Did you know that India is the third largest FinTech market worldwide?

India is one of the fastest growing fintech markets globally. Although nascent, estimates show that India is already the third largest center for fintech. [1] It is at the same time a market with huge, untapped potential. Nearly 1.5 billion payment...

India is one of the fastest growing fintech markets globally. Although nascent, estimates show that India is already the third largest center for fintech. [1] It is at the same time a market with huge, untapped potential. Nearly 1.5 billion payment transactions happen every day in India. The majority of such transactions are person-to-merchant.[2] It is estimated that 80% of economic transactions in India still happens through cash. This significant room for growth of digital payments is great news for India’s vibrant fintech sector.

Look at these interesting numbers:

  • Industry research has projected that $1 trillion, or 60% of retail and SME credit, will be digitally disbursed by 2029.
  • In 2019, fintech investments nearly doubled to $3.7 billion, up from $1.9 billion the previous year.
  • Since 2014, the fintech sector has attracted nearly $6 billion in investments.
  • The digital payments sector is expected to grow to $500 billion by 2020, representing around 15% of the GDP.

[1] https://www.moneycontrol.com/news/technology/fintech-india-emerges-as-3rd-largest-fintech-centre-globally-4972491.html

[2] https://www.aciworldwide.com/-/media/files/collateral/trends/transactions-2025-an-economic-times-report-on-the-future-of-payments-in-india.pdf

If anything, these numbers are a testimony of the rapid growth of the fintech sector, including its future importance for the economy as a whole. The rapid growth of the sector is further enabled by a very high receptiveness of fintech solutions among the Indian population. A global survey ranked India second in terms of fintech adoption, with an adoption rate of 52%.[1] Couple this with the fact that India the second largest internet user base in the world, including over a billion mobile subscriptions, and you get an immense opportunity for fintech solutions to be adopted and scaled across the country. [2]

The Indian fintech sector has been very quick at adopting new technologies and disruptive approaches to come up with better and innovative products. Mainstream financial institutions are rapidly seeking to embrace the disruptive nature of fintech, for example by forging partnerships with innovative startups to sharpen their operational efficiency and respond to customer demands for improved services. This trend is expected to continue and grow even stronger over the coming years. Indian banks are expected to undergo a revolutionary change due to the rapid emergence of fintech and the deployment of AI. These advancements will support the country’s transition to a global digital economy, simultaneously enabling paperless access to finance for every Indian.

[1] https://www.ey.com/Publication/vwLUAssets/ey-fintech-adoption-index-2017/$FILE/ey-fintech-adoption-index-2017.pdf

[2] https://www.statista.com/statistics/498364/number-of-mobile-cellular-subscriptions-in-india/

Image Credits:Energepic, Pexcels

The rapid growth of fintech can be attributed to various measures taken by the Government, for example:

  • The introduction of “India Stack”, a set of APIs (application programming interface) that allows governments, businesses, startups and developers to utilize a unique digital infrastructure. Through India Stack the government has tried to introduce a world-class technological framework for startups, innovators and multi-national companies to accelerate the growth of a digital and cashless economy.
  • The “Startup India” program, which includes various tax exemptions, simplification of regulations, reforms to the patent regime, mentorship and a substantial increase in government funding to startups.
  • The launch of “Pradhan Mantri Jan Dhan Yojana”, the world’s largest financial inclusion program, aiming to provide basic banking activities to the underserved section of the Indian population.
  • ‘Aadhaar’, a government initiative to biometrically tag and create a biometric-based unique identification card for each citizen. Aadhaar creates huge opportunities for businesses to tap into when developing new services, such as services for banking, lending and financial inclusion.
  • The introduction of Unified Payments Interface (UPI), which has emerged as the fastest growing payment instrument in India.
  • Various demonetization measures, such as when PM Modi in 2016 announced that Rs. 500 and 1000 notes would be demonetized. Payment processing firms and fintech companies have been quick to leverage demonetization to increase their market penetration.

Indian fintech will play an instrumental role in banking the unbanked. India has about 190 million unbanked adults.  Despite India’s long history of financial inclusion initiatives traditional approaches to support financial inclusion have had limited success. This places the Indian fintech sector at a very interesting position where it could make a significant contribution to the UN Sustainable Development Goals, while at the same time presenting an array of exiting business opportunities for both domestic and international companies

Image credits: Cotonbro, Pexcel

The Indian Government has recognized the importance of fintech in driving the growth of micro, small and medium sized companies (MSMEs) and has constituted a special committee to support the sector. One of the objectives of the committee, which falls under the Ministry of Finance, will be to create a “regulatory sandbox” to promote innovations. The committee also has a mandate to foster cooperation with fintech hubs in other countries. There is thus an exciting opportunity for the Swedish fintech players to engage with Indian likeminded. Establishing bilateral cooperation agreements with fintech hubs could provide an interesting opportunity to promote knowledge building and policy exchange, while at the same time supporting Swedish companies to enter the Indian market. India’s position as a fintech player of global importance is here to stay, and organizations and companies that can establish cooperation with Indian players are most likely the big winners of the future. 

Inbox us if you are interested in knowing more about the Indian fintech ecosystem! Don’t forget to follow us on Twitter for more updates on the Sweden-India Innovation Partnership.

Greetings from the OSI-India team,

Fanny von Heland, Leena Kukreja, Mini Nair