Introduction:

Financial technology​, also known as ​FinTech​, is an industry composed of companies that use new
technology and innovation to offer financial services. These companies operate in ​insurance​, ​asset
management​ and ​payment​ etc. Fintech is a financial services sector that emerged in the 21st
century.

Fintech start-up firms engage in external partnerships with financial institutions, universities and
research institutions, technology experts, government agencies, industry consultants and
associations. Through these partnerships, they create a highly integrated ecosystem that brings with
it the expertise, experience, technology and facilities of all the entities together.
Pillars of Fintech ecosystem:

Fintech start-up firms engage in external partnerships with financial institutions, universities and
research institutions, technology experts, government agencies, industry consultants and
associations. Through these partnerships, they create a highly integrated ecosystem that brings with
it the expertise, experience, technology and facilities of all the entities together. A successful fintech
ecosystem is where all the market participants connect, engage and share ideas across vibrant
communities and networks, as well as identify and convert opportunities into business.
Fintech in India is still in its early stages of growth, which is why the term might seem vague to most.
However it is not a system that is completely devoid of any structure; it does have a few verticals.
Although each report tends to classify the various verticals of fintech in a different manner, we will for the
sake of convenience and understanding branch out fintech into 6 boxes.

Present Scenario of Fintech Startups

Innovation and technology have brought about a radical change in traditional financial services. The
world has seen the emergence of more than 12,000 start-ups and massive global investment of USD
19 billion in 2015 in the fintech space. These innovators are utilising tech tools to bring in seamless
and innovative financial services for the banked and unbanked population. The global fintech
software and services sector is expected to boom as a USD 45 billion opportunity by 2020, growing
at a compounded annual growth rate of 7.1 per cent as per NASSCOM.
According to the report of The National Association of Software and Services Companies
(​NASSCOM​), India has a presence of around 400 companies in the fintech space, with an
investment of about $420 million in 2015. The ​NASSCOM​ report also estimated the fintech software
and services market to grow 1.7 times by 2020, making it worth $8 billion.
Indian Fintech landscape is segmented as follows:

Opportunities & Challenges of Fintech Firms

On the other hand, traditional banking and financial institutions can leverage their existing customer base
and adopt digital products that nurture strong financial relationships while improving service efficiency and
broadening access to meet changing needs. The disruptive potential of fintech firms can provoke the
much needed modernization of the traditional sector, reducing costs in the process and increasing the
size of the banking population.

Responding to these opportunities and challenges, banks like HDFC and Axis have launched mobile
phone applications to ease digital transactions; Federal Bank announced a partnership with Startup
Village to develop innovative banking products; U.K. giant Barclays is set to operationalize its fifth global
fintech innovation center that will be located in India; and Goldman Sachs Principal Strategic Investments
Group (GSPSI) is looking to invest in Bengaluru’s fintech startup scene.

Thus, the growth prospects in technological innovation may not necessarily produce a mutually exclusive
relationship between traditional institutions and fintech firms in India.
Additionally, India has a large untapped market for financial service technology startups – 40 percent of
the population are currently not connected to banks and 87 percent of payments are made in cash. With
mobile usage expected to increase to 64 percent in 2018 from 53 percent currently, and internet
penetration steadily climbing, the growth potential for fintech in India cannot be overstated. Moreover, by
some estimates, as much as 90 percent of small businesses are not linked to formal financial institutions.
These gaps in access to institutions and services offer important scope to develop fintech solutions (such
as funding, finance management) and expand the market base
Challenges for Fintech Expansion

While digital finance firms have benefited from the government’s pro-startup policies and flexible
regulatory conditions imposed by the Reserve Bank of India (RBI), formal institutions possess an
established infrastructure and legacy that is not easily replaceable. Fintech startups need to instill greater
confidence among Indian customers, already known for being conservative in their financial preferences.
Figuring out how to market to their needs and influence financial behavior are some of the biggest
challenges, as is setting up a strong and responsive regulatory infrastructure to keep apace with the
speed of technological innovation.

ROLE AND IMPORTANCE IN THE PRESENT SCENARIO OF THE

COUNTRY

Keeping in mind the present policies of India like jan dhan yojana,upi,demonetisation etc.Country is in the
path of a digitalised cash system which requires transactions through online platforms. This makes fintech
industry one of the important industries.
Statistics suggests that ​demonetisation lead to

● A surge in digital payments by 300%

● Transactions through e-wallet services up from 17 lakh on Nov 8 to 63 lakh on Dec 7
● Transactions through RuPay Cards up 316% at 16 lakh daily.
Within hours of the prime minister’s announcement, the company paytm has registered a 200 percent
hike in the number of app downloads and a 250 percent surge in the number of overall transactions and
transaction value. The number of saved cards also grew by 30 percent, pointing at a strong set of repeat
customers the platform has now acquired. The company has noted 1,000 percent growth in money added
to the wallet and 400 percent growth in the transaction value of offline payments.
SWOT Analysis for Fintech Industries in India:
I​n modern times, we have seen several interesting businesses emerging within this industry
including mobile payments, mobile wallets, personal financial planning and wealth management,
P2P lending etc. These segments are redefining the way consumers do financial transactions on a
daily basis and we are thoughtful they will only see more light in the coming days.

The SWOT analysis of Fin-tech Industry, India provides an insight into the major Strengths,
Weaknesses, Opportunities and Threats of these emerging startups.

Strengths
Considering its on-going evolution in the market and the use of algorithm based customized services
to customers related to personal finance, insurance & investment along with ease of payments via
mobile, to offer “on the go” services; Fintech may continue to be seen as an area of growth and
opportunity with increase in number of start-ups everyday.

The working population in India is increasing very rapidly, who are not ready to waste their time
through physical transactions. The demographics of the country is a great strength to country as well
as Fintech startups because by 2020, 64% of indian population will be young where all of them
would be inclined towards digital transactions.

These new business models are focused around product diversification and advancement in
financial technology. Recently, the State Bank of India has also allocated a fund of INR 200 crore
dedicated solely for enhancement of financial technology (Fintech) space, and has tied-up with
Society for Innovation and Entrepreneurship (SINE) at IIT Bombay to promote innovation by Fin-tech
start-ups.

Latest move of demonetisation will definitely improve the scope of fintech because the government
is with a strong motive to carry out to lead the country towards a cashless economy. Many state
governments are strongly taking the programmes like fibre grid to the nook and corner of the
country.

Weaknesses
There is a large segment of Indian population that does not have access to either internet or mobile
phones. The proliferation of mobile internet users in India is on rise and estimated to clock 371
million users as on June 2016, out of which around 71% users are in Urban area (262 million urban
users v/s 109 million rural users). Even among the rural internet users, some people are unable to
access several value-added services because of the regional language barrier since the app and
web services are available mostly in English and Hindi. The diversity in Indian languages make the
companies to work more on creating applications suitable to all the people.Similarly, the reason for
less mobile penetration among population might be the trust factor as not every user is familiar as
well as comfortable with mobile way of handling financial transactions. At the same time, limited
financial inclusion in rural locations has always been a cause of concern.
Several start-ups such as CapitalFloat, LendingKart in Lending segment; Bankbazaar, Policybazaar
among the Insurance service providers; Paytm, MobikWik in the mobile wallet segment, aim to
simplify financial services, but the non-availability of broad-based financial infrastructure has been a
major weakness of Indian financial system and a key determinant for the lack of penetration.

Opportunity
The lack of financial services penetration in the country, unfolds immense doors of opportunity for
Fin-tech. With hundreds of millions of people without any access to basic financial services, there is
an immense opportunity to create demand in almost every business segments including insurance,
consumer lending, micro-financing, mobile payments, point of sale solutions, amongst others.
Emerging Fin-tech solutions can help grow the market significantly and broad-base the provision of
financial services to a wider target market.

There is a large untapped population of the country, which if directed will help the FinTech industry
go a long way. The Prime Minister Mr. Narendra Modi, since 2014, has initiated a lot of new
schemes such as Skill India, Digital India, Pradhan Mantri Jan Dhan Yojana, Aadhar enrollment,
Mudra Yojana, Krishi Sinchai Yojana etc. Rural India can be benefitted the most from such schemes,
and this can be viewed as a potential up-surge for Fin-tech start-ups in expanding their customer
base and provide services such as insurance covers (health insurance, life insurance, and crop
insurance); mobile banking (helping them in managing their income and deposits); loans for
agriculture, SME business, and other personal purposes.

The number of accounts opened under the Jan Dhan Yojana scheme reached 219 million by 18 May
2016. Now it depends on the ability of the fintech startups to tap this potential.

Last year in 2015, Reserve Bank of India, announced the approval to 11 major applicants such as
Aditya Birla Group, Airtel, Reliance, Vodafone, Tech Mahindra to set up their payments banks in
India offering mobile based services such as automated bill payment, enable transfer and
remittances, forex services at lower rate and other small scale banking services. Not just this,
ecosystem is building up together to support the innovation in financial space with several banking
institutions now opening up for partnership with multiple start-ups.

Threats
The major threat to Fin-tech industry in the long run could be lack of innovative ideas. Many players
are entering the market with similar idea such as offering mobile wallets, carrier billing, comparison
of investment options, instant credit scores etc. These new players may not be able to attract
investment due lack of disruptive ideas.

As the technology progresses from traditional to mobile way, the new players entering the market
must come up with more innovative use of technology to create their mark in the industry. Moreover,
new and innovative technologies will be a threat to the existing players in holding their position in the
market.

Security or “privacy breach” as one of the continuous threat to tech solutions is also poised to be a
bigger threat for the financial ecosystem. Couple of big security breach and system hack events
could potentially turn people away from online financial transactions. On a positive side, quite a few
tech giants along with several incumbent start-ups are pushing hard to overcome this security
breach issues as to bring more hope for much better and improved services.

This research, in no ways, tries to predict the future of the Fin-tech ecosystem or pass a verdict on it.
Although, given the pace with which it is going, no matter what, Fin-tech is only likely to flourish and
prosper in the coming future.

Gist of SWOT analysis on Fintech industry in India:

S.no Strengths Weakness Oppurtunities Threats

1. Over 45 fintech Low mobile Govt schemes related Upgradation of

firms in India. internet to financial inclusion technology
penetration & digitalisation

2. US$198 Mn funding Security & Increased increased Overcrowding

across 64 deals in authentication investors Interest. of startups
2016 issues

3. Increased focus on Non-availability Growing demand in Security breach

product of broad based various business and fraudulent
diversification and financial segments transactions
innovation infrastructure

FACTORS THAT INFLUENCE FINTECH STARTUPS IN INDIA​:

One of the segments that have seen tremendous growth is the startups in general and fintech in
particular. The startups in India are growing ever so rapidly transforming us into the third largest startup
market in the worlds.

The primary factors that were driving Indian firms to deploy fintech products included streamlining
day-to-day operations, fast growth in revenues, increasing reach, process efficiency and improvement,
empowering sales force, and managing risks and costs.

While the Government of India is trying to solve the problem of financial exclusion with schemes like ​Jan
DhanYojana​, ​Aadhar​ enrolment and payment bank licenses, ​fintech​ startups across the nation are
expanding financial inclusion by leveraging technology.

According to a TechSci report, the mobile wallet market in India will touch $6.6 billion by 2020, backed by
crucial factors like the increasing usage of smartphones, a rapidly expanding mobile internet user
base,government focus, and favourable demographics –50 percent of Indian smartphone users are aged
between 18 and 30 years.

● Across most categories of financial services, India remains under-penetrated

● Even for the financially included, service levels remain low
● Significant government push for greater inclusion – feasible only with the
adoption of technology led models
 ● Internet penetration has increased dramatically over the last five years .
● E-commerce growing rapidly; driven by proliferation of mobile internet
● Smartphones have penetrated approximately half of the banked population
● Start-ups now part of the culture; increased appetite for risk taking
● Significantly higher levels of venture and growth capital; investors have had successful exits
and capital appreciation

In INDIA Innovation is boosted by integration of new technologies

In fintech, a lot of complex financial information and user data are involved which need to be properly
analysed and protected. With the help of the Big data strategies, Fintech businesses are able to harness
and manage their business information properly and follow the compliance policies of data protection.As
INDIA has a large number of internet users BIGDATA ANALYTICS also play an important role

Now although this might look like more than half of India still does not have access to internet (which is
not so harsh considering that half of India lacks access to a host of basic infrastructure); what is vital here
is to assess the rate of growth in the number of mobile internet users. During January to March 2015, the
number of mobile internet users was around 285 million. By the end of September 2015 the number stood
at 305 million users and by the end of Q1, 2017 the number of internet users in India is estimated to touch
500 million.

India is set to overtake the US and become the second largest mobile internet market in the world; then
catch up with China which has around 600 million users

Hold on, you’re probably wondering what all this has got to do with the growth of fintech? Right, so mobile
internet comprises ~94% of the internet usage in India. This means that only 6% of the entire internet
users in India have access to wired internet or a broadband connection at home. Now, this is where it
gets really interesting; mobile internet is to fintech what bees are to flowers. You see in a dynamic country
like India, fintech corporations are betting on the growth of the mobile user base. Without the mobile users
as a foundation, the penetration that fintech will be able to achieve would be considerably less.

Truth is that it’s more expensive for an average Indian to apply for a wired internet connection than it is for
them to avail a mobile connection. This is why the mobile internet base dwarfs the wired broadband user
base.

Digital India Supporting Fintech Industry:

The World Bank estimated that for every 10 percent rise in broadband access, economic growth
increases by 1.38 percent in low-and middle-income countries. The IAMAI-ICRIER report also highlighted
that a 10 percent increase in broadband penetration in India will lead to a 1.08 percent increase in its
GDP contribution.

Before we can dive into how the growth of the mobile internet has directly influenced the growth of the
fintech space, we need to look into how some other segments have tapped into the mobile user base to
propel their growth.
The Role of Mobile Apps

Mobile applications have been the backbone of the internet revolution. This is because apps have
tremendous advantages over the web browser platform. They provide you with convenience at your
fingertips. Apps are faster than accessing the same service from a web browser; when it comes to logging
into a website on your mobile browser v/s using the application, apps win hands down any day. Affordable
smartphones today are as good as a hand held computer which greatly increases the scope of the apps.
Being able to integrate seamlessly into your phone resulting in fewer and fewer actions required from your
end in terms of using the app as well as making payments- apps are the way forward.

Suggestions to Fintech Industry Entrepreneur:

● Fintech startups need to instill greater confidence among Indian customers, as they are known for
being conservative in their financial preferences.
● The language diversity is very large in India, so it is a challenge for the fintech entrepreneurs to
make their apps and services to be accessible to people belonging to all the regions of the
country.
● It is vital for the firms to get into proper collaborations, collaboration does not mean only with
nationalised banks but it is important to get associated with regional as well as cooperative
banks.
● Innovative marketing strategy generally helps them to reach larger people, by using strong
electronic and social media presence in India.
● It is very important for the startups to ensure security of transactions, so they should
simultaneously focus on cyber security to make themselves a strong players.
● It will be very useful for them to have a wing for offline assistance i.e. a customer care wing
supporting the new users round the clock.
● Indians are great techies but not good financial players, because the financial literacy is not a part
of the country’s education system. So it is a great opportunity to startups to offer financial
management services as the software employers do not have time and proper knowledge to
manage their wealth.
● Bringing smarter insurance policies directly to the customers by knowing their interests and
requirements will be a win win situation for the customer, startup firm and the Insurance company
with which the firm collaborated with.
● Since there is a very good government initiative called Aadhar (An unique ID number for
residents of India), Fintech firms should make use of these thing and make the process of
opening bank account easier. They should also focus on easy opening accounts online with
special emphasis on foreign students and new immigrants. This helps both the banking industry
as well as improve the reputation of the country on the global platform.