What does FinTech mean in India?

Currently, FinTech is one of the hottest and newest domains in India. In spite of the financial squeeze in 2016 which fell right after the ridiculous exuberance of 2015, data from startup-analysis platform Tracxn indicates that the sector has attracted US$512 million in funding in 2016. The data also indicates that there were 83 rounds of funding in the year 2016, which is higher than 2015’s count of 80. In addition, there have been as many as 12 acquisitions already.

So, what are the trends that we can spot in this intensified acquisition and funding activity? Which are the evolving business spaces and models seeing the most action? Let’s focus on the top three trends.

1. Mobile payments
It comes as no surprise that a majority of startups are dedicated to solving complications in mobile payments and are in enormous demand in the world’s fastest growing smartphone market. According to Tracxn, an estimated US$212 million are invested in startups using mobile to send and receive money. This represents 40 percent of the total funding in the FinTech industry.
Innovative government-led substructure for identity authentication through Aadhaar card and the Unified Payments Interface (UPI) for convenient inter-bank money transfer is motivating innovations in this space.
Let’s dig into some statistics, shall we? India bought a record 35 million smartphones in the last quarter of 2016, and surprisingly still, less than 20 percent of the 1.3 billion population own smartphones. Do the math and it’s quite easy to understand that the smartphone boom and mobile payment innovations will only expedite in 2017.
2. New models for lending
Conventional banks have left a lot of gaps in lending, particularly for small businesses and entrepreneurs who often don’t have the credentials or collateral to get loans from banks. Banks have also failed to keep up with the widening circle of needs for individual consumers. FinTech startups with new models of digital lending are bridging these gaps. In addition, the easing of regulations by the Reserve Bank of India is also of great assistance.
Digital lending startups which include platforms that connect lenders with borrowers, have accounted for a whopping US$199 million, which is approximately 40 percent of the total funding in FinTech in 2016, according to Tracxn.
The space also saw well-funded players opt for buyouts so as to improve and scale-up their operations fast. Fast Banking’s acquisition of OneMi, Incred’s acquisition of Instapaisa and Lendingkart’s acquisition of Kountmoney are cases in point.
3. Consolidation in wallets
A significant number of acquisitions have occurred in the online payments and mobile wallet space. The buyers are mainly consumer internet and ecommerce companies that want to enhance their payment system in an integrated way instead of depending solely on extraneous providers of payment services.

The prominent ones being:
– Flipkart’s acquisition of payment app PhonePe
– Taxi app Ola’s acquisition of interbank mobile payment enabler Qarth
– Shopclues’ acquisition of Momoe, a mobile wallet for offline stores
– Amazon’s acquisition of online payment gateway Emvantage
The acquisitions help these companies create an enhanced experience for vendors and shoppers, riders and drivers. User experience has emerged as the prime differentiator in ecommerce and other online platforms. Also, the payment structure has been one of the biggest pain points for ecommerce companies across India.
In conclusion, FinTech is not a replacement for conventional banking services; rather it is a result of the unavoidable evolution in the banking sector. Banking services are now improvised with the added convenience of technology. The FinTech sector does this with the help of matchmaking algorithms, technology intelligence, disbursement focused models, big data and machine learning, which are speedily replacing conventional financial practices. Loaded with all the armory in its arsenal, FinTech is completely transforming the corporate landscape in numerous industries and revamping the way companies gain access to finance.

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