Evolution of the Indian FinTechverse

India has the highest FinTech adoption rate of 87%, significantly higher than the global average rate of 64%.

India is rapidly evolving and is one of the fastest-growing Fintech markets globally and has also emerged as Asia’s biggest destination for Fintech deals, leaving behind China. Advanced technologies and a customer-centric approach are what bring this thriving industry its profound growth in this decade.

Having witnessed this flourishing industry and its achievements, let’s look back on its evolution rather a revolution. So, gear up as this article throws light on how the fintech industry has steadily evolved over the years.

The fintech landscape in India

Ever since the start of modern society, finance and technology were entwined robustly. The beginning of the Fintech industry globally is traced back to the 19th century when technology started to mark its place in history, which made the fintech industry flourish.

According to a research paper by Arneris, Barberis & Ross, the significant stages of fintech are differentiated into the following eras, which will help us understand the steady Fintech evolution better.

Fintech 1.0

Outmoded technologies like the telegraph and Morse code were first used to transmit financial information across borders to strengthen the infrastructure rapidly. Then, later during the 1950s, the credit card was first introduced and was the first financial product in the industry, and to everyone’s surprise, it is still in the game.

In India, many British Raj banks were nationalized post-independence, when the country’s economic growth started to shoot up, and banking services were availed by many citizens.

Fintech 2.0

This era has marked the switch from analog to the digitalization of finances led by traditional financial institutions. People perceived finance management and financial institutions differently after the outbreak of the internet. The 1980s and 1990s were the high point in history when online banking pushed the fintech industry to the limelight with electronic installment framework, web-based business models, web-based shopping, portable banking, and digitization of banks.

The banks started to experiment with online banking in the 1980s, got the hang of it by the 1990s, and made it even more popular. In India, ICICI Bank was the first to step into this internet banking space with limited banking services like access to account details and transfers within the bank. Other banks also started to follow the path and rapidly altered the way of banking. It is no wonder banks had faced challenges like technical mishaps, fraud, complex cross-border transactions, payment methods, etc.

Fintech 2.0 gave the fintech industry’s modernistic look, and the below listed important events triggered the rise of fintech in India.

• The first Indian ATM to withdraw cash was launched in 1987, Mumbai by HSBC.
• In 1980, the Central Bank of India launched the first credit card in India.
• Stanford Federal Credit Union was the first institution to let its customers access banking functions via the new World Wide Web in October 1994.
• PayPal launched in 1998, which took the payment systems further after the internet boom.
• The Global Financial Crisis in 2008.

Fintech 3.0 — The rise of Indian Fintechverse

By the time the 21st century rolled around, India had emerged as one of the active players in this era with a plethora of smart advancements and entrants. Moreover, the Global Financial Crisis in 2008 paved the way for the fintech industry to gain traction and become ubiquitous. People started to shift from the traditional banking system slowly and developed trust over the new entrants.

The release of Bitcoin v0.1 in 2009, Google Wallet in 2011, Apple pay in 2014 was the start that shaped the face of the fintech industry in India. Since India focused on customer-centric financial products and services, it has seen more rise in few years. The 2016 demonetization drive pulled in a lot of significance for the fintech. The Indian government’s move towards Digital India and to turn India into a cashless economy with financial inclusion also hands out immense support to fintech companies.

Ever since the traditional banks were struggling to roll out their banking services integrated with the SWIFT system, fintech start-ups started to share the industry space through collaboration. SWIFT system’s initiative like SWIFT GPI provides end-to-end tracking with high security for the transactions. The Indian financial sector opened the door wide open for fintech to offer innovative and cost-efficient financial solutions.

The rapid adoption of fintech had many Indian firms establish like Paytm, Phonepe, Mobikwik, Freecharge in few years. This made sure smartphone adoption is here to stay and will become the primary method for people to handle their money wisely.

The span of around five years led to more than 2000 fintech companies in India at present and became the era of fintech start-ups. This made even the traditional banks rethink their strategies and welcome more fintech inclusion in their services to get hold of present-day tech-savvy customers. Open Banking, Banking as a Service (BaaS) were adopted by traditional banks that allow third-party service providers to access their financial data. BaaS further fuelled the entry of neo banks and digital banks in India.

Fintech applications like mobile payments, automated investment apps (Robo-advisors), online lending businesses, and crowdfunding platforms have taken the financial industry by storm.

The following technologies contribute oodles of success to the fintech ecosystem:

• Artificial Intelligence (AI)
• Machine Learning (ML)
• Big Data and Data Analytics
• Robotic Process Automation (RPA)

Factors that led to India’s immense Fintech growth

The quick adoption of new solutions and financial services made India, a country with the highest fintech usage. The factors which drive India’s fintech growth to the next level are listed below.

Painless payments

Easy digital payment is the key player in the fintech ecosystem, gaining trust and pulling many users in. Since its beginning, the merchants and shoppers have enjoyed this and made it even popular during the coronavirus outbreak. People were concerned about making a physical payment for safety reasons and quickly adapted to these digital payment modes in a jiffy. The demonetization drive in 2016 made every Indian switch to digital payments and online transactions, which was a green flag for fintech entrants at that time. People now make their digital cash flow without any second thoughts as they feel secure and safe more than handling physical cash.

Payment wallets & UPI apps

This is one of the services which transformed the way people carry cash. Multiple digital payment apps like Google Pay, Apple Pay, Amazon Pay, PhonePe, etc., are definitely a booster for ‘Cashless India’. Features like easy transaction, secure, fast, multiple options benefit these payment wallets to make waves in the Indian fintech industry. Moreover, Artificial Intelligence (AI) and Big Data help users personalize their payments and store multiple bank accounts in a single digital wallet.

Digital lending & insurance

FinTech is the cherry on the cake when it comes to market-based lending. When already banks were doing their great job in lending and insurance, fintech collaborated to make it even more feasible by giving enormous options, online availability, customer-centric loans, and speedy approval for businesses and customers.

Wise finance management

After the fintech boom, people witnessed many changes in the way they handle their finances. As every Indian has started managing finances digitally, it is easy to keep track of their expenses and make a calculative move. Robo-guides or Robo- advisors also help in wise finance management by providing automated, algorithm-driven financial planning services.

Remittances

FinTech’s eases the way banks were making international transfers for decades. The remittance was considered an arduous task in the past, involving high fees, tons of paperwork, no tracking of money, multiple players, and a great deal of time. But now, fintech defines it as a flexible real-time payment with transparent fees, end-to-end payment tracking, multi-currency payments, and so on.

Definitely a worthy throwback on this Independence Day 2021?

This nostalgic look back at India’s FinTech evolution promises what the busy future holds for the country. The finance industry will flourish, but it demands a little more wait to reveal further episodes. So, let us wait to witness India evolve more and better in the future.