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Technology is hitting every segment and financial segment is certainly not excused from it. Fintech startups are contributing mainly to make this segment more efficient as they are enabling new technologies to make buying and selling processes easy through easy payment methods. As people are becoming more acceptable toward the new ways of payments, startu ps are also innovating new technologies which are essential for this industry’s fast growth. Aside from the new technologies, a number of new financial institutions, startups and regulatory bodies are also coming up and it opens the door to experimenting with traditional payment methods.

FinTech- A Fast Growing Industry

The financial industry is massive and full of opportunities. Particularly, the year 2015 was an influential year for this industry, as different banks and other financial institutions has reformed their business operating model to develop a user friendly payment environment. These reforms have increased the participation and collaboration of innovations in the financial ecosystem.  This also leads to the emergence of abundant fintech startups and the institutions, which act as key enablers for promoting financial services in India.  

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According to a research conducted by KPMG and NASSCOM, the current market size of fintech technologies is $1.2 billion and it will touch $2.4 billion by 2020. The report estimates that the transaction value for the Indian fintech sector is approximately $33 billion in 2016 and it is expected to reach $73 billion by 2020 with growing rate of 22% annually. Kunal Nandwani, Co-Founder and CEO, uTrade Solutions says, “Indian market is in nascent stage and it can offer great end consumer market to Fintech startups in the future. The sheer size of the market is super attractive for any startup as this segment is spreading across Payments, Banking, Insurance, Financing and Capital Markets and in other segments.

The Fintech players in each segment are fragmented across various small to large players, primarily servicing Indian markets only. There is no “big global player” from India yet.” Kunal Nandwani has launched uTrade as a FinTech company for providing multi-asset trading platform, low latency algos engine, risk management and Blockchain Solutions worldwide. It has also launched India’s first blockchain technology driven solution uClear all along two other products ‘KYChain’ and ‘HashDegree’ under its blockchain catalogue.

Understanding the Indian Fintech Sector Ecosystem

The main reason for the success and failure of fintech industry is that it is under the control of the government and works all along the regulatory bodies like RBI and SEBI. Moreover, the Indian government has started taking keen interest in this space and rolled out many programmes and regulations to improving it. The Start-Up India initiative which was launched by the Government of India in Jan 2016 provided USD 1.5 billion fund for start-ups. In addition to this the central government “Jan Dhan Yojana” has also added over 200 million unbanked individuals into the banking sector.

All this means that for fintech startups has a great field of opportunities ahead because a huge area fintech industry is still untapped.  Nandwani adds, “Several fintech models fall under government regulation (RBI, SEBI, etc.). Regulators like RBI have been supportive of fintech so far, and have allowed for P2P lending, etc. They should continue to let the fintech startups grow, before regulating them.” Further, the Unified Payment Interface (UPI) is also launched by the National Payment Corporation of India (NPCI) this year and RBI is also planning to come up with many other revolutionized concepts.

Key Trends That Are Shaping the Future of the Indian Fintech Industry

Fintech innovations are helping financial institutions to modernize their payment processes to provide a competitive edge. They are also offering customers a smooth user experience, unexplored value added services and an interactive marketplace. The ideas like bank in a box, secure payment, P2P lending and biometrics are striding fast towards mass market implementation. Whereas, the technologies like blockchain has just marked its entry with a promising future in the financial services arena. Nandwani explains, “There are several younger companies trying to help the end consumer in technology based financial planning and investing. Firms like us are building enterprise fintech for capital markets, in a B2B segment. On the other hand, several Blockchain firms like Hashcove are building disruptive fintech models for clearing, P2P finance, etc.”

While India is also a fastest growing mobile market with 80% of adults having mobile phones with the Internet connectivity in their hands and payment gateway firms like PayTM are revolutionizing peer to peer payments on mobile. On the other hand several lending companies like LoanBazaar are bringing borrowers and lenders together for issuing the loan through an NBFC. For providing best insurance deals, insurance aggregators like Policy Bazaar and many others are helping users to find best insurance deals online anytime anywhere. There are many other key trends which are contributing in improving the financial sector and replacing traditional banking processes.

Emerging Startups in the Indian Fintech Industry

Who is really dominating the Indian Fintech industry? There are many small and big players who are shaping the future of the Indian Fintech Industry. As per a report from Tracxn, an analytical company, there were 750 registered fintech firms in 2015 and out of them about 175 launched in 2015 only. The industry is acquired by the emerging companies like PayTM, Freecharge, Policy Bazaar, MobiKwik, BankBazaar.com, Lendingkart, Vistaar Finance,  muSigma, Capital Float, CreditSudhaar, Mswipe, Milaap and many others and all of them are keeping the momentum is on in fintech space. Many big companies will also continue to experimenting with payment processes.

Key Challenges

No doubt, the Indian fintech market is huge, but it is growing very slowly comparative to many other developing nations because of a set of challenges.  The government keeps trying to facilitate new regulations but the whole system is still conservative. It has legacy infrastructure issues that create many problems in the delivery of instant banking services. Nadwani adds, “Sales Cycles in Fintech are long and complex. It takes a long time to scale the platform, as well as get traction in a regulated environment. Just be willing to persevere for much longer (at least 5-10 years) before expecting your business to really scale.” In addition, lack of education among the people also roadblocks the way of startups as people deny adopting modern ways of payments.

Promising Areas for Starting a FinTech Business

Are you thinking of starting a business in fintech? You can explore opportunities in the following promising areas.

  • Personal banking and finance which includes mobile, online banking, financial planning, wealth management, automatic budgeting and lots more.
  • It is forecasted that more than 5 billion consumers will use their smartphones to make payments by 2019 with the growth of eCommerce and mCommerce. So it means mobile payments and money transfer systems that allow cheaper, faster and more convenient money transfer ways.
  • Micro loan market and peer-to-peer lending are highly promising segments and expected to reach over $1 trillion by 2025.
  • Managing big financial data in a better way.
  • Easy investment ways in online trading, robo-advisors and stock markets.

Basically, your innovation should be problem solving either of consumers or businesses. The most important is making transactions easy for all.

At the end, it’s great time to start a fintech business. Despite the fact that there are many big and small companies in the fintech, the market is full of opportunities for emerging startups because of a steady in-flow of investments especially from government, investment firms and individual investors.

[Top Image – Shutterstock]

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