and industry exposure.

Incubator's, accelerators and Innovation labs - Incubators are offering a means

for big business to engage and assist young companies meet their potential.

Tech vendors - Tech companies that provide financial services alongside their core
products. For instance, both Uber and Amazon have dedicated internal teams of
engineers and experts making a strong push toward increasing their presence in the
sector.

Users - From corporates to retail customers, many are considering how they could
leverage fintech to improve their services or experience, respectively.
Fintech ecosystems have evolved significantly with a considerable effort from financial
institutions, start-ups, the government, venture capitalists and regulators to create a
conducive environment of collaboration and dynamism. The sweeping changes
introduced by fintech start-ups are likely to have an impact that extends beyond the
confines of the traditional financial services industry. Financial institutions are
increasingly adopting a collaborative approach with fintech start- ups to provide
personalized and engaged services to customers. Furthermore, the government’s
reformist stance has led to a gallop towards building a vibrant open digital
economy.

39
 3.2 BLOCKCHAIN

Definition

“A Blockchain is a digital, immutable, distributed ledger that chronologically records

transactions in near real time. The prerequisite for each subsequent transaction to be
added to the ledger is the respective consensus of the network participants (called
nodes), thereby creating a continuous mechanism of control regarding manipulation,
errors, and data quality.”

A blockchain is a type of database. Blockchain, sometimes referred to as Distributed

Ledger Technology (DLT), makes the history of any digital asset unalterable and
transparent through the use of decentralization and cryptographic hashing. Blockchain
is an especially promising and revolutionary technology because it helps reduce risk,
stamps out fraud and brings transparency in a scalable way for myriad uses.

How Blockchain works?

Figure 3.3

Step 1- Some person requests a transaction. The transaction could be involved

cryptocurrency, contracts, records or other information.
Step 2- The requested transaction is broadcasted to a P2P network with the help of
nodes.

40
Step 3- The network of nodes validates the transaction and the user's status with the
help of known algorithms.

Step 4- Once the transaction is complete the new block is then added to the existing
blockchain. In such a way that is permanent and unalterable.

Blockchain consists of three important concepts: blocks, nodes

and miners.

Blocks
Every chain consists of multiple blocks and each block has three basic elements:
1. The data in the block.
2. A 32-bit whole number called a nonce. The nonce is randomly generated
when a block is created, which then generates a block header hash.
3. The hash is a 256-bit number wedded to the nonce. It must start with a
huge number of zeroes (i.e., be extremely small). A block also has a hash.
A can be understood as a fingerprint which is unique to each block. It
identifies a block and all of its contents, and it's always unique, just like a
fingerprint.
4. The first block in the chain is called the Genesis block. Each new block in
the chain is linked to the previous block. When the first block of a chain
is created, a nonce generates the cryptographic hash. The data in the
block is considered signed and forever tied to the nonce and hash unless it
is mined.

Miners
Miners create new blocks on the chain through a process called mining.

In a blockchain every block has its own unique nonce and hash, but also references
the hash of the previous block in the chain, so mining a block isn't easy, especially on
large chains.

Miners use special software to solve the incredibly complex math problem of finding a
nonce that generates an accepted hash. Because the nonce is only 32 bits and the
hash is 256, there are roughly four billion possible nonce-hash combinations that must
be mined before the right one is found. When that happens, miners are said to have
found the "golden nonce" and their block is added to the chain.

Making a change to any block earlier in the chain requires re-mining not just the block
with the change, but all of the blocks that come after. This is why it's extremely difficult
to manipulate blockchain technology. Think of it is as "safety in math" since finding
golden nonces requires an enormous amount of time and computing power.
When a block is successfully mined, the change is accepted by all of the nodes on the
network and the miner is rewarded financially.

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Nodes
One of the most important concepts in blockchain technology is decentralization. No
one computer or organization can own the chain. Instead, it is a distributed ledger via
the nodes connected to the chain. Nodes can be any kind of electronic device that
maintains copies of the blockchain and keeps the network functioning.

Every node has its own copy of the blockchain, and the network must algorithmically
approve any newly mined block for the chain to be updated, trusted and verified. Since
blockchains are transparent, every action in the ledger can be easily checked and
viewed. Each participant is given a unique alphanumeric identification number that
shows their transactions.

Combining public information with a system of checks-and-balances helps the

blockchain maintain integrity and creates trust among users. Essentially, blockchains
can be thought of as the scalability of trust via technology.

Simply put, Blockchain is a protocol for exchanging value over the internet without an
intermediary.

Blockchain, mostly known as the backbone technology behind Bitcoin, is one of the
emerging technologies currently in the market attracting lot of attentions from
enterprises, start-ups andmedia. Blockchain has the potential to transform multiple
industries and make processes more. Blockchain technology is being viewed by many
as one of the most innovative technology that has emerged over the last 10 years;
some argue that within 20 years, blockchain will disrupt society more profoundly
than the internet disrupted communication and media. Blockchain technology, a form
of distributed ledger technology, is a vast, global decentralized database that is
cryptographically secure and running on millions of devices – open to anyone. The
transactions in the distributed ledger are immutable and verifiable, therefore, making
it transparent and easy to track. Like the internet, blockchain is effectively a protocol
upon which applications can be built. One of the most powerful features of blockchain
technology is the fact that it does not require traditional intermediaries when doing a
transaction between two parties, thereby significantly lowering or even potentially
eliminating transaction costs.

3.2.1 Types of Blockchain

All Blockchain can be classified into three categories: Public, Permissioned, and
Private.

A Public Blockchain is one where anyone can read or write on the platform, provided
they can show proof of work.

A Permissioned Blockchain offers selective transparency where only selected nodes

have the rights to access and provide consensus on that transaction.

A Private Blockchain where only chosen players have the rights to join the network
which creates a closed loop environment.

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3.2.2 BLOCKCHAIN KEY FEATURES

Near real time - Blockchain enables the near real-time settlement of recorded
transactions, removing friction, and reducing risk.

No intermediary - Blockchain technology is based on cryptographic proof instead of

trust, allowing any two parties to transact directly with each other without the need for
a trusted third party.

Distributed ledger - The peer-to-peer distributed network records a public history of

transactions. The blockchain is distributed and highly available. The blockchain does
not typically preserve the identities of the parties or the transaction data, only the proof
of the transaction existence.

Irreversibility & Immutability - The blockchain contains a certain and verifiable record
of every single transaction ever made. This prevents past blocks from being altered
and in turn stops double spending, fraud, abuse, and manipulation of transactions.

Smart Contracts - Stored procedures executed in a Blockchain to process pre-defined

business steps and execute a commercially/legally enforceable transaction without
involvement.

With huge volumes of data getting generated every day owing to digitization of records,
it becomes important for every organization to effectively manage the security threats
and achieve significant cost efficiencies. This is where Blockchain, with its promises
of decentralized ownership, immutability, and cryptographic security of data, is
catching the attention of the C-suite executives. Multiple use cases are also getting
explored across industries as everyone has started realizing the disruptive potential of
this technology. democratic, secure, transparent, and efficient.

How It May Impact Consumers

Shifting financial services to a blockchain could

 Save consumers up to $16 billion annually in banking and insurance fees 

 Allow speedier settlement of transactions, from bank transfers to stock sales 
 Make it easier, faster, and less expensive to borrow money 
 Make it easier, faster, and less expensive to send money internationally 
 Get dividend payments to investors faster 
 Increase access to financial markets and financial services for
underserved populations 

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How It May Impact Employment

Integrating blockchain into the financial services industry may:

 Reduce jobs for loan officers as borrowing becomes more streamlined 

 Cut jobs for investment banking professionals involved in initial public
offerings as initial coin offerings become a preferred way to raise funds 

 Lower employment at custodian banks such as State Street, BNY

Mellon, Citi, and JP Morgan that act as intermediaries in securities
transactions 

 Increase job opportunities for innovative thinkers and computer

programmers eager to help financial institutions implement blockchain-
based solutions 

 Overall, reduce employment at financial services companies unwilling

to adapt this new technology, if it proves successful. 

INDIAN OVERVIEW

Blockchain in FinTech appeared for the first time as the distributed ledgers of Bitcoin
but has recently attracted consideration from practitioners and researchers. Today,
financial institutions and other market participants, mainly due to the development of
the blockchain technology, are approving the nature of FinTech and the necessity for
research in the academic world given the implications of this technology. Financial
innovation is not something new, as it has an extensive history.
Blockchain is being perceived in India as a game change that, if used to its full
potential, can offer an innocuous, quick and economical way for transactions. Though
it is at a very nascent stage and is yet to mature into a mainstream application, the
technology is receiving encouraging reviews from market players in the country.
A number of major IT players in India are piloting projects that implement blockchain
in financial processes, such as:
 An Indian IT major has launched a blockchain framework for financial
services that can be applied to a network of banks for functions such as
trade settlement. 
 IBM has announced adoption of Ethereum for its IoT projects. The company
has also launched an open source blockchain initiative in collaboration with
a number of partners such as London Stock Exchange, Cisco and Intel. 

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Examples:

 Zone Startups, Bit Street and Block Chain University hosted a hackathon at
the Bombay Stock Exchange called ‘Hack Coin Mumbai’ to build
blockchain-based application for payments, big data and other digital-
based services. This was sponsored by Microsoft, IBM and Citrus pay. 

 IIT Kharagpur, BTCX India and Bleakonomics have held a hackathon to

showcase blockchain- based innovations. 

In India, blockchain adoption is still very premature, but the impact is significant
enough to guarantee assessment, experimentation, and implementation by
enterprises.

Fintech enablement could be seen as a vital area in the Indian market and the next
few years are likely to see increase in accelerators, incubation programmers and VC
funding with fintech incumbents, for achieving scale sophistication and establishing a
wider reach for the applications of blockchain. As a probable list of use cases
remittances, micro transactions, financial inclusion, gold trading and record of asset
ownership - are a few key near-term applications of blockchain that could be expected
in India.

Gartner forecasted that blockchain will generate an annual business value of more
than USD3 trillion by 2030. However, like any technology innovation, blockchain will
evolve with new discoveries. For example, the internet is continuing to evolve and has
new regulations after many decades of existence. Artificial intelligence (AI), internet of
things (IoT), and robotic process automation (RPA) technologies have gained
relevance over time and represent different aspects of the data world. However, their
use is restricted due to their inherent vulnerability to security risks owing to the internet.
With the emergence of blockchain, many such issues can be resolved by creating
indexed records that are tamper proof and referenceable without censorship. The
emergence of new technologies does not present complete solutions, but
convergence of technologies should help players customize solutions. For example,
in usage-based insurance, IoT sensors collect data and insurance companies access
usage patterns on a secure blockchain. A blockchain-based marketplace that
connects AI companies and data providers is another example

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3.2.3 ROBO-ADVISORY: INVESTING THROUGH MACHINES

The technology revolution has transformed the marketplace for investment

products and services in significant ways. New Internet tools have made it possible for
individual investors to buy and sell securities directly in the stock market without the
advice of a broker, investment adviser, or other intermediary. Many individual
investors have acquired the expertise and self-confidence to conduct their own
investment programs online. Some devote hours each day to managing their
investment portfolios. Some have done well for themselves in the stock market. Many
have not. Some view the stock market as little more than a casino. Most understand
that investing in the market is not for amateurs or the faint of heart. Certainly, when it
comes to investing one’s retirement nest egg, caution is advisable.

Robo-advisors have emerged in the marketplace as an alternative for small

investors who are comfortable using Internet technology but want the reassurance of
an investment adviser to guide them. They offer investment advice and discretionary
investment management services without the intervention of a human adviser, using
algorithms and asset allocation models that are advertiseda s being tailored to each
individual’s investment needs.

Understanding Robo-Advisors

The term “robo-advisor” refers to any of a growing number of Internet-based

investment advisory services aimed at retail investors that have emerged in the
financial marketplace in recent months. About a dozen or so of such services
currently exist with any significant customer base. More robo-advisors are expected
to appear in the future. Robo-advisors offer on-line investment advice based on the
user’s responses to a questionnaire filled out online. The questionnaire is designed to
elicit information to establish basic risk parameters and investment preferences for the
user but does not necessarily elicit complete information about the user’s financial
situation. Based on the user’s answers, the robo-advisor formulates an asset
allocation program for the user and makes specific investment recommendations.
Clients with similar investment objectives generally receive the same investment
advice and may hold the same or substantially the same investments in their
accounts. Robo-advisors offer their services through an Internet interface or platform.
A key characteristic of a robo-advisor is the absence of any human contact between
the advisor and investors. Robo-advisors are designed to avoid the necessity of a
personal advisory relationship with the client.

The first robo-advisor, Betterment, launched in 2008 and started taking investor
money in 2010, during the height of the Great Recession. Its initial purpose was to
rebalance assets within target-date funds as a way for investors to manage passive,
buy-and-hold investments through a simple online interface.

46
The technology itself was nothing new. Human wealth managers have been using
automated portfolio allocation software since the early 2000s. But until 2008, they
were the only ones who could buy the technology, so clients had to employ a financial
advisor to benefit from the innovation. Globally, robo advisory is reforming the
landscape of wealth advisory services. At a minuscule share at present, it is projected
to grow by CAGR of 68 per cent over the next five years and manage USD 5 trillion
worth of assets by 2025.

Today, most robo-advisors put to use passive indexing strategies that are
optimized using some variant of modern portfolio theory (MPT). Some robo-advisors
offer optimized portfolios for socially responsible investing (SRI), Hallal investing, or
tactical strategies that mimic hedge funds. The advent of modern robo- advisors has
completely changed that narrative by delivering the service straight to consumers.
After a decade of development, robo-advisors are now capable of handling much more
sophisticated tasks, such as, investment selection, and retirement planning. The
industry has experienced explosive growth as a result; client assets managed by robo-
advisors hit $987 billion in 2020, with the expectation of reaching $2.9 trillion worldwide
by 2025.Other common designations for robo-advisors include "automated investment
advisor," "automated investment management," and "digital advice platforms." They
are all referring to the same consumer shift towards using fintech applications for
investment management.

What Kinds of Robo-Advisors Are Out There?

The Indian robo-advisory landscape can be categorized broadly into three types.

 Fund-Based Robo
 Advisory Equity-based Robo Advisory
 Comprehensive Wealth Advisory

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Fund-based robo advisors offer risk-profiling and goal-based suggestions to their
customers. Investments are in a single asset class—funds—which could be either
managed or exchangetraded. They are suitable for investors, new and seasoned,
who are relatively risk averse and do not wish to have direct exposure to equity but
need guidance on the most optimal investment mix for them. Almost none of them
charge the customer for their services and revenues are mainly through fund
distribution commissions.

Examples of such solutions include Scripbox, Goalwise (now acquired by Niyo),

Fisdom, Finpeg, Orowealth, and Kuvera. Kuvera has also diversified into other asset
classes such as equities and gold.

Equity-based robo advisors focus purely on equity portfolios. These solutions allow
execution through multiple brokers. They are suitable for investors with a fair
understanding of equity markets, who have moderate to aggressive risk profiles but
prefer the guidance of experts to design the most optimal portfolios. Some of them
offer thematic portfolios which are designed around specific sectors or investment
philosophies. Pricing is usually fixed, either as an annual fee or as a transaction fee.
Examples of such solutions include Smallcase, Fyers, Tauro Wealth, and Markets
Mojo.

Comprehensive wealth advisory is one that focuses on aggregating the financial

networth of the customer, understanding their risk appetite and then offering complete
wealth management services. This can be at an individual or a household level. In
addition to fund-based portfolio recommendations, they also offer financial planning,
portfolio management services and human financial advisory with
wealth, and estate planning. Pricing is usually fee- based for a packaged combination
of services.

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3.2.4 How Robo Advisors Work?

Figure 3.6

Step 1 – Sign up and Create a profile.

Step 2 - A new customer signing up for a robo-advisor usually starts by supplying basic
information about their investment goals through an online questionnaire. These
questions may touch on subjects like your investment timeline, your risk tolerance, and
how much money you have in savings.

Step 3 -Robo-advisors then run those answers through an algorithm to provide an

asset allocation approach and build a portfolio of diversified investments that meets
your goals.

Step 4 - Once your funds are invested, the software can automatically rebalance your
portfolio to ensure that it remains close to that target allocation. Many popular robo
advisory encourage investors to regularly contribute to their accounts, such as small
weekly deposits. The robo-advisor will use those contributions to maintain target
allocation.

49
3.2.5 Features of Robo-Advisors

 Portfolio management

Robo-advisors create optimal portfolios based on the investors’ preferences. Typically,

portfolios are created based on some variant of the Modern Portfolio Theory, which
focuses on the allocation of funds to stocks that are not perfectly positively correlated.

Robo-advisors usually allocate funds to risky assets and risk-free assets, and the
weights are decided based on the investors’ goals and risk profile. Robo-advisors
monitor and rebalance the portfolio as economic conditions change by adjusting the
weights of risky and risk-free assets.
 Tax-loss harvesting

Tax-loss harvesting involves the sale of securities at a loss in order to save on capital
gains tax, typically done towards the end of the tax year. By selling a security at a loss,
investors avoid paying taxes on that income.

At the same time, it is important to invest in a similar security in order to maintain the
portfolio allocation and reap the rewards of an upturn in the markets. Robo-advisors
automate the process, allowing users to benefit from tax-loss harvesting effortlessly.
 Less expensive

Robo-advisors offer traditional investment management services at much lower fees

than their human counterparts (financial advisors). The minimum amount required to
use such types of software is also much lower than the minimum amount required by
financial planners.
 Easy to use and secure

Robo-advisors also add value by allowing investors to invest in many different asset
classes conveniently through mobile phones or web applications. Furthermore, they
provide full access to portfolio management tools, which offer more flexibility and
security to users.

 Minimum Balances

It's a boon for investors with a small net worth to get professional robo-advisory
management. Zero minimum balance technology-enhanced robo-advisors include
Folio Investing and Wise Banyan. Personal Capital is free for those interested in
access to portfolio monitoring, with the higher- balance tiers reserved for exposure to
a dedicated financial advisor.
Technological disruption has reached the realm of wealth management services,
where automated financial advisors, known as robo-advisors, are starting to compete
with human advisors. Conceived as a low-cost alternative to traditional human

50
advisors, robo-advisors are online platforms that use algorithms to automatically build
and manage clients’ portfolios. Though robo-advisors started as fintech start-ups in
the aftermath of the global financial crisis, they have grown in popularity in recent
years, particularly as more traditional financial institutions have started to offer their
own robo-advisory services.

Indian overview

Robo advisors in India have been popular for the last 1–2 years and for 3–4 years in
developed markets. As the name suggests, robo advisors are advisors that offer
services automatically based on a specific set of rules and algorithms. They are
extremely sophisticated, easy to use online tools and also product transaction
enablers. They are programmed to take specific inputs and generate output. Indian
robo-advisors have successfully raised huge funds from venture capitalists. Many new
entrants and traditional broking firms have launched robo advisor services in India
such as Aditya Birla Money’s My Universe, Big Decision, Scrip Box, Arthay antra,
Funds India and 5nance. Demographic swing and technology enablement in India
have been the prime enablers unleashing new opportunities and taking the business
model of financial advisory to the next level. In India, robo advisors are distinguishing
themselves as the responders to the digital trend and crafting a model resonating with
early adopters. The services offered range from mutual funds, portfolio allocation,
insurance plan selection to pension fund selection.
Below are few examples:
 Funds India, an online automated advisory service, is able to garner
80,000 customers with an AUM of INR 1500 crore04.
 Robo advisory firm Arthayantra, using analytics tool for customized advice,
is serving 75,000 users with targeting one million users over the next 24
months

There is a need for traditional financial advisors to adopt a holistic approach on going
digital and integrating business strategy with all constituents of their operating model
ecosystem to create a remarkable customer experience.

Top robo-advisory in India

Finpeg - It is an investment robo-advisory platform that deals exclusively with

advisory and selling of mutual fund strategies and schemes. This advisor offers
cutting-edge investment strategies with a proven track record of offering superior
returns and phenomenal downside protection.

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5nance - They are an integrated, one stop shops for all your financial needs. Consider
it as your holistic financial partner. All money management needs such as budgeting,
expenses tracking and savings optimization. Do a comprehensive financial planning
and get investment recommendations. Track portfolio and optimize the returns. Invest
at no extra cost. One of the best features of 5nance is that it gives you
recommendations on where to invest. They provide prudent research on various asset
classes that helps you take an informed decision for the correct investments. They also
have the option to compare products across asset classes to make smart investment
choices.

Scripbox - Invest in mutual funds easily! Algorithmically selected mutual funds to grow
your money and meet your life goals. Save tax Top ELSS funds to save tax the smart
way.
Start an SIP Best equity and debt mutual funds. Build wealth: Top equity mutual funds
for long-term goals.

Goalwise - Goalwise is a Mutual Fund investing service which helps to plan and invest
for financial goals, be it saving for your retirement, buying a house or just building your
wealth. Although a lot of advisory platforms provide only commission-laden mutual
funds, Goalwise lets you invest in zero- commission direct plans for free – no
transaction charges, account fees or any other hidden charges.
Their robo advisory engine (GoalSenseTM) continuously monitors the investments to
ensure that it is on track to achieve the goal making them one of the best robo advisors
in India to consider.

5Paisa - This is an integrated platform for Stocks, Mutual Fund, Insurance & Advisory.
For robo advisors, with just 3 steps you get a customized smart investment plan.

Arthayantra - Arthayantra is the world’s only Full Service Robo Advisor providing
comprehensive, affordable and customized financial planning in India. Equipped with
a tax saving strategy, the right insurance advice, a platform to invest in mutual funds
and tracking your goal of buying a house, ARTHOS has it all. ARTHOS is the robo
advisor for money management. Arthayantra also has a dedicated team of Certified
Financial Advisors and servicing agents who will assist customers at every step of their
financial journey.

Robo advisors have been in the news largely due to rise in new disrupting fintech
start-up. The incumbent firms are also implementing the sophisticated technology
such as advanced analytics and AI to provide great customer service. In India, the
AUM under robo advisory is approx. $42m in 2019 and will grow at an expected an
annual growth rate of 36.2% resulting in the total amount of US$145m by 2023. The
sheer rise of robo advisor due to various number of benefits offered by them such as
an easier onboarding process, a suite of automated capabilities and minimal
investment requirement compared to traditional alternatives.

52
Robo Advisors are quite better compared to the human advisors in terms of cost,
flexibility, time and research. Robo advisors in India are sprouting across the retail
investing space. Robo-advising has brought new challenges to the finance sector. As
there is usually no human-to-human interaction in robo-advising, investors are wholly
dependent on written information, such as the prospectuses of the investment
products. Studies on financial literacy, for instance, show that investors often have
difficulties to understand even quite basic financial terms. Information design and
visualization offer robo-advisor builders and document drafters a number of methods
they can use to serve the needs of their audiences and communicate the core
message effectively to the different readers. Information design can help robo-service
providers engage their audience, draw attention to what is important, and enhance
human-robot interaction. In this way, they can be better equipped to not only comply
with what is required by regulation but also to provide better advice and better
experience to their customers. The benefits can be great for both investors and
investment firms, for whom disputes can cost not only money but also their reputation.

3.2.6 CHALLENGES AND FUTURE PERSPECTIVES

In India, acceptance of various cashless modes payments was seen after

demonetization notes. The government itself encouraged everyone towards the
cashless technologies like digital wallets, Internet banking, and the mobile-driven point
of sale (POS).

Linking with the Aadhaar card, kick, UPI and BHIM had restructured the financial sector
in India.

After the ban of 500 and 1000 notes, it was reported that digital transactions raised up
to 22% in India FinTech start-ups like Paytm saw 435% of more traffic to the websites
and Apps. This led to the growth of many FinTech start-ups in India as there are many
opportunities to grow.

Digital Finance firms have benefited from many government ‘s start-up policies.
Reserve Bank of India also allowed an easy way to start a FinTech start-up.
Government is also providing the financial assistance for start- up ‘s up to 1 crore.
Customers started accepting the digital currency for both personal and commercial
use.

Due to various changes in the Indian economy, the financial structure of Indian banks
and financial institutions were changed, and digital wallet became a mandatory
channel for the transfer of payments.
Integration of IT with finance led to the increase in the value of digital money like
Bitcoins. Crypto currency, Block chain system led to faster transactions of digital
payments.

Banks like HDFC, Federal Bank etc. linked their official digital transactions with the
small startup in India like Startup Village which led to the growth even in small FinTech
start-ups.

53
Modernization of the tradition sector of banking and finance had increased more
customers, reduced the time and were able to provide fast and quick services to the
customers.

FinTech industry also has few challenges, like Fintech startups, find a little difficult to
reach the growing phase in the business cycle.
Collaboration and adoption rate is quite less but the ratio is moving upwards with a
59% increase in the digital payments.

Integration of many other techniques like blockchain management, cryptocurrency is

not still in a niche stage in India.

3.2.7 FUTURE OF ROBO-ADVISORY- INVESTING THROUGH MACHINES

Standard securities companies provide unique perspectives, provide a range

of investing resources and provide personalized guidance. Digitalization does not
serve as a replacement for an intimate partnership but complements it by leveraging
consumer data to create a financial strategy specifically to satisfy the expectations
and goals of the buyer. Established financial consultants give their clients a hybrid
model that blends the expertise, knowledge and customized support of conventional
financial planners with the flexibility, user-friendliness, miniscule-fee, pure- logic
trading framework, completely integrated and innovative technology of robo-advisors.
A client can opt for a passive asset allocation system or aggressive asset management
models. Still, the number of advisory platforms in India is growing, suggesting that
many see opportunity in this Wealth Tech segment. One reason for this is that, on
average, over 50% of new investors are youth and millennials aged between 25 and
38, showed a 2019 survey. Digital public goods have played a key role in the growth
of this sector. Many of them heavily leverage Aadhaar authentication, eKYC and
Digi Locker for new customer onboarding, UPI for transactions and fees, and eSign for
document signatures thereby bringing down operational and growth barriers
significantly. Financial data aggregation enabled by Account Aggregators could give
this process another push. Low decibel M&A activity is already taking place across
India’s robo-advisory landscape. Recently, Niyo acquired Goalwise and rebranded it
as Niyo Wealth. Existing and upcoming neobanks, several of whom are looking to
grow inorganically into financial advisory services, are likely to play a role here.
Growing per capita income, favorable demographics, increasing smartphone and
internet penetration, and an expected shift in investment behavior (primarily triggered
by economic uncertainty in the last two years) from ‘borrow and spend’ to ‘save and
spend’, makes India a promising market for wealth advisory solutions in the mid- to
long-term. Despite the investment tools may clear benefits, it’s better to under the
risk and limitation before using them. One such risk associated with automated
system is fat finger error. Fat Finger error is a human error caused by pressing the
wrong key while using an input data. These errors have serious impacts on your
portfolio holding. Robo Advisors offers simplicity, but simple isn’t always the best
approach. Lifetime goals and plans cannot determine by few questions and
answers. A robo advisor reason for choosing a portfolio could be different than an
investor.

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 If you are an early investor, then Robo Advisors are a great option due to low
fees, low threshold and simplistic use. But In case if you are a long-term investor
with a large amount of capital then you required the guidance of a certified financial
planner. For any investor every situation andneeds are different, so they must weigh
their options of whether a traditional investment advisor will work better or a robo
advisor.

The growing interest in ETFs and index funds in a see-saw market may also be
supportive of a move towards robo-advisories. Robo advisors have been in the news
largely due to rise in new disrupting fintech start-up. The incumbent firms are also
implementing the sophisticated technology such as advanced analytics and AI to
provide great customer service. In India, the AUM under robo advisory is approx. $42m
in 2019 and will grow at an expected an annual growth rate of 36.2% resulting in the
total amount of US$145m by 2023. The sheer rise of robo advisor due to various
number of benefits offered by them such as an easier onboarding process, a suite of
automated capabilities and minimal investment requirement compared to traditional
alternatives. Robo Advisors are quite better compared to the human advisors in terms
of cost, flexibility, time and research. There are so many robo-advisory firms in India.
But the scenario states that they are actually unable to solve the real time problems of
the users. Robo-advisors will definitely work well in India over a period of time. But
they actually need a different kind of flavor, not a copy of US models as the replica
would not work in India due to a lot of differences in terms of economic conditions and
regulatory frameworks of the countries. One should understand the core need & do
customization in the model accordingly for the best fit. Automation or no automation,
there are growing parts of society who often favor a human advisory model and
operate in a conventional way. Adapting to this kind of technologies will require some
time to develop. In addition to robo- planning services, investment management and
financial planning firms will still offer clients a human contact as asset managers.
Gradually, based on customer faith, trust and familiarity in this emerging technology,
businesses will start providing automatic advice coupled with human advisory service
capabilities. Compared to other developing countries, India's robo-advisory industry is
also in its infancy. This has development opportunities, though, and the robo-advisory
industry in India will flourish in the future.

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FUTURE OF BLOCKCHAIN IN INDIA

While Blockchain and Bitcoin have won the world over, India is also taking
significant strides to adopt Blockchain. With India’s increasing focus towards
digitization, the scope of Blockchain in India only seems to be growing. In the wake of
demonetization, the Indian economy is already witnessing a paradigm shift – from cash
to cashless. Indian citizens have already opened up to efficient and reliable transaction
mechanisms such as UPI, Paytm, and Google Pay. In India, Blockchain is witnessing
a major demand in a select few areas including Banking, Insurance, Logistics,
Healthcare, and Public Administration. While some of the players in these industries
are collaborating to realize the collective benefits of Blockchain tech at an industry
level, some others are exploring the potential of Blockchain along with their
subsidiaries and partners. The Indian government’s proactive encouragement towards
disruptive digital technologies is offering a massive boost to the growing scope of
Blockchain in India. For instance, post-demonetization, the RBI issued a statement
focusing on Blockchain’s potential to combat financial scams and frauds and to
transform financial markets and the payment infrastructure altogether. Ever since the
demonetization, the overall focus of the Indian government has been to promote
digitization for a cashless economy. To further this goal, Indiachain – NITI Aayog’s pilot
project in Blockchain tech – was developed to help create job opportunities in this
domain. At the state level, Andhra Pradesh became a pioneer of sorts by becoming
the first Indian state to leverage Blockchain tech for maintaining land records. Although
India is still at the nascent stage in exploring Blockchain technology, it holds is
immense potential for Blockchain applications. Blockchain integration in financial
transactions will not only save time and money, but it will also make the transaction
processing and authentication process much more seamless. Furthermore,
Blockchain can be an excellent tool to monitor money laundering and black money
accumulation – since all transactions are permanently stored on the Blockchain
network, every transaction is accountable. Blockchain is also capable of dealing with
issues like double spending and unauthorized spending.

Several blockchain tech investors want in on the Indian FinTech market and this
is certainly an indicator of the vast potential of this technology. Harmony, a Silicon
Valley-based blockchain protocol, announced interests to invest in the Indian FinTech
market last year. Additionally, Blockchain Venture Capitalist - Tim Draper announced
his interest to invest in India following Binance and WazirX announcing their USD 50
million “Blockchain for India” fund and CoinDCX pledged USD 1.3 million to fund
initiatives that enable adoption of crypto in India.

The best feature of Blockchain is that it operates on a decentralized database, thereby

making all transactions transparent, seamless, and highly secure. Apart from financial
transactions, Blockchain tech can be leveraged in other areas as well.

 To protect intellectual property rights – With Blockchain, content creators and

publishers can track and protect their ownership and intellectual property rights
by making the origin data transparent on the Blockchain network. This will also
help prevent piracy or misuse of intellectual property.

56
 To store files securely – Since files or data is not stored on a single, centralized
ledger, but is distributed on multiple networks and systems, it becomes impossible
to hack or violate the stored data. In Blockchain each block contains an encrypted
hash code without which the data cannot be accessed.

 To impart transparency in Administration – Blockchain technology can be used to

make elections or other polls transparent. By automating the process with smart
contracts and making the results publicly accessible and transparent, the poll
process can be devoid of corruption.

 To crowdsource VC funds – Blockchain frameworks (like Ethereum) can allow

individuals to purchase tokens and choose capital investments, thereby
encouraging direct cooperation and collaboration between the public and
enterprises.

While blockchain holds great promise for FinTech solutions, financial institutions are
finding it hard to move from their legacy systems. This is due to a lack of clarity around
regulations as well as their inability to innovate and adopt cutting edge technologies.

This provides scope for FinTech startups and blockchain platforms to bring new and
more efficient products and services to the market. some fintech’s are trying to replace
or compete with payment infrastructures like Visa & Mastercard or remittance
companies like Western Union & Moneygram, by focussing on key tenets like
Transparency, Speed & Security in its platform and tooling offering.

Fintech-driven blockchain platforms promise to lower the cost of serving existing and
new users for fundamental financial products and services like payments, lending,
credit, trading. This will also increase the scope for the creation of cross-finance
applications that ease the issues of increased transaction costs and the time taken for
transactions to reach the recipients.

Collaborations between stakeholders from governments, the private sector, the startup
community, and these blockchain protocols, will create an ecosystem that enables
FinTech solutions. Ongoing government initiatives like the Blockchain District by
Telangana State Govt and the 100 Smart Cities Mission of India are substantial efforts
that provide the impetus for the growth of blockchain in FinTech.

Blockchain today may be compared to what the Internet was in the early 1990s. While
we have witnessed how the ‘Internet of Information’ has changed our society over the
past two decades, we are now entering a phase where Blockchain may do the same
by ushering in a new paradigm comprising ‘Internet of Trust’ and ‘Internet of Value’.
With tremendous opportunities to exploit Blockchain technology, India could be on the
frontier of the next digital disruption. The key lies in overcoming the challenges faced
during the early adoption phase – if we can get past the obstacles in the initial stage,
Blockchain tech can be put to good use to strengthen the Indian economy.

57
FINTECH SUCCESS STORIES IN INDIA

The Government, through its Digital India initiative, has taken a number of steps
to drive digital penetration in the country. The following initiatives have resulted in
increase in banking penetration rate to 80% in 2017 from mere 35% in 2011:
 Aadhaar, the largest biometric program in the world, had generated over 1.2
billion digital identities. As of 15 September 2018, over 23 billion
authentications and 6.2 billion e-KYC have been done using Aadhaar (UIDAI
stats).
 Jan Dhan Yojna, one of the largest financial inclusion programs in the world,
was launched by the Government in 2015, has over 327 million beneficiaries
as of 19 September 2018.
 United Payments Interface (UPI), an instant real-time payment system through
bank account, was launched in 2016. In August 2018, UPI crossed an
important milestone of 300 million transactions in a month.
 In August 2016, the Government launched Bharat BillPay (BBP), an
interoperable payment platform, which allows users to make bill payments
across multiple channels and payment modes and provides instant receipts
through SMS.
 In March 2017, the Government launched Bharat QR, a common
interoperable quick response (QR) code.

58
 CHAPTER 4. DATA ANALYSIS AND INTERPRETATION

1. Consumer Gender for the feedback of service of Fintech industry.

INDEX NO. OF RESPONDENTS PERCENTAGE

FEMALE CONSUMER 51 44.2%
MALE CONSUMER 62 54.2%
PREFER NOT TO SAY 3 1.3%
TOTAL 116 100%

TABLE NO. 4.1

GRAPH NO. 4.1

INTERPRETATION

According to the above Data, 44.2% are Female respondents, 55.4% are Male
respondents and 1.3% preferred not to say.

59
 2. QUALIFICATIONS

INDEX NO. OF RESPONDENTS PERCENTAGE

UNDERGRADUATE 52 45.5%
GRADUATE 37 32.5%
POST-GRADUATE 22 19.5%
OTHERS 5 2.5%
TOTAL 116 100%

TABLE NO. 4.2

GRAPH NO. 4.2

INTERPRETATION
According to the above data, 45.5% are undergraduate, 32.5% are
Graduate, 19.5% are Post Graduate and 2.5% are others.

60
 3. Who influenced you to use FinTech?

INDEX NO. OF RESPONDENTS PERCENTAGE

FAMILY 64 55.8%
FRIENDS 43 37.7%
OTHERS 9 6.5%
TOTAL 116 100%

TABLE NO. 4.3

GRAPH NO. 4.3

INTERPRETATION

According to the above data, 55.8% respondents got influenced by Family members,
37. % respondents from friends and 6.5% by others.

61
 4. How familiar are you with automated financial advice tools (e.g., robo advisers)?

INDEX NO. OF RESPONDENTS PERCENTAGE

VERY FAMILIAR 39 33.8%
SOMEWHAT FAMILIAR 51 44.2%
NOT AT ALL FAMILIAR 26 22.1%
TOTAL 116 100%

TABLENO.4.4

GRAPH NO. 4.4

INTERPRETATION
According to the above data, 33.8% Respondents are very familiar with robo-advisory,
44.2% respondents are somewhat familiar whereas 22.1% are not at all familiar with
any automated financial advice tools.

62
 5. Which sector do you think will be most affected by automated advice tools?

INDEX NO. OF RESPONDENTS PERCENTAGE

BANIKING 36 31.2%
INSURANCE 24 20.8%
PAYMENT 30 26%
ASSEST MANAGEMENT 17 15.5%
LENDING 9 65%
TOTAL 116 100%

TABLE NO. 4.5

GRAPH NO. 4.5

INTERPRETATION
According to the above data, 31.2% respondents think that banking will be the most
affected by automated financial advice tools, 20.8% responded with insurance, 26%
responded with payment, 15.5% responded with assets management.

63
 6. Is Fintech shaping the future of consumers?

INDEX NO. OF RESPONDENTS PERCENTAGE

YES 56 48.6%
NO 41 36.2%
MAYBE 19 15.2%
TOTAL 116 100%

TABLE NO. 4.6

Fintech shaping the future of consumers

17%

48%

35%

YES NO MAYBE

GRAPH NO. 4.6

INTERPRETATION
According to the above data, 18.2% responded that there is protection against
Crowdfunding and Peer to Peer lending, 42.9% respondents do not think there is
existing protection, and 39% people are not sure about it.

64
 7. Did demonitisation affect the Fintech industry?

INDEX NO. OF RESPONDENTS PERCENTAGE

YES 21 18.2%
NO 50 42.9%
MAYBE 45 39%
TOTAL 116 100%

TABLE NO. 4.7

Demonitisation affect the Fintech industry

YES NO MAYBE

GRAPH NO. 4.7

INTERPRETATION
According to the above data, 18.2% responded that there is protection against
Crowdfunding and Peer to Peer lending, 42.9% respondents do not think there is
existing protection, and 39% people are not sure about it.

65
 8. What do you consider to be the biggest risk, if any, that could be
introduced from automated advicetools?

INDEX NO. OF RESPONDENTS PERCENTAGE

Mis-selling of financial 37 32.5%
advice.
Flaws in the automated 37 32.5%
financial advice algorithms.
Privacy and data protection 39 33.7%
concerns.
None ofthe above 3 1.3%
TOTAL 116 100%

TABLE NO. 4.8

GRAPH NO. 4.8

INTERPRETATION

According to the above data, when asked about the biggest risk that could be
introduced from Fintech 32.5% responded with Mis-selling of financial advice, 32.5%
responded with flaws in the automated financial advice algorithms, 33.7%responded
with Privacy and data protection concerns and 1.3% responded with none of the
above.

66
 9. Which technology do you see as having the greatest impact on the financial and
managerial services in industry in 5 years?

INDEX NO. OF RESPONDENTS PERCENTAGE

Robo-advisors 30 26%
Blockchain Technology 51 44.5%
Crowdfunding 25 22.1%
Peer to Peer Lending 6 5.1%
Others 2 1.3%
TOTAL 116 100%

TABLE NO. 4.9

GRAPH NO. 4.9

INTERPRETATION
According to the above data, 26% responded with Robo-advisors, 44.5% responded
with Blockchain technology, 22.1% responded with Crowdfunding ,5.1% respondents
with peer-to-peer lending.

67
 10. Do you think the existing Crowdfunding and Peer to Peer lending has investor
protection?

INDEX NO. OF RESPONDENTS PERCENTAGE

YES 21 18.2%
NO 50 42.9%
MAYBE 45 39%
TOTAL 116 100%

TABLE NO. 4.10

GRAPH NO. 4.10

INTERPRETATION
According to the above data, 18.2% responded that there is protection against
Crowdfunding and Peer to Peer lending, 42.9% respondents do not think there is
existing protection, and 39% people are not sure about it.

68
 11. When working with FinTech services, what challenges do you face?

INDEX NO. OF RESPONDENTS PERCENTAGE

IT Security 28 24.6%
Regulatoryuncertainty 25 22.1%
Differences in business 21 18.2%
models
IT compatibility 27 23.4%
Differences in operational 12 10.4%
processes
Others 3 1.3%
TOTAL 116 100%

TABLE NO. 4.11

GRAPH NO. 4.11

INTERPRETATION

According to the above data, 24.6% responded with IT security,22.1% responded with
regular uncertainty, 18.2% responded to differences in business models,23.4%
responded with IT compatibility ,10.4% responded to difference in operational
processes.

69
 12. What business use cases do you most likely see blockchain technology useful for?

INDEX NO. OF RESPONDENTS PERCENTAGE

Insurance 25 22.1%
Fund Transfer Infrastructure 43 37.7%
Post trade settlement 13 11.7%
Digital Identity management 19 16.9%
Payment Infrastructure 16 11.7%
TOTAL 116 100%

TABLE NO. 4.12

GRAPH NO. 4.12

INTERPRETATION

According to the above data, 22.1% respondents thought that Blockchain technology
can be most used in Insurance, 37.7% responded with fund transfer infrastructure,
11.7% responded with post trade settlement, 16.9% responded with Digital Identity
Management.

70
 13. Should governments get more involved in helping to combat
cyberthreats in a systemically important industry like
banking/financial services?

INDEX NO. OF RESPONDENTS PERCENTAGE

YES 105 90.9%
NO 11 9.1%
MAYBE 0 0
TOTAL 116 100%

TABLE NO. 4.13

GRAPH NO. 4.13

INTERPRETATION

According to the above data, 90.9% respondents think that government should be
more involved to help combat cyberthreats whereas 9.1% respondents think that
government should not be involved.

71
 14. What is your satisfaction level after using any Fintech service?

INDEX NO. OF RESPONDENTS PERCENTAGE

FULLY SATISFIED 56 48.1%
PARTIALLY SATISFIED 56 48.1%
NOT SATISFIED 4 3.8%
TOTAL 116 100%

TABLE NO. 4.14

GRAPH NO. 4.14

INTERPRETATION

According to the above data, 48.1% respondents were satisfied after using Fintech
service, whereas 48.1% were Partially Service and 3.8% respondents were not
satisfied after using fintech service.

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 15. In your opinion, what are the opportunities related to the rise of Fintech?

INDEX NO. OF RESPONDENTS PERCENTAGE

Ease to use 41 35.1%
More personalized service 44 37.7%
Upgraded payment system 22 19.4%
Lower costs 9 7.8%
TOTAL 116 100%

TABLE NO. 4.15

GRAPH NO. 4.15

INTERPRETATION

According to the above data, 35.1% respondents choose Ease to use, 37.7%
respondents choose More personalized service, 19.4% respondents choose
Upgraded Payment system, and 7.8% respondents choose Lower costs.

73
 CHAPTER 5 FINDINGS, RECOMMENDATION AND
SUGGESTIONS

FINDINGS

5.1(1) General Findings:

Fintech can lead the way for financial inclusion:Innovation and use of technology:
Fintech companies innovate to enable secure digital payments. With AI, they have
been successful in creating instant digital payments that allow transfers, verification,
cashless buying and selling, and more. . The finance sector has encountered
digitalization relatively late. Financial technology, or fintech, is now rapidly challenging
old business models. India's Fintech sector may be young but is growing rapidly, fueled
by a large market base, an innovation- driven startup landscape, and friendly
government policies and regulations. FinTech refers to the scope of financial services
that can be available on digital platforms. This new disruption in the banking and
financial services sector has had a wide- ranging impact. 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.

5.1(2) Specific Findings:

This study used an explorative and descriptive approach to address the term
“FinTech.” The results of this study show that FinTech is an emerging concept in the
industry but is rarely mentioned about in IS research. The explosion of FinTech as a
subject of media focus suggests that a collection of knowledge is highly required and
should not be limited to technological aspects. This study contributes to the research
in three ways. First, it contributes to the financial innovation and digital innovation
literature by extending the available knowledge on the drivers of innovation and by
positioning FinTech in the context of the existing research. This serves as a basis for
future studies on the FinTech phenomenon. Moreover, we provide an overview of how
this phenomenon has evolved and developed over time. In doing so, we reveal the
main “building blocks” of FinTech. Second, this study provides a methodological
approach to an analysis of the phenomenon that is missing in the research but
emphasized by social entities Third, this study is of practical value to researchers,
participants of the financial markets, and other interested parties who are seeking a
retrospective look at the origins of FinTech or the activities in this area.
Moreover, this study is the first one to bring the perspective of the media to the
understanding of FinTech.

74
 5.2 Recommendations & Suggestions

● Communication and consumer education

As more and more customers get on the digital board, fintech’s will have to focus on
building trust and consumer engagement. Especially given the time when
cybersecurity is extremely vulnerable. To be critical and to stay ahead of the
competition than other fintech brands, it is necessary to focus on the security along
with making the procedure simple for consumers. Communication is one of the major
keyways to drive engagement with consumers. While the digital payment process
might not be new for some segment of consumers, it is entirely a new process for
another segment of people. Thus, it becomes the brand’s responsibility to build
transparency in communication and make the consumers aware of all the activities in
a simple way, so they can understand fraudulent activities beforehand.
Communication also includes giving consumers regular updates, sharing clear
information with regards to change of policy, polite customer service and so on.
Fintech’s in India should also consider going regional or vernacular to connect with a
growing majority of consumers. The more they use technology to their advantage, the
stronger the brand they will create; thus, surviving difficult times.

● One platform, multiple services

One thing a consumer prefers the most would be, multiple services across one
platform. Many Fintech brands have already rolled out this process of offering multiple
services across one app, but the increase in offerings of robust solutions through
powerful API integrations will add on. In the coming days, consumers who need
banking services are likely to turn to those financial players, who can offer convenience
and ease of transactions that is entirely safe and secure. To address these consumer
needs, banks cannot do much, but technology can help a lot in digitalizing consumer
demand.

● Blockchain and big data

Blockchain and Big Data are two technologies in full swing, but they are also two
complementary technologies. According to experts, brands adopting burgeoning
blockchain technology will benefit the most. Financial services will be able to reduce
fraudulent activities, phishing attacks and ensure secure payments. One of the other
things that Fintech needs to bring their attention to is—Artificial Intelligence, Machine
Learning and Data Analytics. As all these can help financial services in addressing
their key challenges like cost reduction and scrutinize risky transactions. This will help
financial services to get a better hold on their offerings, reduce fraud, automate trading
processes, ensure secure payment processing and so on. The other thing, Fintech
brands need to bring their attention more closely to is—Data Analytics, AI and Machine
Learning.

75
● Neobanks will stage a comeback.

With an increasing number of startups applying for banking licenses and institutional
banks looking to expanding their digital offerings, neobanks are seen as the future of
banking. Globally, neobanks merely a decade-old industry — are expected to raise
$394 billion by 2026, according to a report by PwC. In India, neobanks such as NIYO
SOLUTIONS and RazorpayX raised a total of $90 million in 2019. And although the
RBI, India’s banking authority, does not stipulate for 100 percent digitised banks, some
advances in the policy, or at least discussions around it, could be held next year.

● Aggregators and digital first insurtech to rise.

With the entire gamut of insurance changing in the year 2020 from traditional stand-
alone insurance offerings to digital, bite-sized offerings for specific purposes like covid-
care, etc., digital- first InsurTechs are set to see a stupendous rise in the year 2021 in
India.Further, digital-first aggregator platforms around the entire insurance value chain
that not just give an option to compare insurance policies and chose the best one, but
also allow digital KYC, after-sales services, and claims, will take the front seat in 2021.
Incumbent insurance players will look to collaborate with modern Insurtech players
and many bigtechs will look to jump into the bandwagon to get a share of the rising
pie.

● RegTech

Regulatory technology or RegTech is expected to bring technological advancements

in the highly regulated financial industry and transform its landscape. RegTech
solutions include identity management, regulatory reporting, transaction monitoring,
risk management, and compliance software. The technology enables banks and other
financial institutions to highly reduce administrative overhead, protect customers, and
ensure financial stability for everyone. The technology is known for its speed, agility,
integrative power, and analytical capabilities.

Transparency of the regulatory issues and hiring of tech personnel are among the key
challenges of the Indian FinTech space. Innovation has been a bit limited for the low-
income groups. Additionally, mass awareness and internet bandwidth are still a huge
roadblock in India. As a coin has two faces even FinTech industry in India also have
few challenges, yet these challenges can be converted into opportunities if a further
support is provided by the government In India, there have been more than 500 million
internet users, with more than 95% of these users accessing the internet through a
mobile phone and using it to transact online. The surprise demonetization move has
given a massive fillip to the fintech sector. Government policies are evolving quickly,
providing a favorable backdrop for fintech.

76
 5.3 CONCLUSION

Future of Fintech industry looks shinning and growing rapidly on the back of rise of
start-ups in Fintech industry, penetration of smart phone users, contiguous build-up of
the digital infrastructure and over all streaming of financial process in many industries.
In a recent report, by Research and Markets, as of March 2020, India alongside China,
accounted for the highest FinTech adoption rate 87%, out of all the emerging markets
in the world. On the other hand, the global average adoption rate stood at 64%. The
report also states that “The FinTech market in India was valued at Rs 1,920.16 billion
in 2019 and is expected to reach Rs 6,207.41 billion by 2025, expanding at a
compound annual growth rate (CAGR) of approximately 22.7 percent during the 2020-
2025 period.

Government of India through its multiple financial institutions has been aiming at
creating a ‘cashless’ society. But this is a dream, which will take some time to get
fulfilled. On the other hand, the technology officers of multiple companies will play a
crucial role in adopting technology to drive efficiencies and growth, eventually leading
to better profitability. The collaborations between tech innovators and financial
institutions will go a long way in building the seamless eco-system benefitting all
parties involved.

With elements like payment gateways, emergence of Bitcoin, digital currencies,

Internet banking etc. FinTech is set to revolutionize the industry and offer a
personalized service to the customers, where customer will be truly hailed as a king.
Though there was initial skepticism associated by larger banks to incorporate
technology in their systems, the changing consumer behavior has somewhat brought
the wave of technology sweeping in this sector, which can no longer be, ignore by any
financial institution. The role of government regulations will be equally crucial at this
stage to support a robust FinTech system to promote healthy competition in the
market. The availability of a technically skilled workforce and the presence of most
parts of the financial services and technology ecosystem make Bengaluru and Mumbai
the top two headquartered cities for FinTech companies., Paytm being the highest
valued unicorn, at $16 billion. The market in India was valued at Rs 1.9 lakh crore in
2019 and is expected to reach Rs 6.2 lakh crore by 2025, expanding at a compound
annual growth rate (CAGR) of ~22.7 per cent during the 2020-2025 period. The
changes will be more focused on digital lending (alternative finance) and open
banking.

FinTech growth will ultimately create outsized opportunities for firms and help
empower them in the digital age. According to MEDICI India FinTech Report 2020 2nd
Edition, India had the second-highest number of new FinTech startups in the last three
years, right behind the US. Also, within FinTech segments, digital payments have been
at the forefront, followed by lending, Incutech, Wealth Tech, Neo Banks, Red
Tech.Existing FinTech companies have gained one-third of new revenue at the cost of
traditional banks. Between 2010 and 2015, India saw 1,216 new FinTech startups
founded. India is on its way to becoming Asia’s top financial technology hub. A
meaningful collaboration and co- existence are providing affordable and efficient
added service will help both the worlds. Mumbai, the financial capital of the country
and Bangalore Dubbes the Silicon Valley of India, lead the charge with over 42% of
the Fintech startups based there. India is a very difficult fintech market to navigate

77
because potential customers are spread across varying income levels and a
considerable geographical canvas. Another major concern that places an obstacle is
the development of digital banking in India is the dependence of cash. From SMEs to
daily wage laborer's, the economy runs on access to liquid capital. The domestic
economy will need a slow revamp with introduction of accessible technology and
service that are tailored specifically for their lifestyle. India is home to multiple
languages and different lifestyles - finding uniformity across the nation is immensely
difficult. Indeed, that means that are several markets and sectors within fintech ranging
from Blockchain Payment, wealth management and digital banking that startups and
companies in India can venture into. Meeting customer expectations and providing's
innovative services will be an effective way for new players to establish themselves in
the markets. With a population that is quickly growing comforting with using the internet
for most of their needs, the digital Revolution in financial services is finally underway
in India.

78
 BIBLIOGRAPHY & ANNEXURES

1. “Value of Fintech”, KPMG, (2017)

2. "Cash based to cash less FinTech is here to stay" Acharya S Rathana Aruna , P
Uma V R Kumar(2018)

3. “Inclusion Financial Inclusion Index” CRISIL (2013)

4. "To FinTech and Beyond" Itay Goldstein, Wei Jiang, G Andrew Karolyi (2019)
"Fintech and the Future of Finance" James Guild (2017)

5. "Growth potential and Challenges of FinTech in India" Dr. Jatinder Kaur (2019)

6. "Fintech, Digitalization and Blockchain: Possible Applications for Green

Finance" G Dorfleitner (2019) "Fintech in India– Opportunities and Challenges" Dr.
C. Vijai (2019)

7. “The Evolution of FinTech: A new Post-Crisis Paradigm” Douglas W Arner,

Janos Barberist and Ross P Bucley (2016)

8. "Financial inclusion: Emerging role of Fintech and evolving ecosystems " Prasad
(2019)

9. "Fintech: Ecosystem, business models, investment decisions, and challenges"

Lee, I., & Shin(2018)

WEBLIOGRAPHY

Websites

1. https:/groww.in/blog/robo-advisory-india

2. http:/www.businessstandard.com/article/companies/india

3. https:www2.deloitte.com

4. www.investopedia.com

5. www.businessworld.in
 QUESTIONNAIRE

1. Gender?
• Female
• Male
• Prefer not to say.

2. Qualifications?
• Graduate
• Undergraduate
• Postgraduate
• Others

3. Who influenced you to use Fintech service?

• Friend
• Family
• Others

4. How familiar are you with automated financial advice tools (e.g., robo advisers)?
• Very Familiar
• Somewhat Familiar
• Not at all familiar

5. Which sector do you think will be most affected by automated financial advice
tools?

• Banking
• Insurance
• Payment
• Asset management
• Lending
6. Is Fintech Shaping the future of consumers?

• Yes
• No
• Maybe

7. Did demonitisation affect the Fintech Industry?

• Yes
• No
• Maybe

8. What do you consider to be the biggest risk, if any, that could be

introduced from automated financial advice tools?
• Mis-selling of financial advice
• Flaws in the automated financial advice algorithms
• Privacy and data protection concerns
• None of the above

9. Which technology do you see as having the greatest impact on the

financial services industry 5years fromnow?

• Robo-advisors
• Blockchain Technology
• Crowd funding
• Peer to peer lending

10. Do you think the existing Crowdfunding and Peer to Peer lending has investor
protection?

• Yes
• No
• Maybe

11. When working with FinTech services, what challenges do you face?

• IT security
• Regulatory uncertainty
• IT compatibility
• Differences in operational processes
• Others
12. What business use cases do you most likely see blockchain technology useful
for?

• Insurance
• Payment infrastructure
• Post trade settlement
• Digital identity management
• Payment Infrastructure
• Others

13. Should governments get more involved in helping to combat

cyberthreats in a systemically importantindustry like banking/financial
services?
• Yes
• No
• Maybe

14. What is your Satisfaction level after using any Fintech Service?
• Fully Satisfied
• Partially satisfied.
• Not Satisfied

15. In your opinion, what are the opportunities related to the rise of FinTech?

• Ease to use.
• More Personalized Service
• Upgraded payment system.
• Lower Costs