India has opportunity to become US$1 tr digital payments market

Having recorded 3,435 crore digital payments in 2019-20, India has the opportunity to become US$1 trillion digital payments market. The rapid growth of fintech players has helped accelerate financial inclusion.

New age technologies like AI and ML will further quicken digital adoption in the country, benefitting both the industry and the consumers in the coming years. Fintech players, according to PTI, are hopeful that the industry will expand and will penetrate into newer areas of financial transactions.

While the government is making efforts to give a big push for digital India, the Reserve Bank is enabling the sector’s growth with regulatory interventions and there will also be a separate division for the fintech companies at the central bank. The RBI in an article had highlighted that fintech has the potential to fundamentally transform the financial landscape, provide consumers with a greater variety for financial products at competitive prices and help the financial institutions become more efficient. The central bank said the scope of operations of fintechs has also broadened, moving from crypto assets to payments, insurance, stocks, bonds, peer-to-peer lending, robo-advisors, regtech and suptech.

Seema Prem, FIA Global CEO and Co-founder, said fintech companies have helped small and medium enterprises grab and gain opportunities which they were previously deprived of or which were difficult for them to get hold of. “Fintech players very evidently have been prioritizing their strategies with many changes in rules and market conditions,” she said. “However, there is an increased need and requirement for a multi-stakeholder framework that encompasses the regulators and governments, to guide them better.” Prem also said that the government’s support in providing adequate liquidity through regulated banks and NBFCs, will also provide the much needed support to the fintech to wok towards a positive approach.

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Swastik Nigam, Winvesta’s Founder and CEO, pointed out that India has a well-developed ecosystem for payments and credit. “Even as fintechs have various benefits, they can also be viewed as double edged swords because the technological innovations led by them may also magnify the existing threats to consumers in terms of privacy breaches and cybersecurity risks.” Ranvir Singh, MD & Co-Founder of Kissht, said the fintech industry and lending sector in particular will be looking to build new products on the scalable architecture that may revolutionize the lending industry in ways similar to what United Payments Interface (UPI) did for payments in India.

RBI Governor Shaktikanta Das believes fintech and digital players could function as the fourth segment of the Indian financial system, alongside large banks, mid-sized banks including niche banks, small finance banks, regionals rural banks and cooperative banks. The RBI said a central bank’s interest in fintech is not confined to its impact on the financial sector per se, but rather its implications for financial stability and monetary policy. The regulatory environment, like the roots that provide life to a tree, provides a solid foundation for fintech activities. The central bank said Indian fintechs are witnessing one of the biggest challenges till now – COVID-19 pandemic. “For a healthy and sustainable business ecosystem, fintechs need to bridge the digital divide and promote equitable, broad-based customer participation across urban and rural areas, and the various producing and consuming sectors.”