The Indian fintech industry is one the most promising industry of the decade and it has just got started. And this fact is hardly questionable.
According to NASSCOM report, which was published this year, transaction value among fintech companies was estimated to be approximately USD 33 billion in 2016 and is expected to reach USD 73 billion in 2020, growing at a five-year CAGR of 22 per cent. To top it all, the fintech market is forecasted to touch USD 2.4 billion by 2020.
Nonetheless, from Urjit Patel’s resignation as the Governor of Reserve Bank of India to limited access to Aadhar data stack, 2018 has not been less than a roll-a-coaster for the financial services sector, especially the fintech industry.
But 2018 was not just a disappointment for the sector. For starters, even though the government didn’t legitimize the validity cryptocurrency, it did recognize the capabilities of blockchain or the RBI released norms for interoperability for the payments companies.
These are just one of many things that pumped up the industry.
Tech-in it Up
In the year gone by, the industry witnessed multiple POCs and pilots tests multiple uses of blockchain technology.
In fact, India boasted of it first full-fledged live blockchain platform. The solution is powered by MonetaGo and helps Trade Receivables Discounting System (TReDS) Exchanges, which includes SIDBI-NSE owned RXIL, Axis Bank’s A.TReDS and Mynd Solution-lead M1xchange, cancel out double invoice factoring and communicate amongst themselves in such a way that it enables them to share information without giving away the details.
There has also been remarkable innovation even in the artificial intelligence space, especially in the investment and insurance space.
Gaurav Chopra, Founder and CEO, IndiaLends says the wave generated by the ‘Digital India’ movement will continue in the upcoming year.
“The revolution in the Fintech industry shall be largely fueled by Artificial Intelligence and machine learning in the year 2019.
The power of blockchain has been identified in the year 2018. 2019 will be all about utilizing that power. Things like Know-Your-Customer, anti-money laundering, asset and collateral management will all be taken over by blockchain. The lending industry will also become more transparent and organized owing to the ease of use offered by Smart Contracts, ” he shared.
The year also witnessed a huge growth in the payments industry. According to Statista, the total transaction value in the segment is roughly about USS 50,215m in 2018 and is expected to show an annual growth rate of 20.4 per cent resulting in the total amount of USD 127,235m by 2023.
Vivek Kumar Singh, CFO, ToneTag attributes this growth to streamlined use and easy accessibility which has allowed more customers to warm up to the idea of making their banking mobile.
Additionally, the industry saw one of the biggest revolutions in form interoperability which allows users to transfer money from one wallet company to another and even bank. This is expected to further fuel the growth of the payments industry.
2018 was one win and two loss for the digital lending or the alternative lending industry.
The FY2018-19 Union Budget, allowed TReDs platform to access GST data stack. Digital lenders are now hoping that access could be extended to fintech companies, which in turn, will help them to bridge the SME credit gap in the country.
While on the other, the infamous Aadhaar verdict limited the access of private companies to Aadhaar data stack, increasing the cost and turnaround times of the consumer lenders. The industry sentiment was also hampered to the IL&FS-led liquidity crisis faced by the country.
Nonetheless, Manish Lunia sounded ever optimistic about the coming here. He says, as data availability from alternate sources (GST filings, smartphone devices, online transactions, etc.) is becoming more ubiquitous, lending from digital NBFCs is set to exponentially rise in 2019.
“Digital NBFCs will continue their growth trajectory of 25-50% in the coming year as well as the benefits of GST stabilization, formalization of the economy continue to rise. The credit market in India, both consumer & SME, is too big an opportunity to be missed. The current crisis is merely a blip. We are already witnessing strong signs of investor interest – in both debt & equity,” he noted.
New Year, Old Challenges
2019 will continue to see innovation in the BFSI segment and we are going to see more projects as the technology continues to edge up. But the question is the industry ready to adopt it.
Alok Mittal, CEO & Co-founder, Indifi Technologies feels that “The technology revolution will continue to accelerate in 2019 with alternate innovation in process technology around KYC, electronic signatures. More integrated startups covering lending, insurance and investments will gain momentum rather than standalone startups.”
Even Navin Surya, Chairman, Fintech Convergence Council opinions resembles with Mittal as he shares, “I think coming year is going to be even more exciting as we find solutions to current challenges and as interesting fintech startups in Investment, Insurance as well PFM segments further driving growth over and above existing fintechs in payments and credit.”
Having said that, there are challenges which the industry needs to address. With almost no access to Aadhaar data stack, the industry needs find a solution to make e-KYC a smooth service for the customers.
And hence, Adhil Shetty, CEO, BankBazaar foresees several regulatory changes that will impact the entire financial ecosystem.
“It is essential that regulations complement innovation. Fintechs are doing a yeoman service in helping Indian customers engage with financial markets to access the right financial products at the right time more effectively and efficiently. The new age customers want the convenience and seamlessness offered by digital finance,” he said while adding that, “Fintechs along with the rest of BFSI have been working closely with regulatory bodies and the government to chalk out regulations that enable the same ease of delivery of services without compromising on the speed or cost. The need of the hour is for consensus between fintechs, banks, insurers, regulators, and the government for a more paperless, presence-less approach to personal finance.”
Furthermore, 2019 also needs to address one of the most important issues of the present and coming decade – data security. Some of the top companies around the globe, including Facebook and Google have reported data breaches in 2018 have incurred losses and more importantly lost customers.