The advent of Fintech technology in financial markets brought an astronomical shift to the finance industry and the process of financial inclusion. The Fintech disruptions are a paradigm shift for the conventional finance industry and incumbent players. The radical Fintech innovations significantly induce the rapidly growing ubiquity among all Fintech landscapes in the Indian finance industry. We shall analyze the incredible Fintech revolution impacting the Indian financial system and its role in attaining financial inclusion. Financial disruptions have been noticeable over the past decades in the Indian finance industry in the digital payments systems, digital lending landscape, and digital wealth management. Let us critically understand the nuances and growth trajectory of different Fintech landscapes.
The digital payment landscape: Digital payments have become ubiquitous to the Indian financial system, sweeping away the cash system. The Dhan-Jan Yojana by the BJP-led government and the COVID-19 pandemic fuels the flames further to make India a faceless, cashless, and paperless economy. Primarily, the digital modes of payments considered are BHIM-UPI, IMPS, NACH, AEPS, NETC, debit cards, credit cards, NEFT, RTGS, PPI, and others. The recent history of digital payments in India showcases the unparalleled growth in all digital payment modes. The fathomable year-on-year growth is reported at 58% in the financial year 2022-23. The pandemic foreseeable evidence is reported with the growing use of UPI by Indian households. The UPI continues to be the flag bearer of this digital landscape, accounting for over 75% of retail payments in India in 2022-23.
Further, it is forecasted to grow at 90% in 2024-25, achieving incredible financial inclusion. In contrast, the volume of credit cards and debit cards witnessed a year-on-year growth of 30% and a decline of 13% in the financial year 2022-23 compared to 2020-21. Moreover, the number of digital transactions was 2,071 crores during 2017-18 and rose to 9,192 crores in 2022-23, superimposing the further exponential growth trajectory.
Simultaneously, the value of digital transactions reported is 1,962 lakh crores from 2017-18, which exponentially rose to 2,050 lakh crores in 2022-23. National Payments Corporation of India (NPCI, 2020) further predicts more transparent growth under the RBI regulation and fraud detection to control digital fraud and bring financial inclusion faster.
The digital lending landscape: Digital lending as a part of the Fintech ecosystem emerged in the aftermath of the global financial crisis and the questionable failure of a centralized banking system worldwide. Brett King, published in 2018, carried the sub-title “Banking Everywhere, Never at a Bank” named Bank 4.0. Nevertheless, in 2024, the Indian economy is venturing into the bank 5.0 riding on the incumbent bank players, robo-advisory in banking, decentralized banking, embedded banking, hybrid robo-advisors, and bots and the use of artificial intelligence for credit and risk management. The Indian economy seamlessly presents a patchy picture of the digital lending landscape in India as India has been steadily whetting its appetite for digital transformation in financial services.
The lending landscape is one of India’s most prominent off-shoots of Fintech. In the Indian scenario, digital lending is growing by leaps and bounds from the regulated financial institutional front and the most innovative the individual front (Digital Crowdfunding Network) for seamlessly meeting the credit automation. RBI’s data reveal that digital lending growth is at the very nascent stage compared to the physical mode. The physical lending was 53.08 lakh crores in 2020-21 and is anticipated to grow by 75.90 lakh crore during 2024. At the same time, digital lending could maintain the proportion of 1.12 lakh crore during 2020-21 and is expected to grow to 2 lakh crores in 2024. Moreover, the NBFCs have a higher proportion of digital lending, 0.23 lakh crores in 2020-21, compared to 1.93 lakh crores in physical mode, which is forecast to rise by 2.50 lakh crores in digital lending and 4.50 lakh crores in physical mode in 2024.
The Indian digital lending landscape is not immune to the classified models of crowdfunding and peer-to-peer (P2P) lending business models in the contemporary finance industry. Although at the nascent stage, but gaining momentum to create a decentralization lending mechanism in the Indian economy. P2P lending and crowdfunding sources of funds are significant in providing easy access to small and medium entrepreneurs’ credit and supporting the decentralization mechanism in the banking industry. I2i Lending, Lendingcart, Lendbox, Faircent, i- Lend, Len Den Club are the crowdfunding start-up funds in India working along with incumbent players to create widespread access to credit to the bottom section of society. We do not have credible data sources for this budding industry but RBI data reveals that the current start-ups are more than 40 and are expected to grow at an increasing rate.
Digital wealth management landscape: Artificial intelligence (AI) and big data analytics demystify the contemporary financial markets’ wealth management. These digital solutions accelerate low-cost investment decisions and assets under management (AUM). Incumbent players are leveraging digital wealth managers (DWM) or rob advisors to attain the digital space in risk appetite measurement, portfolio creation, and portfolio rebalancing. The robo-advisory customers are millennials (60% population under age 40) and baby boomers, representing the population emerging as the wealthiest in the upcoming decades. Indian wealth companies implement discount brokering models, goals-based investing, thematic investing, and hybrid models to achieve the highest AUM at the lowest cost for customization. Digital wealth managers and the wealth tech business models exclusively participate in attaining financial inclusion in the Indian economy. Currently, stock broking and investment decisions are no longer privileged terminologies. Due to easy access to mobile banking and stock broking apps such as Zerodha, Upstox, Angel One, Groww, ICICI Direct, and 5paisa, etc. the percentage of the population participating in stock market investments increased over the past decade. These share brokers are authorized members of the Indian stock exchanges (i.e., NSE and BSE). More than 100 registered brokers provide service to the customers as full-service and discount service brokers. In terms of active clients, Groww stands higher in 2024 with 70,92,413 clients, and Zerodha stands for 65,93,363 active clients who avail the services. Indian Wealthtech, also prominently called investment tech to reach a trillion-dollar Fintech market in 2025. Incumbent players are leveraging big data analytics, AI and ML applications, robo advisory for effective portfolio construction, zero-cost index funds options, risk preference, and risk mitigation, and provide uplifted real-time insights to the clients in the financial markets. Hence, the digital wealth management landscape also significantly contributes for the financial inclusion in the Indian economy.
To conclude, the Indian economy is unlocking the full potential of financial markets with innovative Fintech technology. The incumbent players are more adaptive to the transformational leaps forward in the past two decades. Fintech innovations are implemented in products, processes, business models, and organizational innovations. The ubiquitous role of Fintech innovations has persistently been felt in digital payments, lending, and capital markets innovations as per the data sources mentioned above. In this context, RBI’s financial inclusion index reports growth from 43.4 % in 2017 to 56.4 % during 2023-24. This, furthermore, showcases the exponential growth in financial inclusion achievement primarily because of Fintech firms’ innovations to enhance hyper customization and personalization in digital payments, lending, and capital markets landscape.
Jyoti Kumari is an Assistant Professor in the area of Finance at ICFAI Business School. She earned her PhD in Finance from the Indian Institute of Technology (IIT) Kharagpur and her M.Phil from the Central University of Hyderabad. Before joining IBS Hyderabad, she was an Assistant Professor at the Indian Institute of Management (IIM) Sambalpur and the Institute of Public Enterprise (IPE) Hyderabad.