Three trends that will define India’s fintech sector in 2023
From digital payments and wealth management to lending and insurance, Indian fintech firms are leveraging technologies such as artificial intelligence, machine learning and the cloud to disrupt traditional financial services.
The domestic fintech sector is poised to reach $1 trillion in AUM and $200 billion in revenue by 2030, according to an EY report. This puts India in a strong position to lead the next generation of fintech innovations and drive the industry forward.
With the eyes of the world on this sector, here are three trends that will drive Indian fintech innovation in 2023.
1.
Neobank partnership powered by hyper-personalized products
Indian neobanks witnessed a 5x jump in funding last year and the figure is expected to reach $215 billion by 2023, the EY report said. The current market size is estimated at $48 billion, according to an Inc42 report, with Fi Money, Open, Niyo and Jupiter being some of the top names in the industry.
Money management app Fi Money recently closed its Series C funding with new and existing partners investing $75 million, valuing the Bengaluru-based fintech at $550 million.
What makes this sector so attractive is that a growing number of India’s young working population are finding value in the personal financial solutions that neobanks have to offer. But it’s not just consumers, traditional banks have also noticed the benefits of partnering with neobanks to run their business.
In the absence of a regulatory framework for digital banking licenses, such partnerships will drive a wide range of hyper-personalized financial products and services.
2.
AI-driven efficiency in digital lending
From ‘Buy Now, Pay Later’ to instant loans, digital lending services have already captured a large portion of India’s growing appetite for credit. More than $9 billion in investments were made in digital lending in the last 5 years, and the market is expected to grow to $515 billion in book size by 2030, according to the EY report.
With growth in credit disbursements far outpacing deposit growth, the RBI has expressed its concerns over the banking sector’s ability to meet rising credit demand while maintaining adequate capital buffers. Technology such as the Account Aggregator framework, combined with AI-powered credit assessment techniques, will enable fintechs to deliver credit where it is most needed.
3.
Wealthtech for everyone
Mostly, Indians have invested in physical assets like gold, real estate and FDs, preferring to stay away from the capital markets. Apart from boosting digital payments, the pandemic played an important role in driving more Indians to the capital markets, evident from the 63% jump in active demat accounts to 89.7 million in FY22.
Fintechs focused on simplifying investments, covering mutual funds, stocks, peer-to-peer investments and everything in between are perfectly positioned to democratize access to wealth management services through AI-enabled personalized advisory services. This will allow an entire generation to effectively build wealth and achieve their financial goals.
Hyper-customized financial products combined with the ever-deepening digital penetration in India will increase access to banking services. AI-powered lending will expand access to credit, while advances in wealth technology will allow millions to take advantage of India’s booming markets.
Together, these three trends will ensure that India maintains its position as the global leader in fintech innovation in 2023.
