As we draw closer to the end of this series (which we hope you must have thoroughly enjoyed reading), we want to enlighten you about a very interesting segment of startups. These are called ‘FinTechs’. These companies have generated immense interest among investors. They have begun to disrupt the way the entire financial system in India works. In today’s story, let us take a look at what exactly are FinTechs, the size of the market in India, and which sub-segments they cater to.
What are FinTechs?
The word ‘FinTech’ is a combination of the words ‘finance’ and ‘technology’. FinTech simply means the use of technology to enhance financial services and make them seamless. FinTechs tend to select a particular need or niche within the entire financial system and go deeper to serve that need.
A brief history
The FinTech revolution started gradually and subtly, without us noticing it.
- Right from the 1980s, Credit Cards, ATMs, electronic stocks trading, and bank mainframes were the early elements of the FinTech revolution.
- FinTech space received attention and funding in the West, post the Global Financial Crisis of 2008.
- As investors and Venture Capital (VC) firms realized that existing financial systems were fraught with fragility, they started investing in new platforms that served differentiated needs.
- Having a more secured, safe, and fast layer over and above traditional banking became a necessity, giving rise to new Fin-Techs.
- In India, the demonetization drive of 2016 was a watershed moment. With the government clearly moving in the direction of a \”less-cash\” economy, (if not a \”cashless\” economy immediately), the FinTech eco-system received a boost.
- People shifted to online payments and digital transactions in the wake of demonetization and COVID.
The FinTech market in India
According to a joint study by BCG and FICCI, there are over 2,100 FinTechs in India and the total FinTech market in India is worth $50-60bn. These have grown fast and big in a short span of time. 67% of India’s FinTech’s started not more than 5 years ago.
A look at the FinTech eco-system in India