Decoding Fintech’s Role In The Future Of India’s Capital Markets

India’s fintech ecosystem has seen a huge upward trend lately, with it becoming the third-largest fintech ecosystem globally. This rapid rise has fueled aspirations that each and every Indian citizen will have access to the financial ecosystem. 

It’s encouraging to see that tech adoption has been much higher, particularly in traditional BFSI settings. New-age platforms have replaced the traditional forms of investing, banking, lending, and trading. The number of fintech adopters in India has soared in the last few years. Currently, it stands at 87%, which is much higher than the global average of 64%. 

Amid all the euphoria, one sector which has gained massively from this digitisation is the capital market sector. The capital market has seen increased retail participation over the last couple of years. This has been primarily due to the digital penetration in tier two and three cities which always had the aspiration but lacked the means to execute things. 

So it would be safe to assume that the capital market, more so, the equity market is on the cusp of a major revolution. This might realise the long-held view that equity investments should surpass FDs.

Retail-Ising The Capital Market 

We can all agree that for a long time, only a few had access to stock markets with the segment being largely concentrated in the big four cities — Mumbai, Delhi, Bengaluru and Chennai. Lack of knowledge coupled with a dearth of effective information about the financial markets has contributed to this.

What has been surprising is how quickly the landscape has changed. Today, more than 80% of new accounts are being opened in tier 2 and 3 cities. The emergence of new-age fintech has democratised the overall market and it is no longer a fiefdom of a selected few. 

India is increasingly becoming tech-savvy, hosting about 655 Mn active internet users. With the growing numbers, majorly led by GenZ and millennials, many financial institutions and broking companies are aggressively adopting digital means to reach out to the masses. 

Interestingly, the fintech and stock market now moves in tandem. They are no longer competitors but work together for enhanced efficiency and accessibility. Today, the stock market is accessible to almost anyone with a smartphone with an internet connection and the necessary KYC documents. 

Changed Demography

In recent years, interest in the stock market has seen a significant uptick. Interestingly, the NSE reported that the share of individual investors in the market has gone as high as 40.7%. The retail participation by GenZ and millennials have risen two-fold. This is majorly accelerated by fintech-enabled solutions provided by companies. They are simplifying end-to-end investment and trading processes. 

Take, for instance, the collaboration between broking companies and fintech solutions. They have streamlined everything, from sourcing market data and analytics to conducting trades for clients. Now, the focus is on automation and providing a best-in-class customer experience throughout the wealth creation journey. For example, integrating AI technology with fintech platforms allows investors to explore different market opportunities, all while in sync with risk aversion. 

From creating a Demat account to learning about financial markets, testing trading strategies, and conducting trades, all can be done within minutes and a few clicks. This is supported by fintech-driven innovation backed by artificial intelligence (AI), machine learning (ML), and data analytics.

The New Face Of The Stock Broking Industry

As with every industry, investor retention is also crucial in the stock market. This has translated to more digital broking platforms leveraging data analytics to provide a seamless wealth creation experience. By tracking users’ interactions on the platform, continuous enhancements are deployed to improve user experience. 

Simultaneously, retail investors now have a more comprehensive range of options for selecting algorithm-based services. It offers accurate market predictions, resulting in better-informed investments and trades. 

In addition, technologies like big data analytics, AI, and ML have made all the processes easier and faster for investors. As a result, trading stocks is no longer about tracking the indices 24*7. With tech-enabled solutions doing it for you in just a few seconds, staying ahead of the curve is much simpler and quicker. 

For investors new to the market, app-based platforms are quite beneficial. It gives real-time market updates and recommendations. At the same time, it allows new investors to learn about strategic investments, stock market jargon, and fail-safe measures. While facilitating informed investments, fintech ushers time-saving and cost-effective stock market participation. 

And how can we not mention the emergence of financial super apps? Let’s park it for some other time. But do keep an eye on it since it’s going to be the next big revolution in the personal finance space.

An Empowered Investor Is Good For Everyone 

Recent fintech innovations are bolstering back-end technology, customer-facing solutions, and automation. They have democratised the stock market, opening it to tech-savvy investors while fostering financial literacy, inclusivity, and increased retail participation. 

With the ongoing fintech revolution, the stock market will have greater participation, especially from the untapped tier 2 and tier 3 cities. Most importantly, fintech-enabled trading and investment companies will continue to strengthen the financial ecosystem in the country. 

This revolution has empowered the new age customers so much that the country is witnessing a trend of do-it-yourself. When the customer demands to do things on her own, you know the change is real!

Note: We at Inc42 take our ethics very seriously. More information about it can be found here.