What is Fintech Sector

As per industry estimate, India has over 676 million smartphone users, over 1.2 billion telecom subscribers (wireless + wireline) and 825 million internet subscribers of which approximately 39% belong to the rural areas (as on March 2021).

Further, total number of transactions related to digital payments, a key enabler for expansion of digital markets, has increased from 2,071 crore in FY 2017-18 to 5,554 crore in FY 2020-21. As on date, more than 5179 crore transactions have been reported in the current financial year.

Furthermore, India now hosts the 3rd largest ecosystem for startups globally; 59,593 startups have been recognized by DPIIT across 57 unique industries, of which 1,860 startups belong to the FinTech sector. As of December 2021, India has over 17 Fintech companies, which have gained ‘Unicorn Status’ with a valuation of over USD 1 billion.

As regards to investment inflow in the Fintech sector, no such data is maintained centrally.

Government has taken several measures to increase investment inflows in Fintech sector.The Pradhan Mantri Jan Dhan Yojana (PMJDY) has been targeted at increasing financial inclusion in India by helping in new bank account enrollment of beneficiaries for direct benefits transfer and accessibility to a host of financial services applications. This has enabled Fintech startups to build technology products to penetrate the large consumer base in India.

Aadhar, the unique biometric identification system, allows the public to access government digital services thereby improving the availability and transparency for social payments including financial assistance to those in need.

Unified Payments Interface is single platform that merges various banking services and features under one umbrella and has been built as a scalable payments platform supporting digital payments in India.

Jan DhanYojana, Aadhar and Mobile (JAM trinity) alongwith Unified Payments Interface have been instrumental in bringing in transparency, integrity and timely delivery of financial benefits and services to the public. 

Key initiatives undertaken by the Government for the Fintech ecosystem in India are listed below:

• Jan Dhan Yojana: has been targeted at increasing financial inclusion in India by helping in new bank account enrollment of beneficiaries for direct benefits transfer and accessibility to a host of financial services applications. This has enabled Fintech startups to build technology products to penetrate the large consumer base in India
• India Stack: is a societal initiative aimed at building public digital infrastructure to promote public and private digital initiatives including accelerated adoption of technology in finance
• Aadhar: the unique biometric identification system, has allowed Aadhar Enabled Payment System and Aadhar Payment Bridge System:
  • Aadhar Enabled Payment System allows individuals to conduct financial transactions on a Micro-ATM by furnishing their Aadhaar number and verifying it with the help of their fingerprint/iris scan
  • Aadhar Payment Bridge System allows ease in bulk and recurring Government benefits and subsidy payments, facilitating operations from Aadhaar-linked bank accounts, using the biometric authentication
• Development and roll-out of authentication solutions including Digital KYC, video-based customer identification process, and digital signature on documents has created various safeguards and a hassle-free system for Fintech startups and customers to leverage the technology-enabled solutions in the sector
  • A central repository, Central KYC, has been developed for reducing the hassle of undergoing multiple KYCs for different financial institutions. This allows the KYC process of consumers to be conducted only once unless there are any changes in consumer details
  • KYC and customer on boarding costs have been reduced significantly enabling expansion of financial services to rural India and opening their accounts
• Unified Payments Interface has been built as a scalable payments platform supporting digital payments in India
• License for Payments Banks has further helped in enhancing the financial inclusion drive in the country by allowing the setting-up of payments banks and expanding the access to payments/remittance services. In a bid to promote digital payments banks in the country, RBI has announced an increase to the maximum end of day balance for payment banks to Rs. 2 lakh
• National Automated Clearing House System has been successfully used for making bulk transactions
• Bharat Bill Payment System has helped in enhancing consumer convenience to pay bills across utilities and other segments and has been expanded to include all categories of billers who raise recurring bills (except prepaid recharges) as eligible participants, voluntarily
• RBI has also developed a Payments Infrastructure Development Fund (PIDF) scheme to subsidise deployment of payment acceptance infrastructure in tier-3 to tier-6 centres
• The RBI has created a regulatory framework around Peer-to-Peer (P2P) lending by recognising P2P lenders as Non-Banking Financial Companies (NBFCs), thus providing alternative credit access to the unbanked
• IRDAI has undertaken various initiatives towards boosting the insurance penetration, such as permitting insurers to conduct video-based KYC, launching standardized insurance products and allowing insurers to offer rewards for low-risk behaviour
• Government institutions such as the Health ministry and the NITI Aayog are also supporting the transformation in the insurance industry through the National Digital Health Mission (NDHM), the Digital Information Security in Healthcare Act (DISHA) and the National Health Stack