After a transformative 2022, fintechs hope to return to growth in 2023, led by rural technology adoption and customization of offerings, even as the focus intensifies on collaborations and partnerships with banks and NBFCs.
This year saw significant growth in the fintech segment on the back of credit demand from retail and MSME and pandemic-driven physical constraints. Introduction of norms for differentiated segments and increased regulatory control caused operational disruptions, but cracked down on unscrupulous lending practices.
It also saw new initiatives in digital payments and the launch of ONDC and 75 digital banking units focusing on customer centricity, financial inclusion, increased accountability and transparency.
Decrease in funding
On the other hand, the fintech industry witnessed a 57 percent decline in funding, leading to a shift towards building sustainable organizations that thrive in challenging funding environments and create value for all stakeholders, said Gaurav Chopra, founder and CEO of IndiaLends, adding that the Indian fintech market is expected to reach $200 billion by 2030.
As we move into 2023, the focus will remain on customer experience, improving financial awareness, distinctive financial products, co-lending and alliances, industry participants said, adding that rural fintech will be critical to the growth of the sector. “2023 will pave the way for a rural fintech revolution that will focus on cashless transactions, embedded finance and open banking for hyper-personalization, leading to increased digital adoption,” said Dilip Modi, founder of Spice Money.
Although concerns about additional policies will persist due to increased regulatory intervention in 2023, industry participants expect the influx of new entrants to continue – particularly in retail segments such as insurance brokerage, wealth management and personal loans due to the availability of alternative data and SaaS solutions.
Cloud access for activities like invoicing, inventory management, business reports and accounting services will become indispensable for MSMEs’ digital adoption, thus also increasing credit flow to the sector, said Rahul Raj, co-founder and CEO of FloBiz.
On the back of increased confidence in the sector due to consolidation and better regulations, customers will be spoiled for choice in 2023 as competition intensifies and industry players look to portfolio diversification, higher market share and innovation, participants said.
“Fintechs will be more certain when it comes to finding a product market adaptation that finds acceptance within the regulations. Second, unit economics and profitability will be the guiding light for all new initiatives and current practices,” says Nageen Kommu, CEO of Digitap.
