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New technologies are reshaping the Indian banking and financial landscape, and it is led by fintech startups and aggressively pursued by the traditional banking sector. 

India has the highest FinTech adoption rate globally, which is powered by “6,636 FinTech startups” in the country. Indian FinTech industry’s “market size is $50 Bn in 2021” and is estimated to touch “$1.3 by the year 2025.”

As per the latest reports, there are over six-plus Fintech companies in India, out of which more than “67 percent have been set up in the last five years”, due to which the segment is witnessing “exponential growth in funding”; thus, the industry has attracted “investments worth more than US$8 billion” till 2021.

Venture capital investors have invested in India fintech due to the “rising demand for technology-enabled fintech products across a fast-growing addressable market.” 

In 2016, the Unified Payments Interface (UPI), a system to enable the seamless transfer of funds via multiple bank accounts using a single mobile application, was launched by the National Payments Corporation of India (NPCI). 

What is Fintech?

FinTech (financial technology) is an amalgamation of “software, mobile applications, and other technologies created to improve and automate traditional forms of finance for businesses and consumers alike.” When companies use such “technology to offer financial services” are known as Financial technology or FinTech companies. These companies operate in insurance, asset management, payment, and numerous other industries.

Leading tech accounts for 47%, followed by insurtech at 26% and digital payment at 16% of the total market size. 

Artificial intelligence, Blockchain, Cloud computing, and big data are the backbone of this technology.  

Though Indian consumers heard about and used FinTech technology in the past few years. 

Indian banks started to experiment with online banking in the 1980s. However, it was in the 90s that online banking became popular, but the use and application of technology for financial transactions were still in their nascent stage. “In India, ICICI Bank was the first to step into this internet banking space with limited banking services like access to account details and transfer within the bank.”

The startup culture in India post-2010 saw the emergence of new-age fintech companies like Paytm, which is now dominating the Fintech space in the country. Demonetization and Corona pandemic has helped the industry as people adapted to the new trend, thereby leading to the “emergence of three new Unicorns and five new Soonicorns.” 

In 2021, Indian fintech startups “raised around $8 Bn across 280 funding deals, a record high in both cases, while the average investment ticket size stood at $33 Mn.” 

When did FinTech start?

According to Daniel Lowther, head of CCgroup’s FinTech division, a B2B tech PR and marketing agency headquartered in London, fintech was first heard in 2005, when Chris Skinner launched Zopa, a UK peer-to-peer lending company. However, it is believed that it was “Reuter” to be “the oldest fintech in the world” dating back to 1851.

What is the future of fintech in India?

As of December 2021, India has over “17 Fintech businesses that have achieved the Unicorn Status.” 

Will fintech replace banks?

 It is unlikely that FinTech startups will replace traditional banking systems due to consumer trust in banks, which has been built over many years. Further, Banks offer multiple financial products, which most startups can not due to regulations. Indian banks are also catching up with fintech startups by launching their own fintech solutions that would help them retain their customers.

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