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India is amongst the fastest-growing Fintech markets in the world. It has the highest Fintech adoption rate globally at 87%. The Indian fintech market is majorly focused on lending and payments sectors, among other segments such as Wealth Technology, Personal Finance Management, Insurance Technology, and Regulation Technology.
India is projected to become the third-largest Fintech market by 2025.
2015 was a formative year for the country's fintech sector as it saw the emergence of numerous fintech start-ups and public & private investments. The fastest growing fintech industry in the world is centered in the Asia Pacific region, with some of the major players like China and India globally based in this region.
Covid-19 Pandemic Driving the Growth of Fintech Industry in India
The Fintech industry in India is leveraging technology to streamline operations of the various financial processes.
Rising customer expectations, e-commerce, and smartphone penetration are key drivers of growth for this industry.
The Covid-19 pandemic in 2020 has dramatically accelerated the adoption of digital payments in India, pushing companies to improve automated service. The South Asian subcontinent has at least 150 e-wallet providers.
Owing to the pandemic, online banking advanced. The limitation or unavailability of in-person banks also sped up the adoption of fintech banking apps.
UPI became one of the most preferred payment modes for online and offline purchases and transactions amid social distancing during the lockdowns. Mobile-based payments showed a growth of 43%. The total count of transactions touched 3.1 billion in December 2020.
Fintech Market in India - The Present
Given India's educationally and economically diverse population, there is still a large segment of the unbanked population. People still prefer cash transactions over online transactions and fail to recognize the convenience Fintech offers through its products and services.
Government initiatives like Pradhan Mantri Jan Dhan Yojana are improving financial inclusion in the country.
Demonetization, the Digital India initiative, cashless economy movements, and other major financial interventions have also propelled the growth of fintech.
With the onset of the pandemic, fintech became the forefront of the country's financial inclusion struggle. Amid the lockdown, the fintech market in India witnessed a 40% rise in the number of digital transactions.
Currently valued at $31 Billion, the Indian Fintech market is expected to grow to $84 Billion by 2025 at a CAGR of 22%.
Fintech Market Predictions For 2022
The fintech industry is the second-highest funded industry in India after e-commerce. And it will take the top rank in the coming years. India's Fintech adoption rate is at 87%, which is significantly higher than the global average rate of 64%.
2020 and 2021 were primarily dominated by the challenges of the pandemic and digital transformation of how we function daily.
Many shifts have occurred in the past two years. Some processes are still being streamlined, but we have reached a stage where fintech innovations have the space to develop and grow.
2022 can be safely considered the stabilizing year where leading banks will accelerate their digital transformation to compete and survive in the unpredictable and new normal of the post-pandemic world.
Here are the top 5 trends of 2022 for the Fintech Industry in India.
Top 5 Fintech Market Trends in India 
Based on the study by Global Market Insight in 2019, the fintech evolution of digital banking has considerably reduced physical visits to bank branches by around 36%. And it is expected to go down even more as the trend becomes more prevalent.
People now have the luxury of MasterCard with free transaction fees, P2P transfer, and zero paperwork without physically going to a bank branch to make local or global transactions.
Even though this is still concentrated in the hands of a smaller section of the Indian population who have the affordability and financial literacy to consider digital transactions, the government initiatives and the digital transformation of financial services aim to make the process simple and more inclusive.
Neobanking, though often used interchangeably with digital banking, is conceptually different. A neo bank exists solely online without any physical branches functioning independently or in partnership with traditional banks.
Neobanks provide multiple advantages for traditional banks for MSMEs (Micro, Small & Medium Enterprises) such as -
- Personalized customer experience
- Automated services
- Transparency via real time notifications
- Easy-to-use APIs
- Rich insights to boost revenue
The global neo bank market is expected to accelerate at a CAGR of 46.5% between 2019 and 2026, generating around $394.6 Billion by 2026.
According to Mordor intelligence predictions, the A.I. fintech market will be projected to $22 Billion by 2025, growing at a CAGR of 23%.
How is A.I. used in Fintech?
A.I. is used to predict consumer behavior and enable effective buying of targeted and personalized products. This will offer multiple opportunities to marketers of financial services.
Digitization and decentralization enabled by A.I. It powers the fintech revolution. The pandemic has further hastened the pace of A.I. adoption in fintech. Razorpay (using A.I. to address fraud issues), INDmoney, Mswipe, Lending Cart, and CogNext are some of the leading Indian fintech companies using A.I.
Blockchain is a public distributed ledger with encryption and traceability. Unlike a typical database, a blockchain is a type of database that stores data in blocks linked together via cryptography and can be managed in a decentralized manner.
The most common use of blockchain is to store cryptocurrency transaction history. It can also be used for storing other things like legal contracts.
By integrating blockchain into banks, consumers can see their transactions processed in very little time. No other sector can benefit from blockchain as the banking sector and is especially useful in supply chain management. And there is considerable momentum among the Indian banking sector in advocating the technology.
There are multiple components of payment innovations in fintech such as - mobile payments, contactless payments, e-wallets, identity verification technology, A.I., and machine learning for security.
2022 will be the year when digital wallets and mobile payments will drive fintech payment innovations.
Mobile payments also cover in-store transactions apart from online purchasing. According to Payvision (2020), in-store transactions are projected to rise to more than $2.7 billion by 2022. This will automatically push global e-commerce transaction value to $5.4 trillion by 2025.
Fintech in Future
Recent research and findings have made it amply clear that fintech will revolutionize the financial sector in many ways. Increasing the use of payment gateways, providing credits, conducting business and personal transactions across the globe, and easier account setups will also significantly boost the e-commerce market.
Here’s what we can look forward to in the Fintech industry in 2022
- Banks and other financial institutions will rely on AI to handle large transactions, security, and customer service
- Blockchain technologies will be adopted at scale across economies globally
- Physical visits to banks will drop by 40% given the rise of digital transactions and neo banks