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Reshaping India’s economy: The fintech revolution in banking

April 19, 2023 | 5 minute read

India has been experiencing rapid economic growth over the past few years, and the fintech industry has emerged as a key player in shaping the country’s financial landscape. Fintech companies are leveraging technology to connect people, businesses, and governments to financial services in new and innovative ways. They are changing the way Indians save, invest, and spend their money by providing convenient, secure, and affordable financial services.

Fintech’s impact on banking

Fintech in the banking industry have impacted and transformed the way customers can access and utilize their finances. Its impact ranges from payment apps to investment and insurance companies. This profound benefit of fintech can also be seen as a supplement to brick-and-mortar or traditional banks, and it is a power booster for the financial services sector. With neo banking evolution in the fintech segment, banks are revolutionizing their processes and services for the big time.

Fintech is constantly evolving by addressing the current and primary needs of the end consumer and, in turn, ensures banks adopt smarter technology and resources. Let’s look at some notable aspects and the impact created by the innovative and growing fintech solutions.

Fintech solutions transforming banking

1. Unified Payments Interface and Rise of Digital Payments

The Unified Payments Interface (UPI) has witnessed remarkable growth since its inception in 2016 in India. UPI revolutionized digital payments by enabling seamless, real-time transactions between different banks through mobile devices. Its user-friendly interface, security features, and government support led to widespread adoption, making UPI the backbone of India’s digital payment ecosystem and fostering financial inclusion.
Contactless payments gained more popularity during and post the COVID-19 pandemic, enabling users with a secure and seamless experience to transact, leaving them with no choice but an afterlife of convenience.
In June 2023, the cumulative value of UPI transactions reached $177 billion, marking a substantial increase from its initial value of $12 million back in November 2016 (with April 2016 being the launch of the UPI pilot). This remarkable expansion can be attributed to the widespread adoption of the internet and the surge in mobile users over the previous decade.
Today, digital wallets are extensively used in place of physical cash transactions. The digital payments space is projected to exponentially grow to $10 trillion by 2026[2]. This has been the game changer for the Indian economy and promises to be the harbinger of accelerated economic progress.

2. Buy Now Pay Later

Buy Now, Pay Later (BNPL) is a type of short-term financing that allows consumers to make purchases and pay for them at a future date, often interest-free. BNPL is a payment option where you can make a purchase (buy goods/services) without having to pay from your own pocket. The borrower needs to sign up with Financial Institutions (lenders) to avail this facility. BNPL is often easier to get approved as compared to personal loans, traditional credit cards, or lines of credit.
The global buy now pay later market size was estimated at US$ 125.09 billion in 2021 and is expected to reach around US$ 3268.26 billion by 2030, poised to grow at a CAGR of 43.8% during the forecast period 2022 to 2030 (as per Precedence Research).

Role of new age technology

The rise of fintech startups has democratized wealth management and grown financial literacy in the new generation of investors. Robo-advisors were early enablers of quick execution of investment strategies.

Embedded Finance, Autonomic Systems, and Privacy-Enhancing Computation are three technology trends gaining traction in the fintech space. Alongside these, Composable Architecture and Total Experience are the top strategic technology trends gaining rapid momentum in Banking. CIOs are aware today that Composable Technologies, Hyper-automation, AI to combat fraud, Conversational AI, Application Marketplace, and Advanced Analytics are keys to a strong technology foundation leading to “True Digital Transformation” of an organization.

Driving financial inclusion

Fintech is transforming finance and promoting financial inclusion in India. As the sector continues to grow and mature, it is expected to make finance more accessible, innovative and inclusive. It continues to empower the unbanked population by making finance affordable, accessible and easy for all. Some numbers like India having 2.94 billion Bank Accounts, 650 million smartphones and also affordable internet access backs the above statement as to how our nation is moving towards the path to digitization.

Opportunities in the Indian Fintech space for the next decade

The financial services and fintech sector in India are set to create more value in the upcoming decade than it has over the past 70 years combined. The vision for the financial services market, presently valued at approximately $850 billion, is to attain a worth of around $1.7 trillion by 2030[2].

Particularly within this realm, fintech is expected to augment the market’s capitalization by an extra $300 billion, escalating from its current $85 billion to nearly $400 billion during this timeframe. India is unequivocally standing at a pivotal juncture, where the accumulation of value will drive substantial growth forward.

The future outlook of Fintech

Fintech companies can help banks improve their risk management. These companies are using data analytics to gain insights into customer behavior and preferences. This data can be used by banks to improve their risk management processes.
Government advancements and initiatives to flourish Fintech have been consistent. RBI created a working group on Digital lending to regulate technology paving the way for more successful startups in India.
As financial services and currency undergo relentless digitization, fresh opportunities emerge to construct inclusive and streamlined financial solutions that fuel economic development. The swift fintech evolution is reshaping the financial sector, progressively erasing the demarcation between financial institutions and the sector itself. This represents a paradigm shift.
We at Nucleus Software envision a finer, simpler and better state of finance for all, with every passing year. Our credo is encouraging the adoption of fintech for a robust banking ecosystem in India. With our evolved lending platforms, we are contributing significantly to the fintech revolution. We also have 50+ business use cases which helps enable various fintech’s on our platform.

Jennette Arora

Senior tech lead,

Nucleus Software