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For India to realize its vision of becoming a $5 trillion economy by 2024-25, it will have to bet big on its top performing sectors. At the same time, it will have to make the most of the new and emerging technologies and integrate them with these high-growth sectors. With 10% contribution to India's GDP, retail is India's largest industry and innovative fintech solutions will be the key to take the industry to the next level and help India realize its vision of becoming a global economic powerhouse.
Fintech adoption in India is steadily increasing. In fact, it has increased to 87% in 2019 as compared to 52% in 2017, as per the EY Global FinTech Adoption Index 20191 . It is interesting to note that according to the EY report, money transfers and payments were the biggest drivers of fintech adoption in India.
At Pine Labs, we are at the forefront of leading this change where our ecosystem of merchants in India is 150,000 and counting. Our vision is simple- We believe that every business can grow exponentially with technology and capital.
We believe that the growth in digital payments and alternative lending for the Micro, Small and Medium Enterprises (MSMEs) through fintech solutions should be the next big focus areas. India's MSMEs are the key contributors to the country's GDP. However, they are yet to reap the true benefits of fintech and that must change right away. In this annual roundup of the fintech industry we share some of the leading drivers of fintech adoption in India, the barriers, fintech and payments trends to watch out for in 2020, and some of the key initiatives that will fuel fintech adoption in India.
The advancements in technology has made it possible for merchants to reimagine POS and explore it as more than just a checkout counter. In addition to accepting multiple modes of digital payments, they can now view latest EMI offers and instantly offer it to their customers to boost sales, apply for a business loan, capture customer feedback and do a lot more. POS technology will have to be built to last and scale, keeping user experience at the center of the development process and at the same time ensuring compliance with regulatory requirements.
The numbers validate the fact that the 2016 bank note demonetization in India was the catalyst of digital payments adoption in India. According to the latest RBI data, the use of debit card at POS grew 83% since November 2016. Such transactions were 23.47 crore in November 2016 and rose to 42.87 crore in August 2019.
#3. Unified Payments Interface (UPI)
As per data released by National Payments Corporation of India (NPCI) in October 2019, about 5.35 billion UPI-based transactions were recorded in 2018-19 as compared to 915.2 million in 2017-18. A recent NCPI release states, "The total transactions of UPI jumped to 1.15 billion in October 2019 from 0.96 billion in September 2019."
The perennial challenge faced by fintech companies in India is funding. Investment into India's fintech sector fell by nearly 50% to reach $300 million by H1 2019, as per 'Pulse of Fintech', a report by KPMG. Another report submitted by the Steering Committee on Fintech, Department of Economic Affairs, Ministry of Finance, substantiates this decline in funding. The report states,
"...in comparison to global fintech investments of a record USD 57.9 billion in about 875 VC or PE or M&A deals in first half year of calendar year 2018, fintech investments in India of 54 deals worth USD 640 million (1.2% of world levels) appear to be relatively small."
There are an estimated 12 million2 mom-and-pop stores or kirana stores in India. Most of these kirana stores are yet to ride the wave of UPI and adopt digital payments in a big way.
There is also a need to simplify and explain the benefits of fintech to the larger India, beyond the metros. This is the need of the hour if we want to drive financial inclusion in its true sense.
Payments - Our Plutus Smart device is testament to the fact that we have delivered an all-in-one Android-based POS machine solution that not only accepts multiple modes of digital payment, but also is a handy equipment for the merchants to have at their billing counters. It helps them have a quick view of the ongoing brand/bank EMI offers that they can share with customers and fast track closure of sales, the ability to capture customer feedback in the form of NPS and reinvent their business based on actionable customer insights, and do a lot more.
myPlutus - With over 100,000 installs on Google Play Store alone, myPlutus app is today a dependable mobile app for merchants to view their real-time transactions on the go. Using the app, they can also watch product videos, register and track service requests, as well as register their new store(s).
Paper POS - At Pine Labs, we have always been ahead of our competitors when it comes to the adoption of new and emerging technologies. We have recently started shipping out Paper POS, an industry-first QR code on a single QR sticker that gives shoppers the option to pay either via UPI or Bharat QR.
Debit Card EMIs - With an industry-first debit card EMI, we have now empowered our merchant community of over 150,000 to offer the power of affordability to their customers. Such an arrangement is a win-win for both the customer as it makes products affordable, as well as the merchants as it helps them convert store walk-ins to sales. We have made this possible by entering into strategic partnerships with some of the leading private and public sector banks in India and the NBFCs.
Democratization of Technology - Our Open APIs for in-store as well as online payments are helping the developer community to develop innovative billing and payment solutions. We have seen tremendous enthusiasm among the developer community, something which has also translated into billing apps that are being used widely across diverse industry verticals.
The Government of India on its part has taken a series of steps in this decade to bolster the fintech and payment landscape in the country. Some of these noticeable steps include:
SEBI and RBI are ensuring that regulations are framed with the intent of lowering risk of fraud and increasing transparency to accelerate fintech adoption in India.
Steering Committee on Fintech, Department of Economic Affairs, Ministry of Finance, has urged the Government and RBI to take necessary steps to eliminate discrimination in access to payments infrastructure to non-banks vis-a-vis banks with a view to enhancing competition and innovation."
Fintech in India is ready for a breakout. The positive effects of this would be felt in the Payments space where we can expect the following trends to emerge at the start of the new decade in 2020:
There cannot be a one-size-fits-all approach to the needs around fintech in India. It will be important for fintech companies to think of innovation at different income levels. The presence of 12 million kirana store and over 40 million merchants in India, presents a unique opportunity for these companies to think of payment solutions that work for this vastly untapped and critical audience.
What's good to note is that we have made steadfast progress in making this vision possible. In fact, The Economist Intelligence Unit's 2019 Global Microscope on Financial Inclusion report, the overall environment for financial inclusion has improved globally with India, Colombia, Peru, Uruguay and Mexico having the most favorable conditions for inclusive finance.
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By Sunil Param | on April 05, 2021
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