Fintech for the Next Billion in India

28 August 2020
Creating fintech for the next billion

A couple of weeks ago we shared our insights and 5 Key Takeaways from the Global Fintech Festival 2020 in India. 

As we have previously outlined, there is a role for #FinTech services in last-mile connectivity in this fast-emerging market and India is prioritising financial inclusion in the nation with the transparency that their #biometric identity card puts forth.

This provides a unique opportunity for the payments industry to establish consumer trust within the market and transactional security is the key to establishing that.

The billion-plus population is the backbone of the Fintech Industry

The country’s billion-plus population once deemed a weakness for the nation, is proving to be the backbone of the #FinTech boom. Over the past 5 years, India has seen exponential growth in the FinTech industry both in terms of funding received and the increasing consumer adoption of FinTech solutions. 

According to a report by the National Investment Promotion & Facilitation Agency of India, over the next 3 years, the overall #transaction value in the Indian FinTech market is estimated to jump from approximately $65 billion in 2019 to $140 billion in 2023. And this is with a projected industry adoption rate of 87% compared to the global average rate of 64%. 

This growth is backed by several government initiatives that provide impetus to FinTech companies to grow further. These include the enrollment of over a billion Aadhar cards (Indian biometric identity card), banking initiatives, smartphone penetration reaching over a billion, the UPI (Unified Payments Interface), and the ‘Digital India’ campaign. 

Further, measures such as the provision of payment bank licenses to FinTech’s, the newly introduced centralized taxation system, and promotions of startups in the country through ‘Startup India’ have also supported this measure. 

A large part of the population still rely on cash

Despite the tremendous progress made in the Indian FinTech space, its true potential is yet to be uncovered. 

The largest segment of internet users in India is from rural areas. This is an important statistic as currently most digital products are targeted at the urban consumer rather than rural. 

In spite of this, only 20.3% of rural India’s 833 million people have direct access to the internet. On the other hand, 64.8% of Urban India has direct access to the internet (see The Banking and Finance Post, 2020). 

This indicates that the rural market remains largely untapped and has massive potential. Current technology solutions are geared towards targeting the affluent user, and this is set to change in the next wave of growth. 

A large population of India finds it easier to rely on cash, which is the most popular payment method, due to poor access to financial institutions. In response to this several new FinTech companies are tying up with banks to target their products to those without access. 

This is a win-win model as the rural population will have easy access to financial institutions and banks can also expand their reach. 

India is in the top 10 spam-sending countries 

With a potential boost to FinTech companies in the #payments, rural #banking, and #microfinance space, comes a need for #cybersecurity and transaction monitoring. India’s enormous talent pool in computer science and data management means there are also sadly active and talented fraudsters. 

Many of the rural consumers are still learning about digital finance, and are often unaware of the risks that cyber #fraud threats can pose. India is in the top 10 spam-sending countries and is ranked as among the top five countries to be affected by cybercrime (Government of India, 2018).

In 2016, in one of the most famous cyber heists in history, the Union Bank of India had almost $171 million taken from its accounts, due to a phishing email opened by an employee of the bank. This was followed by a sophisticated and professional attack that led to the funds loss.

In the same year, the user data of 17 million people was stolen from the food-tech giant Zomato, by an ethical hacker, who pointed out how vulnerable their system was. 

Other India based online and banking threats have caused 100s of millions in economic damage and theft losses over the last 5 years.  This may grow to an even larger extent with the fast pace of change.

The national government of India (@Indiagovin) think tank Niti Aayog, outlined in their report on cybersecurity that artificial intelligence and machine learning can boost their ability to defend themselves against cyberattacks (Cybersecurity by Niti Aayog, 2019). They have also outlined a lack of trained cybersecurity personnel who are prepared to protect organizations against cybercriminals. 

As cybersecurity has emerged to be a global security threat in the world, countries have been quick to implement systems to combat this, especially in countries like the UK. There has been no such action taken in India, with regard to large budgetary allocations in spite of there being a large need (ET, 2019).

There is a huge opportunity that exists in India to contribute to the growth and innovation that is coming with the scale-up of #eCommerce, #ePayment, and #neobanking. But this has to be joined together with increased vigilance, education as well as cyber and fraud prevention technology that is of the most recent generation.

As a company, Cybertonica is convinced our early commitment to this market was well-timed and the interest levels in our offering are high both in FinTech and the traditional banking arenas.

The benefits may even be magnified by the #COVID based acceleration of the sector, as the operators begin to see the complexity and the necessity of having a specialist providing their platform for risk, fraud prevention and compliance in one toolset. 

The growth of our engagement will move quickly as the first customers are in discussion with our representative in Mumbai. Talent from India has already played a big part in developing the company. Now the market will see that expertise rewarded in new products and innovation.

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