5 mins read . 04 May 2023
A recently published report by Boston Consulting Group (BCG) and QED Investors has projected the revenues of financial technologies (FinTech) companies to grow 6-fold to $1.5 trillion by 2030. The $12.5 trillion financial services industry is localized in the regions of North America and Asia-Pacific, but it is expected to become the largest in Asia-Pacific by 2030. The Fintech sector in the APAC region is expected to grow at CAGR (compounded annual growth rate) of 27% over the next 8 years. Countries like India have already started undergoing major fintech activity with the likes of Paytm and PhonePe causing great positive disruption to the traditional payment systems.
Fintech has been an integral part of your life even before you probably heard of the terminology. You use Paytm or Google Pay to make a small payment to your local vendor, pay Ola or Uber through a stored credit card. All of these are examples of fintech being an integral part of your life. Buying and selling shares through online trading apps or accessing micro lending from aggregators fall in the Fintech category too. The latest Global FinTech Adoption Index published by Ernst & Young shows that nearly 70% of the world population was using fintech applications in 2019.
FinTech is an archetypal term for technology that can augment, streamline, digitize or disrupt traditional financial services. Fintech encapsulates the usage of software, algorithms, and applications as well as some hardware like internet-connected piggy banks. This enables routine tasks like depositing checks, transferring funds, paying bills, peer-to-peer lending, crypto exchanges; and the list can go on.
With an adoption rate of 87%, India is far ahead of the global average of 64% in the FinTech adoption race, By the year 2030, the Indian FinTech market is projected to generate revenues of $200 billion with an AUM over $1 trillion as per the same EY study. India is currently the third-largest FinTech ecosystem in the world, and 67% of the total fintech companies in India were just established in the last 5 years. The strong engineering skills, English language proficiency and a vibrant start-up culture have helped the cause of Fintechs.
The Buy Now Pay Later (BNPL) scheme was met with mixed reactions, owing mainly to a lack of transparency. However, it is a great way to allow credit access to the underserved segment and SMEs because 75% of MSME lending is still carried out by banks. We can see plenty of collaborations between banks and fintech plays to boost the BNPL model implementation.
Embedded finance is a sector that has caught the attention of many, as it involves the integration of financial services into non-financial companies, mainly involving fintech. The current market value is about $43 billion, but this can be expected to touch $141 billion in next 2 years, and this presents a huge opportunity for fintech players to embed financial services for companies.
Fintech innovations like virtual fingerprint, AI-driven credit scores are taking the field of data forensics by storm, with financial institutions, internet lenders etc looking for effective methods to prevent fraud. Digital biometrics can enable quicker updating of customer and client information into bank databases, and further information like device type, location, ISP can also be collected. Smart credit scoring like social media activity, assets etc can help banks determine if a said user is trustworthy. We have just seen the tip of the Fintech iceberg in India.
CONTENT SOURCE: BCG REPORT