Despite financing challenges and complex market conditions, the fintech sector in India continues to grow and evolve, with several emerging fintech trends in India poised to shape the future of the sector.
These trends include ecosystem banking, generative artificial intelligence (GenAI) and embedded finance, according to a new report by PwC India and ASSOCHAM.
The report, title “Fintech – Powering India’s $5 Trillion Economy by Driving Innovation, Enabling Inclusion and Building a Sustainable Future,” provides an overview of the current state of fintech trends in India.
It highlights important developments, regulatory changes, emerging market trends and areas of focus for the future.
Generative AI driving banking and fintech trends in India
Generative is one of the biggest fintech trends in India highlighted in the report. Financial institutions in India are increasingly adopting technology and many are building internal capabilities or forming partnerships to streamline processes and create new solutions.
For example, State Bank of India (SBI), the country’s largest lender, is exploring AI capabilities in the long term, starting with its internal use by employees, said Nitin Chugh, head of digital banking and the transformation of SBI, said the Economic Times of India in July 2024.
HDFC Bank, India’s largest private bank by revenue, currently has a proof of concept to help coders code faster. The company also seeks to use large language models to interpret key data repositories such as statements and provide meaningful analysis to relationship managers, telephone agents and other sales and service professionals.
In an interview with Fintech News Network, Gautam Anand, Executive Vice President and Head of Mobile Banking at HDFC, explains how the bank is leveraging generative AI to serve over 120 million customers.
Technology company Microsoft is working with Axis Bank and Aditya Birla Capital, among others, to deploy processes using genAI to transform contact centers, increase sales and overhaul claims and underwriting processes.
Ecosystem Banking Helps FSIs Seize Untapped Opportunities
Another important fintech trend in India is ecosystem banking, where financial service providers offer holistic solutions integrating financial services within non-financial ecosystems.
This approach allows financial institutions to seize untapped market opportunities and build customer loyalty by addressing specific needs across the customer value chain.
An example of an ecosystem bank is the partnership between Agriculture Insurance Company of India Limited and Wingsure Insurance Company to use cutting-edge technology to improve access to insurance products for Indian farmers.
Another example is ICICI Bank’s digital platform “Campus Power”. designed to help students meet their financial needs and provide value added services for higher education in India and abroad.
Integrated finance catalyzes collaboration between ISFs and non-FIS
Embedded finance is also touted as one of the leading fintech trends in India, providing opportunities for collaboration between traditional financial institutions and non-financial services companies.
This collaboration allows financial institutions to access new customer segments, leading to increased customer acquisitions and improved engagements.
For non-financial services businesses, integrated finance enables increased customer loyalty, new revenue streams and an improved customer experience.
An example is the partnership between Royal Sundaram General Insurance and the Indian Railway Catering and Tourism Corporation to enable the sale of integrated insurance policies alongside the purchase of e-tickets through Insillion’s API platform.
Embedded finance revenue in India is expected to grow at an annual growth rate of 30.4% between FY 2022 and FY 2029, reaching $21.12 billion by then.
Holistic inclusion, beyond financial inclusion
Holistic inclusion is another key theme in the financial sector. Holistic inclusion goes beyond financial inclusion, focusing on the participation of women and people with disabilities and providing opportunities across rural and urban demographics.
Fintech startups and financial institutions are leveraging innovative distribution strategies that combine digital infrastructure and physical proximity to increase penetration and awareness among diverse populations.
A notable example is Union Bank of India, one of the largest state-owned banks in the country. Union Bank of India did significant efforts to improve accessibility and inclusiveness for its customers with disabilities, including talking ATMs, debit cards with touch markings, as well as multilingual screen readers.
CBDCs are shaping cross-border finance
Other emerging trends highlighted in the report include the adoption of central bank digital currencies (CBDCs), advances in cross-border finance, the rise of alternative investments, longevity financing and green finance.
In the area of cross-border financing, financial institutions must address existing challenges such as complex settlement procedures, long transaction processing times and high remittance costs. Advances in this area will streamline international transactions and reduce costs for consumers. Meanwhile, the development of CBDCs will continue to gain momentum as the Reserve Bank of India advances its Digital Rupee project, aimed at improving the efficiency and security of digital transactions.
Demand for alternative investments will increase, driven by the growing investment appetite of the middle class and residents of non-metropolitan areas. This growth will be supported by improving digital and financial literacy, making these investments more accessible to a wider audience.
Fintech growth prospects in India
India’s fintech sector has seen remarkable growth in recent years, driven by increasing smartphone penetration and a strong digital payments infrastructure. In 2023, the market value was estimated at approximately US$689 billion, a figure expected to reach US$2.1 trillion by 2030, with an annual growth rate of 18% between 2023 and 2030.
Insurtech, which already commands a significant share of the Indian fintech market, is poised for further growth amid increased adoption of digital distribution channels, underwriting technology and automation of asset management. disasters.
The digital lending space is expected to grow thanks to advances in credit assessment and underwriting, aided by AI and machine learning (ML). The book size of digital lenders in India is expected to grow from US$38.2 billion in 2021 to nearly US$515 billion by 2030, an annual increase of 33.5%. according to to a 2023 report from IIFL Fintech.
Wealthtech, meanwhile, is expected to triple in size by 2030 and reach market revenues of more than $31 billion. This growth will be driven by the adoption of cutting-edge technologies such as AI, ML, blockchain and big data analytics, as well as the advent of new business models.
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