Technology disrupted finance many times over in the latter half of the past decade. Bank accounts, brokerage accounts, credit cards, mutual funds—some of the most important and basic financial products—can be opened in a matter of minutes, provided you have basic verification (KYC—Know Your Customer) in place. India’s expansion of financial services has been so successful that the International Monetary Fund (IMF) wrote a paper in February 2021 on how other emerging markets and developing economies can learn from our experience in building the now-famous digital infrastructure called the India Stack. Fintech is part of this transformation.
While there was no single magic moment or tipping point for fintech in India, one of the earliest predictions was back in 2015 by Nandan Nilekani, co-founder of Infosys and ex-chairman of the Unique Identification Authority of India (UIDAI). UIDAI developed the Aadhaar biometric system which is the ‘A’ in the JAM trinity (Jan Dhan–Aadhaar–Mobile), widely acknowledged as a pivotal driver for financial inclusion in India. Nilekani, while talking at an entrepreneurs’ meet organized by The Indus Entrepreneurs (TiE), said, and I quote from an NDTV article:
. . . in 2009 there was a WhatsApp movement in telecom. My analysis is, in 2015, there is a WhatsApp movement for finance in India.
Change is coming on many fronts . . . new licences, smartphone Aadhaar identification, e-sign, payment banks, etc. Some of it is regulated, some of it is technology, some of it is design, and some of it is market . . . [link to full video]
Nilekani was right and change did come in a very big way. Paytm’s digital wallet in 2014 was the first (Mint, 2019) Indian app to use a quick response (QR) code. It was such a runaway success that by December 2017, Paytm became the first Indian app to cross (Singh J., 2017) 100 million downloads. In April 2016, the Reserve Bank of India (RBI) launched the Unified Payment Interface (UPI) which went on to transform digital payments in India. In September 2016, Mukesh Ambani announced that Reliance Jio would offer free voice calls and unlimited data till 31 December 2016; Jio added 50 million subscribers in eighty-three days (Sengupta & Khan, 2016) and India is now the world’s largest consumer of mobile data (Abbas, Economic Times, 2021). In November 2016, Prime Minister Narendra Modi announced demonetization of currency notes of Rs 1000 and Rs 500 denominations which would play a major role in spurring payments via digital platforms. All these seemingly unrelated events played a huge part in sparking the fintech revolution in India. Today, QR codes and UPI are the things we take for granted while making payments through our smartphones to just about anyone, from kirana shops to newspaper vendors. And the success is of a global scale. To put things in perspective, UPI crossed US$ 100 billion in value in December 2021 (Singh, T.D., 2022), just over five years after its launch.
Fintech sits right at the top of India’s huge start-up ecosystem. The National Investment Promotion & Facilitation Agency’s website states that there are more than 2100 fintechs existing in India today, over 67 per cent of which have been set up in the last five years. The Indian fintech industry ecosystem consists of subsegments including Payments, Lending, Wealth Technology (WealthTech), Personal Finance Management, Insurance Technology (InsurTech), Regulation Technology (RegTech), etc. With the pandemic restricting our movement, everything went online. NASSCOM, India’s apex body of the information technology and business process management (IT-BPM) industry, called 2021 ‘The Year of the Titans’. In its January 2022 report, NASSCOM stated that BFSI (which includes fintech start-ups) in India enjoyed a lion’s share of investments across all stages. In 2021, India added thirteen BFSI unicorns, and saw an increase in seed and late-stage median ticket size by four times, and had more than fifteen rounds of US$ 100 million-plus funding.
The best way to understand technology’s impact on personal finance is to open your smartphone and check the number of personal finance apps. Almost every financial product in your life will have an app. So, you will have the apps of your banks (HDFC Bank, SBI, etc.), payments apps (like Paytm, Google Pay, etc.), investment apps (Smallcase, Paytm Money, ET
Money, etc.), domestic stock market apps (Zerodha, Angel One, IIFL, etc.), international stock market apps (Winvesta, Vested, etc.), portfolio tracking apps (INDMoney, Mprofit, etc.) and so on and so forth. Even these are just scratching the surface because there are apps for lending, insurance, crypto and more. Payments are integrated within shopping apps such as Amazon, delivery apps such as Zomato, lifestyle apps such as Myntra, etc. So, you can now choose to pay via UPI, digital wallet, credit cards, and—one of the hottest fintech areas of the past few years—buy now pay later (BNPL). Thus, fintech start-ups in India have transformed financial habits in general and access to financial products in particular. For example, today, we can buy US stocks like Apple and Tesla sitting in our homes in India—all with the tap of an app. And people are lapping this up. In 2021, as per a Times of India article (Hariharan, 2022), investments by Indians in the US stock markets more than doubled to US$ 300–500 million. Apps have enabled a change in saving habits, which can be seen in the ease of onboarding and starting an SIP in mutual funds. Starting an SIP is an easy and seamless process and, as mentioned earlier, SIP inflows in December 2021 crossed (Raj, 2022) Rs 11,000 crore—which is remarkable because SIP inflow was probably a rounding-off error in mutual funds flow a few decades ago. The sheer range of financial products now can be dizzying to anyone new to finance. And this is where technology played a role yet again—by creating a world of content to help us.
The excerpt is from ‘The Wisest Owl: Be your own Financial Planner’ by Anupam Gupta (Penguin Random House).