While 2021 was a year of unprecedented disruption, 2022 is a year of remarkable adaptation and metamorphosis. As opportunities open up in the fintech industry, some trends continue into 2022 and may drive the financial services industry forward.
- THE RISE OF INDIAN FINTECH: According to Affle’s MAAS, India’s fintech sector will reach a market size of 150-160 billion US dollars by 2025. India’s vibrant fintech industry has more than 2,100 fintech companies, 67 %t of which have been founded in the last 5 years alone. COVID-19 has accelerated the pace of digitization across various categories. While some fintech segments (e.g., lending) may collapse in the short term, there is a significant shift in attitude toward digital offerings in financial services.
- THE UNICORN CLUB: 1 in 4 start-ups belong to the fintech world, and they are now increasingly becoming unicorns. About 20 fintech unicorns have come up within the last 2-3 years. With a population of 1.3 billion and smartphone penetration of 45%, India’s massive demand for digital services has helped India surpass the UK to become the world’s third-largest tech unicorn ecosystem by 2021, after the United States and China.
- SCALE-UP OF UPI: Cheap internet data, high penetration of smartphones and India Biometric identifiers support the rapid introduction of online payment systems on mobile platforms. With 8,193 crore digital transactions in FY22, UPI’s most common payment method in India. Worldwide, the number of cashless transactions has skyrocketed, leading to a shift in the dynamics of the payments sector, which is witnessing a shift in favor of digital. Currently, 250 banks are live members of the UPI, which means they allow interbank transfers of funds with the UPI.
- THE UPSURGE OF DIGITAL CURRENCIES: While the Unified Payment Interface (UPI) of Home Payment Systems will continue to drive digital payments in India, new offerings such as Buy Now, Pay Later (BNPL), digital currencies, corporate payments, and offline payments will shape the industry. India’s digital payments market has been expanding steadily at a CAGR of 23 % (in terms of volume) and is expected to reach 217 billion (21,700 crores) transactions in FY26 from 59 billion (5,900 crores) in FY22.
- GROWTH OF CBDC: Experts say that with regulation coming into play, central banks may also be part of the game with the introduction of central bank digital currencies (CBDCs). The CBDC is an electronic record that performs essential functions such as currency, a unit of account, value storage, and deferred payment standard as a digital token in the country’s official currency. It is predicted to be the future of payments and finances. You’ve probably heard of China producing its digital currency – the digital yuan. Other countries like the USA, UK, Europe, etc., are also in the race. Finance Minister Nirmala Sitharaman has announced that the Reserve Bank of India (RBI) will soon release its digital currency. Central Bank Digital Currency, or CBDC, is a legal tender issued by the Reserve Bank of India. The digital rupee issued by the RBI will be the digital version of physical cash and will, therefore, be sovereign-backed.
Conclusion: Fintech’s, financial institutions, regulators, and governments have collaborated to make India’s Fintech journey one of a kind. With a total valuation of $ 319.67 Bn, India is home to 94 unicorns, as of 25th March 2022. Thanks to digitalization, India will be one of the many countries in the transition to a digital cash economy. India has been able to lead countries worldwide in the digital space as the economy continues to adapt to government initiatives and other digital players. Keep in tune with more fintech news and follow us for more updates.