Three trends that will define India’s fintech sector in 2023

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India has proven to be a global leader in the fintech space with a thriving ecosystem of startups and established companies driving innovative financial solutions.

From digital payments and wealth management to lending and insurance, Indian fintech companies are leveraging technologies like artificial intelligence, machine learning and cloud computing to disrupt traditional financial services.

According to an EY report, the domestic fintech sector is poised to reach $1 trillion in AUM and $200 billion in revenue. This puts India in a strong position to lead the next generation of fintech innovation and drive the industry forward.

Here are three trends that will drive Indian fintech innovation in 2023, along with the world’s view on the sector.

Neobank partnerships are driven by highly customized products

Indian neo-banks saw a 5-fold growth in funding last year, and the figure is expected to reach $215 billion by 2023, says an EY report. With a current market size estimated at $48 billion as reported by Inc42, Fi Money, Open, Niyo and Jupiter are some of the top names in the industry.

Money management app Fi Money The Bengaluru-based fintech recently raised $75 million in its Series C funding from new and existing investors, valuing the Bengaluru-based fintech at $550 million.

What makes this sector so attractive is that India’s large number of young working people find value in the personalized financial solutions offered by Neo Banks. But it’s not just consumers, traditional banks are also taking note of the benefits of partnering with neobanks in driving business.

In the absence of a regulatory framework for digital banking licenses, such partnerships will enable a variety of highly-personalized financial products and services.

AI-Driven Efficiency in Digital Lending

From ‘buy now, pay later’ to instant loans, digital lending services have already captured a large share of India’s growing appetite for credit. According to an EY report, more than $9 billion has been invested in digital lending in the past 5 years, and the market is expected to grow to $515 billion in book value by 2030.

With credit growth outpacing deposit growth, the Reserve Bank has expressed its concerns about the banking sector’s ability to meet growing credit demand while maintaining adequate capital buffers. Technology like
Account Aggregator Structure

Combined with AI-driven credit assessment techniques, it will enable fintechs to effectively deliver credit where it is most needed.

Wealthtech for everyone

Mostly, Indians prefer to stay away from capital markets by investing in physical assets like gold, real estate and FDs. Apart from increasing digital remittances, the pandemic played a key role in driving more Indians to the capital markets, which saw a 63% jump in active demat accounts to 89.7 million in FY22.

Fintechs focused
Facilitating investments
Mutual funds, stocks,
Unparalleled investment
And everything in between is perfectly positioned to democratize access to wealth management services through AI-enabled personalized advisory services. It will allow an entire generation to efficiently build wealth and achieve their financial goals.

Highly-personalized financial products coupled with deepening digital penetration in India will increase access to banking services. AI-driven lending will expand access to credit, while advances in wealth technology will allow millions to benefit from India’s emerging markets.

Together, these three trends will ensure that India retains its position as a global leader in fintech innovation by 2023.


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