First-time creditors, artificial intelligence to drive fintech growth: Expert

Its boomtime for Indian fintech and the next five years are likely to drive crucial growth for the industry in India. While Nandan Nilekani has predicted an amalgamation of all things finance via ‘finternet’ a growth spurt is fast approaching in the cross-section of internet growth, mobile telecom access, and a new market of first-time creditors. What is also driving growth in the sector is the slimming gap between urban and rural markets because of widespread internet and smartphone access. Artificial intelligence could also help in creating massive growth for the industry.

Explaining the potential for growth of the sector in India, Adhil Shetty, CEO, BankBazaar.com told Republic Business, “In the coming years, we will witness remarkable innovation in retail and MSME lending. The Account Aggregator system is already in place, and the Unified Lending Interface (ULI) has been announced. What UPI did for payments, these advancements will achieve for lending. This will make lending even more democratised. The next five years look promising for the industry. With young Indians increasingly getting interested in managing their finances and using digital solutions, fintech will continue to play a crucial role in bridging the financial inclusion gap between the urban and the rural.”

What is likely to be the size of the fintech industry?

The fintech industry has also brought with it a big push for financial literacy backed by loan and credit apps. According to industry projections, India is likely to become a global fintech superpower by 2025 with the size of the market likely to grow to $1.5 trillion. The total addressable market of the Indian fintech industry is likely to be $1.3 trillion by 2025. The fintech segments that are likely to witness massive growth include payments, digital lending, insurtech, and wealth-tech. According to industry estimates, India is likely to reach $100 trillion in transaction volume and $50 billion in terms of revenue by 2030. India’s lending market, which was at $270 billion in 2022 is also expected to hit $350 billion in 2023. In parallel to the lending market, India is also considered one of the largest markets for insurance-tech which is expected to grow by 15X to reach $88.4 billion by 2030. Meanwhile, India’s wealth-tech market is expected to grow to $237 billion by 2030, on the back of a growing base of retail investors.

More fintech growth

India’s fintech industry stands at a pivotal moment, trailing only the United States and China with 26 unicorns and 87 'soonicorns'. The next wave of fintech growth is to be propelled by the over 1,400 fintech companies that have already raised over $31 billion in funding – the sector has come of age. India currently has over 10,000 registered fintechs. “Fintech will also play a stellar role in increasing insurance penetration, retail participation in the securities market, and making cross-border transactions easier,” adds Shetty.

Fintech industry – India vs China

India has massive scope for growth vis-à-vis Chinese economy. According to Shetty, “China is a more mature market than India, but both nations have much to learn from each other. China offers lessons in scaling up while India makes a strong case for itself by demonstrating sustainable growth. China has made strides in central bank digital coins while India’s UPI is globally renowned payment system.”

The next wave of growth in the fintech industry, says Shetty will come from regulatory support. “The next leg of growth in India’s fintech industry will be driven by regulatory support. Policies that ensure consumer safety and promote innovation will help fintech companies grow. At the same time, we cannot ignore the emergence of artificial intelligence, which will be adopted by fintechs to offer better services and create new business models. Partnerships between fintech companies and banks will lead to innovative solutions that leverage the strengths of both sectors. All in all, it will be a win-win situation for consumers,” Shetty added.