Fintech in India: Growth Drivers, Challenges and Schemes
Why in the news
The Prime Minister addressed Global Fintech Fest 2024 at Jio World Convention Centre, Mumbai, as India’s fintech boom drew attention.
Key facts
- India has gone past China as Asia’s leading fintech market and ranks second globally, behind the US.
- Market size: about USD 110 billion (2024), heading for USD 420 billion by 2029.
- Fintech was the second most funded startup sector in India in 2022.
- Fintech means technology that improves and automates financial services; it is among the fastest-growing sectors for business and jobs and can advance financial inclusion.
- Key segments: digital payments, digital lending, BankTech, InsurTech, RegTech and cryptocurrency.
About Global Fintech Fest (GFF)
- Jointly organised by the Payments Council of India, NPCI and the Fintech Convergence Council.
- Showcases India’s fintech progress and gathers stakeholders; about 800 experts, from policymakers and regulators to bankers and academics, were to take part.
Areas of innovation
| Area | Meaning |
|---|---|
| Blockchain | Records kept across a network of computers with no central ledger |
| Smart contracts | Programs that automatically execute deals between buyers and sellers |
| Open banking | Third parties get access to bank data to build connected applications |
| Insurtech | Technology to simplify insurance |
| Regtech | Helps firms meet compliance such as AML and KYC norms |
| Cybersecurity | Closely tied to fintech because of cybercrime and decentralised data |
Growth drivers
- Digital infrastructure: open API platforms such as Aadhaar, UPI, Bharat Bill Payments and GSTN.
- AI and machine learning driving new business models.
- India has the second-largest smartphone user base and internet market.
- Young, working-age population; by 2030 India will add 140 million middle-income and 21 million high-income households.
- Inclusion programmes: PMJDY, DAY-NRLM, Direct Benefit Transfer and Atal Pension Yojana.
Challenges
- Complex regulation across several agencies such as RBI and SEBI.
- Data breaches and cyberattacks.
- Low digital literacy and access.
- Building trust among older and first-time users.
- Sensitivity to tax and interest-rate policy changes.
- Keeping up with technology and scaling systems.
Government initiatives
- India Stack: public digital infrastructure for public and private initiatives.
- AePS: transactions through Aadhaar number and biometrics on Micro-ATMs.
- Central KYC: one repository to avoid repeated KYC.
- UPI: scalable digital payments platform.
- BBPS: bill payments for all recurring billers except prepaid recharges.
- NDHM and DISHA: digital infrastructure for insurance and healthcare.
- Fintech hub at IFSC, GIFT City in Gandhinagar, Gujarat.
Way forward
- Self-reliance in cybersecurity, as India now imports offensive and defensive capabilities.
- Consumer education on benefits and cyber safety.
- Strong data protection law; RBI’s fintech sandboxes are a good step, and the data protection bill, 2019 needs debate and passage.
Exam angle
- Organisers of GFF: PCI, NPCI, FCC.
- GIFT City location: Gandhinagar.
- Full forms: AePS, BBPS, CKYC.