India's Fintech Sector Attracts $2.8 Bn Fund In 2023: Report

India's Fintech sector is experiencing robust growth and is poised to play a crucial role in the country's economic development, India boasts approximately 9,900 FinTech companies, ranking third globally after the United States of America and the United Kingdom. The sector attracted around USD 2.8 billion in funding in 2023, with payments, banking, and alternative lending emerging as key investment areas, according to a comprehensive report by ASSOCHAM and PwC India. The report highlights significant opportunities in digital banking, payments, and investment solutions, while also addressing challenges faced by the industry.

Deepak Sood, Secretary General of ASSOCHAM, emphasized the sector's importance, stating, "India's Fintech revolution stands as a testament to our nation's commitment to innovation, inclusivity and economic growth. Over the years, India has emerged as a global leader in the FinTech sector by leveraging technology to democratise financial services and empower millions."

The report outlines several growth drivers, including increased digitalization, government initiatives promoting financial inclusion, and technological innovations tailored for rural areas. However, it also identifies challenges such as low financial literacy, cybersecurity threats, and regulatory complexities.

Vivek Belgavi, Leader of Fintech and Alliances and Ecosystems at PwC India, and Mihir Gandhi, Partner and Leader of Payments Transformation at PwC India commented on the sector's evolution: "Fintechs have played a pivotal role in enhancing customer experience, increasing efficiency in different FS across the value chain and backend processes, innovating technology stacks and facilitating broader access and inclusion."

The digital payments landscape in India continues to be dominated by United Payment Interferences (UPI), with credit card transactions increasing while debit card usage declines. The report projects that the book size of digital lenders could reach USD 515 billion by 2030, driven by advancements in AI-powered credit assessment and underwriting.

Emerging trends in the sector include cross-border payments integration, cloud-based infrastructure adoption, and the introduction of Central Bank Digital Currency (CBDC). The report also highlights the growing importance of InsurTech, WealthTech, and FinTech Infrastructure in India's financial ecosystem.

Mihir Gandhi and Vivek Belgavi added, "Currently, Fintechs in India have been focussing on improving last mile distribution and becoming more inclusive by targeting underserved segments such as rural women, industry workers and differently-abled people who are unable to access the services provided by the industry."

Despite the positive outlook, the report cautions about challenges such as the rural-urban digital divide, funding crunches, and increasing regulatory oversight. It emphasizes the need for standardized and interoperable platforms to enable enhanced collaboration within the industry.

As India moves towards its vision of a USD 5 trillion economy, the Fintech sector is expected to play a pivotal role in fostering innovation, enabling financial inclusion, and building a sustainable future for the country's financial services landscape.