The advancements in technology are revolutionizing the way every industry and segment functions, with the financial domain being one of the biggest beneficiaries. The amalgamation of technology in finance has entirely transformed the way transactional operations are being handled. So much that the traditionally cash-driven Indian economy has gradually warmed up to fintech, with the term ‘fintech’ being mentioned in the Union Budget speech for the first time ever in 2019. Driven by factors such as a multi-fold increase in investments made, smartphone penetration, bolstered e-commerce and subsequent rise in customer expectations, the fintech segment has grown exponentially, pervading our daily lives and impacting most of our financial decisions. According to a report from NASSCOM and KPMG India, the fintech market in India is forecasted to double from its current value to reach USD 2.4 billion by 2020. Moreover, the transactional value for this sector is estimated to grow at a5-year CAGR of 22%, reaching USD 73 billion by 2020. Even the government is actively taking initiatives towards a diligent facilitation of the fintech revolution, to drive towards its motive of ‘Cashless India’.
In such a scenario where fintech is rapidly gaining acceptance and momentum, a wide gamut of innovative fintech startups have emerged, becoming key players of the financial domain in no time. As the country goes digital, these startups are gradually paving their way to empower hundreds and millions both financially as well as in a broader sense, thereby steadily leading to financial inclusion.
Catalyst of India's economic development
A developing country like India that encourages and facilitates innovations has served as a breeding ground for startups, rising as the second largest startup hub globally. In such a supportive environment, fintech startups have immense growth potential and opportunity for an overall upliftment of the Indian economy. With recent initiatives and reforms like Demonetization and Digital India, businesses, as well as individuals, are being encouraged and provided platforms that would accelerate the transformation to a cashless economy. Moreover, these startups have emerged as powerful solutions to the problems faced in the modern-day financial domain.
Infact, Mr. Arun Jaitley has termed MSMEs as the backbone of the economy outlining that this sector is poised to lead the consolidation phase. While these play a pivotal role in the development of the country, their own growth is often hindered by lack of access to finance from the traditional Indian banking setup. However, the introduction of digital lending by fintech startups has effectively paved way for facilitation of easier and cheaper credit to these businesses for their healthy sustenance. By providing solutions that address the structural issues in the information asymmetry resulting in opacity along with lowering credit cost and reducing the turnaround time for underwriting loans, fintech is significantly aiding these businesses in their growth.
Moreover, with better measures to monitor all the payments made, fintech startups have the potential to increase transparency to a substantial extent, thereby reducing the need for cash. Increased business activities facilitated by the fintech sector along with an improved labor market is also bringing about a transition in the Indian employment landscape. While a gradual decrease has been observed in employment among core sectors of the financial services domain, it has also led to the emergence of new job avenues in concurrence. In fact, it has been estimated that fintech and digital finance may create over 21 million new jobs by 2025. This will also help increase the tax base for the government, subsequently increasing the expenditure. With better investment and savings avenues through access to digital banking and financial services, the subsequent boost in consumption will positively impact benefit the public sector and the economy collectively. Therefore, fintech startups have the potential to influence and boost the development of India to a great extent.
Bridging the gender gap
With the financial service industry undergoing revolutionary changes in recent times, there is a severe need to unlock all innovations, creativity, and human talent to cater to massive growth opportunities.For the banking and financial services industry to reach its full potential, the pressing concern of gender imbalance within the sector needs to be duly confronted. By addressing the gender disparities to empower women, the fintech segment has begun harnessing this immense talent reserve to reach optimal financial results.
By investing their time and resources in implementing and monitoring the effective execution of policies, awareness and training programs, fintech startups are leading the charge in addressing the gender issue and subsequently empowering women. Additionally, female employment empowers women to take greater decisions and make better choices, which includes having a positive influence onthe woman’s household.
Not only from an employment perspective, but fintech startups have also recognized the value of and begun developing products keeping women customers in mind. With such steps, fintech is gradually bridging the gender gap through equal involvement and empowerment of women. Despite a large number of specialized loans for women entrepreneurs, it is a known fact that women business owners face greater funding challenges than men. While the sector still has a long way to go in order to affect the skewed gender balances substantially, the steps taken by these startups are certainly bringing about a positive difference both in economic as well as social terms.
In the last few years, fintech startups have made a significant impact, not just by redefining the financial services sector but also by being an active facilitator of the nation’s growth. If the ecosystem continues being as supportive, fintech has the potential to substantially boost economic development as well as women empowerment in India.