I-Day Special | Fintech redefining payments

S uresh Kumar, a newspaper vendor in Mumbai, has not visited his bank branch since the last few years. He doesn't have to. Thanks to a financial services application on his phone, he is able to receive money from his customers digitally.

“This is the best way of doing transactions. It saves me time because I no longer have to go to each customer’s house for payment. Also, my money is safe and I don’t have to go to the bank to deposit it,” he says.

Senior citizen Rina Verma has also been using a fintech app to pay for groceries and milk since demonetisation. “We had started using Paytm when demonetisation happened. But we realised that this mode of payment was easier than looking for exact change. During the lockdown, this helped a lot for everything from groceries to vegetables and other deliveries. It has also helped maintain social distancing,” she said.

Kumar and Verma are just two examples of millions of users in the country who have adapted one of the biggest revolutions since independence — the use of fintech platforms for financial transactions.

Rapid rise in transactions

The growth in payments has exceeded expectations. According to Digidhan estimates, the value of digital payment transactions has increased 168 per cent from ₹2,070 crore in 2017-18 to ₹5,554 crore in 2020-21.

A number of fintech players such as Paytm, PayNearby, BharatPe, Spice Money, Eko have been working on financial inclusion.

As per NPCI data, AePS transactions increased from a mere 14.35 million in January 2016 to 344.76 million in July 2021.

“India is leaps and bounds ahead of most countries barring China in the fintech universe. A lot of it is driven by the need. India is a very credit and payments-starved market,” said Suhail Sameer, CEO, BharatPe.

Payments

UPI transactions crossed the ₹6-lakh crore mark in terms of value this July and is being recognised globally.

Sonali Kulkarni, Lead for Financial Services, Accenture in India believes that India is far ahead in terms of payments infrastructure and regulations. According to her, both UPI and NEFT have been game changers and are unique to India.

Expanding to other sectors

Vinay Bagri, co-founder and CEO of digital banking fintech Niyo, said the country’s infrastructure to support fintech players has expanded significantly since demonetisation.

“IndiaStack, Aadhaar, central KYC, and video KYC are enabling players to bring better value to customers,” he said, adding that fintechs are also becoming extremely popular in other segments such as stockbroking and mutual funds.

Not surprisingly, Indian fintech’s success story has also captured the interest of the global investor community.

“Over the past five years, Indian fintechs have raised approximately $10 billion from investors all over the world, catapulting the sector’s total valuation to an estimated $50-60 billion,” said the report by BCG and FICCI.

It is estimated that India is poised to realise a fintech sector valuation of $150-160 billion by 2025.

The challenges

However, margins and revenue streams continue to be slim for most operators. Paytm, Mobikwik, and PB Fintech are all loss-making companies, according to their DRHPs.

Breaching the rural barrier is also a big challenge for many of them even as they are popular in urban and semi-urban areas.

“Rural consumers will respond better to conversational, voice, and vernacular models. That shift has not fully happened in fintech,” said Kulkarni.

But challenges notwithstanding, players and experts agree that development in the fintech space is one of the biggest breakthroughs in India.

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