The Power Of FinTech
India’s cash-driven economy is responding well to the fintech opportunity with the sector expected to transact $73 billion worth of business in 2020 from $33 billion transactions in 2016, according to a comprehensive report on the sector. In five years that works out to a solid 22 per cent growth.
The Yes Bank-backed report, titled ‘India Fintech Opportunities Review’ underscores the fact that despite concerted efforts, banks have been unable to cover the humungous Indian population. This is why fintech companies leveraged their strengths in the vast opportunities thrown up. “Many fintech companies are working in different ways to contribute toward deeper financial inclusion in areas such as microfinance, digital payments, credit scoring and remittances,” the report says.
The Indian Fintech sector is still in a nascent stage. Many companies are barely three years old and employ 14 employees on an average. In the coming years, however, fintech can have a multiplier and beneficial impact on the economy, both in job creation and GDP growth.
By 2025, the economic impact of fintech is expected to give a $700 billion fillip to the GDP. It will also give rise to $800 billion of new deposits and $600 billion in new credit. In governance, fintech is expected to reduce $3 billion in leakage and approximately $2 billion in subsidies.
The YES Bank-IFOR study, conducted over 90 days, is till now India’s largest and most comprehensive analysis of the fintech ecosystem. More than 611 respondents participated in the survey, including 123 global fintech companies, representing more than half of the fintech sector. The IFOR survey also includes inputs from 100-plus ecosystem members, including investors, academics and incumbents in the finance sector.
India’s MSME segment will also be able to draw hugely on the benefits of fintech, which will reduce turnaround times and address the concerns of asymetrical information in MSME. “Fintech also holds the promise of lowering the cost of credit, particularly by reducing operating expenses of lenders, better KYC procedures, lower due-diligence costs and operating expenses,” say the Yes Bank-IFOR report.
The report also points out that fintech has the potential to increase transparency in the eco-system. It reduces the need for cash, and more payments are made digitally, and can be better monitored. It could also reduce the size of the informal sector, increase business activity and boost the labour market.
The Yes Bank-IFOR report also noted that fintech-induced increases in national income could raise consumer confidence. This could have the beneficial effect of triggering fresh rounds of investment and consumption. “If the ecosystem is supportive, fintech could boost the cycle of economic development,” the report said.
