As The Fintech Times goes around the world at Expo 2020 Dubai, the first World’s Fair in the Middle East, Africa and South Asia (MEASA) region, the spotlight now focuses on one of the world’s emerging economies and second-largest country by population – India.
First – India at Expo 2020 Dubai
From Brazil to Israel to Saudi Arabia to Singapore to the United Arab Emirates (UAE) to Canada – countries from across the world are represented at the world’s largest gathering of people in the MEASA region. In terms of its pavilion, according to the official Indian Pavillion website, the facade of the India Pavilion will symbolise ‘India on the move’ and is reported as one of the largest pavilions at Expo 2020 Dubai. It comprises four floors, which showcases the country’s latest technologies and the creation of an ambient, futuristic environment with installations that are being powered by augmented reality (AR) and projection mapping.
Upon entering the Indian pavilion, highlights of the country’s accomplishments will be felt – in particular with its journey into space accomplishments and also, later on, its achievements in the health and wellness and health sector. With the ladder, Ayurveda and alternate medicine system are highlighted. But, what about fintech, financial services and wider digital sectors?
For instance, Dr Ajai Chowdhry, HCL Founder and Chairman-Start-up Committee, FICCI announced the launch of the India-UAE VC Fund of $150million from the India Pavilion.
The fund is said to be a first of its kind that is being set up in the UAE with an aim to help promising start-ups via an accelerator to nurture the growth of Indian and UAE start-ups. It will target to invest in a minimum of 50 demonstrated and validated start-ups over a period of five years, turning 10 unicorns by 2025. This will be funded by investors across the UAE, wider Gulf Cooperation (GCC) countries (Bahrain, Saudi Arabia, Qatar, Oman, Kuwait and the UAE) and India.
There’s also the India Innovation Hub, which is a project of the India Pavilion at Expo 2020 Dubai where over 500 Indian startups will be showcased. This included recently where Dubai Silicon Oasis (DSO) and India Innovation Hub announced a partnership with Indian online travel company EaseMyTrip and HSBC to facilitate 200 Indian startups to showcase their business ideas and innovations to global investors at Expo; fintech, artificial intelligence (AI) and cybersecurity are among the key priority sector focuses.
Now – What Is India at the Moment
According to Invest India, India has the highest fintech adoption rate globally of 87 per cent which is significantly higher than the global average rate of 64 per cent. Quoted from a different source, according to Amitabh Kant, the CEO of NITI Aayog, India’s fintech industry has cumulative funding of over $27.6billion with a forecast to be valued over $150billion by 2025. Management consulting firm Boston Consulting Group (BCG), in association with the Federation of Indian Chambers of Commerce and Industry (FICCI), estimate that India’s fintech industry could reach $150-160billion by 2025.
The country has over 17 fintech unicorns. As in much of the world, while payments and alternative finance segments constituted more than 90 per cent of the sector’s investment flows in 2015, a major shift has been witnessed towards investment flow distribution in other fintech areas such as insurtech and wealthtech – for instance. As a whole, it is estimated that there are over 2,000 fintechs in India, whereby more than 67 per cent have been set up in the last five years. Some well known Indian fintechs include the likes of Razorpay, Pine Labs, BharatPe, PolicyBazaar, and Paytm. Others include the likes of M2P Fintech, MoneyTap, and Cashfree Payments.
Some of the top fintech destinations and clusters in India are Mumbai, Gurugram, Bengaluru, Delhi, and Hyderabad. In particular, Mumbai (India’s commercial and financial hub) and Bengaluru together represent almost half of the fintech hubs in the country.
Why Is India a Strong Fintech Leader?
Why is India’s fintech landscape a force to be reckoned with? Yes of course the obvious answer lies in its large population (second largest in the world after China with nearly 1.4 billion people). However, there are other reasons beyond that.
First, there is strong government support and a strategy behind it. This is evidenced with Digital India for instance. What is that? It is the Indian government’s vision to transform the country into a digitally empowered society and knowledge economy. According to the Digital India website, Digital India ‘is an umbrella programme that covers multiple government ministries and departments. It weaves together a large number of ideas and thoughts into a single, comprehensive vision so that each of them can be implemented as part of a larger goal.’
Some of its nine pillars include universal access to mobile connectivity, e-governance – reforming government through technology and information for all. Some of the services as a positive consequence of Digital India include the likes of Bharat Interface for Money (BHIM), which is an app that makes payment transactions simple, easy and quick using Unified Payments Interface (UPI). This enables direct bank-to-bank payments instantly and the ability to collect money using a mobile number or payment address.
There is also an Inter-Ministerial Steering Committee on Fintech (IMSC) by the Department of Economic Affairs (DEA), Ministry of Finance set up in 2018 to consider various issues that relate to fintech in India with an aim to help make fintech-related regulations more flexible `.
Second, there is an increasing penetration of mobile devices and the internet, which is what generally fintech globally thrives on. As of December 2020, India had the second-highest number of smartphone users globally at around 600 million people and also had the second largest internet users market at around 800 million people.
Third, it is not just the large population of India but its composition. Two-thirds of them are under the age of 35 years old. In addition, it is expected that India will add 140 million middle income and over 20 million high-income housholds by 2030 – both of which will further boost the demand for fintech and wider solutions.
Fourth, the financially excluded historically have seen fintech benefit them that many might not have seen at similar levels. Feeding off of government support, there have been various financial inclusion programmes – including the likes of Pradhan Mantri Jan Dhan Yojana (PMJDY), Deendayal Antyodaya Yojana – National Rural Livelihoods Mission (DAY-NRLM), Direct Benefit Transfer, Atal Pension Yojana – that have accelerated the digital revolution. They have helped bring more people, in particular in rural areas, to access digital financial services according to Invest India.
To contextualise its efforts, PMJDY for example, which is the world’s largest financial inclusion initiative, has helped in new bank account enrollment of over 435 million beneficiaries for direct benefits transfer and accessibility to a host of financial services applications (remittances, credit, insurance, and pensions). Also, financial literary has been important with recent initiatives towards improving financial literacy in the country. This includes setting up the National Centre for Financial Education and implementation of the Centre for Financial Literacy project by the Reserve Bank of India (RBI).
190 million adult Indians do not have a bank account
At present, 190 million adult Indians do not have a bank account. Although relatively well percentage-wise compared to other developing and emerging economies, the size of India by population still shows the unbanked population as a significant gap and further opportunities for fintech to cater to them.
Fifth, demonetisation helped accelerate fintech. Back in November 2016 when the demonitisation of the old rupee (rupee is the official currency of India) of 1,000 and 500 bank notes suddenly came by surprise (by coincidence I myself was also there at the time and witnessed the challenges of the sudden announcement), this helped accelerate digital and in particular digital currency. Through a report from the RBI, it highlighted that total credit card outstanding when up by 39 per cent from September 2016 to September 2017. Even the traditional vendors who would only accept cash having to adapt and embrace digital currency. In many ways, it helped when the world suddenly encountered the COVID-19 coronavirus pandemic and had to embrace digital – as in the case of India this similar in many ways happened in 2016.
Sixth, visible fintech solutions have helped transform the country. For example, the e-RUPI is a person and purpose-specific digital payments instrument to allow for contactless & cashless payment solutions and shall play an important role in making the direct benefits transfer more seamless and effective. This is being used and adopted for cashless payments for Covid-19 vaccinations. Also, there is India Stack, which is a set of APIs that allows governments, businesses, startups and developers to utilise a unique digital infrastructure helping to tackle India’s challenges through a presence-less, paperless, and cashless service delivery; it has been credited in helping accelerate the evolution of Indian fintech.
Ambitions for the Future
It is worth noting that the country has future ambitions that is prioritising fintech and wider digital. Besides mentioned above, this aspiration was clearly highlighted at the recent Union Budget 2022. As reported, the focus of the Union Budget is to ‘provide basic amenities to the poor, middle class and youth’, Prime Minister Narendra Modi said, and asserted that it is imperative that India becomes self-reliant.
Related to fintech, key highlights included where when Finance Minister Nirmala Sitharaman proposed a 30 per cent tax with any income from transfers of digital assets and said no deductions would be permitted (aka a tax on cryptocurrencies). Also, the finance minister highlighted a digital rupee, which would be an Indian digital currency that would work using blockchain and other technologies with a planned launch via an issuance by the RBI in 2022-23.
India presents a wealth of opportunity as far as its wider digital economic development and transformation. It has been leading across many fronts and in the future looks likely it will continue to do so. Opportunities such as Expo 2020 Dubai have allowed for the country of 1.4 billion people to showcase its fintech and digital solutions. Nevertheless, this has been happening in India for a while now and projected to be for the future.