After a transformative 2022, fintechs are hopeful of getting back to growth in 2023, led by rural technological adoption and customisation of offerings even as focus intensifies on collaborations and partnerships with banks and NBFCs.

This year saw significant growth in the fintech segment on the back of retail and MSME credit demand and pandemic-driven physical constraints. Introduction of norms for differentiated segments and increased regulatory scrutiny 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 with a focus on customer centricity, financial inclusion, increased accountability and transparency.

Decline in funding

On the other hand, the fintech industry witnessed a 57 per cent decline in funding, leading to a shift towards building sustainable organisations 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.

Going into 2023, the focus then will remain on customer experience, improving financial awareness, distinctive financial products, co-lending and alliances, industry participants said, adding that rural fintech will be crucial 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-personalisation, leading to increased digital adoption,” said Dilip Modi, founder of Spice Money.

Even as concerns around additional guidelines will persist owing to increased regulatory intervention in 2023, industry participants expect the influx of new players to continue — especially in retail segments such as insurance intermediation, wealth management and personal loans owing to 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 boosting 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 spoilt for choice in 2023 as competition intensifies and industry players eye portfolio diversification, higher market share and innovation, participants said.

“Fintechs will be more sure-footed when it comes to finding a product market fit that finds acceptance within the regulatory framework. Secondly, unit economics and profitability will be the guiding light for all new initiatives and current practices,” said Nageen Kommu, CEO of Digitap.

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