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Since the commencement of National Payments Corporation (NPCI) in 2008, the Indian BFSI industry is on an upward growth trajectory. While the November 2016 demonetisation fueled in the growth spark for fintech startups, several government initiatives further added to the momentum. With all the developments of 2019, which have catalysed the fintech ecosystem, we can also estimate the biggest fintech trends in 2020. This is evidenced by an increase in both the number of fintech startups as well as the investments they have attracted. According to Datalabs by Inc42’s recently released report “Fintech Outlook 2019”, there are currently 2707 fintech startups in India and $5.29 Bn have been invested between 2014-2018 in this sector. What Are The Key Drivers Of India’s Fintech Growth? As Niti Aayog CEO Amitabh Kant highlighted in a recent media statement, fintech market in India is likely to expand to $31 Bn in 2020. The government programmes which played a key role in propping up fintech are: UPI GST Jan Dhan Yojna Startup India Licence for payments banks Digital India programme Recognition of P2P lenders as NBFCs Regulatory sandbox by RBI for fintech National Common Mobility Card (NCMC) among others The continuously increasing collaboration between banks and fintech startups in the form of supplementary offerings, partnerships, acquisitions, incubators and investment is one of the key drivers of India’s fintech growth as well. The other drivers of growth include continuous efforts to bridge financial inclusion gaps; greater adoption of digital payments on the consumer end, adoption of technology by banks like AI, ML, blockchain, robo-advisory, among others. Fintech Vision: The Biggest Fintech Trends In 2020 According to industry thought leaders, the biggest fintech trend in 2020 will be in software built to optimise the lending industry. The trend will be to build solutions to reduce NPAs and to build services which will lead to improved credit recovery. Given the debt crunch over the last year, entrepreneurs are expected to focus on solving these problems that could revitalise the economy. The industry will also see the first major state-backed cryptocurrency pegged to fiat come out along with the extension of the internet through the blockchain. And there is no surprise that the banking and financial services sector will continue to embrace AI to improve productivity and efficiency. The deepening of the alternative lending ecosystem, driven by technology-enabled “alternative” lenders such as P2P players, mobile lending platforms, pay later loans, crowdfunding, or invoice financing, is another key trend observed by the fintech analysts Inc42 spoke to. Where Is Fintech Headed In 2020: Growth Of Neobanking And BaaS platforms: The banks and payment service providers will build next-generation customer solutions in collaboration with neobanks and banking-as-a-service (BaaS) platforms with the government expecting to be more accepting of open banking standards. Established players such as Kotak Mahindra Bank, Paytm, Bharti Airtel and DBS have already made the first move in introducing digital-only banking services for the Indian consumer. Tokenisation: 45% of CEOs across the Asia Pacific say that they are adopting advanced cybersecurity practices at their organisations to build trust and transparency with the customers. In 2020, companies will continue adopting technologies such as biometrics, card tokenisation, which is also slowly gaining popularity in India. Tokenisation is the system of replacing sensitive information like card/account details with a random value provided by the platform for each transaction. During the transaction, it is the value of the token that is exchanged and not the user data. Also, Aadhaar-linked biometrics are likely to be crucial in the coming future. MSME Financing To Rise: MSMEs failed to reach their full potential due to lack of access to formal credit. However, this is about to change at a rapid pace with the rollout of GST and a brigade of lending tech startups entering into the alternative SME lending sector utilising alternative credit scoring methodologies. Rise Of Data Analytics And New-Age Technologies: Indian wealth management and insurtech startups are continuously utilising real-time data analytics as well as IoT devices, and blockchain to introduce personalisation, security and quick approvals at different stages. Moreover, banks are already using technologies like AI/ ML, blockchain to reduce errors and offer more streamlined digital banking experience to the consumers. This will increase further in the coming years, beginning with 2020. Innovation In Cloud: According to International Data Corporation (IDC) estimates, global spending on public cloud services and infrastructure is expected to grow at a CAGR of 23.8% over 2018 to reach $210 Bn in 2019, and is forecasted to grow at a CAGR of 22.5 % during 2017–22 to reach $370 Bn in 2022. In addition, the banking industry is forecasted to spend more than $20 Bn on public cloud services in 2019, which indicates the significant inroads it has made into the industry. Experiments to Continue With RPA: With organisations looking to implement robotic process automation (RPA) in their firms, in order to gain full leverage, they will have to overcome certain challenges. This includes the need to design and implement a future-proof organisation model that effectively marries the unique and complementary capabilities of robotic and human workforce. Robo-Advisory To Gain Ground: Although miniscule at present, its applicability is gaining ground. As per analysts, robo-advisories can be revolutionary in personal finance management. Next Generation Payments To Evolve: 46% of Indian fintech is focussed on payments and trade processing. Payment initiative such as UPI are expected to define the future of payments. Rise Of Niche Fintech Players: Entrepreneurs in fintech space are finding solutions to bridge finance gaps in areas such as agriculture and the supply chain in the B2B segment. At the same time, fintech startups are introducing flexible loan options for short-term needs of salaried professionals, freelancers and young students. This will certainly encourage the fintech stakeholders to invest further to bring in more innovation and evolve the sector. Whether it’s digital payments, digital lending, insurtech, wealth management or robo-advisory, fintech as an industry is a hotbed of innovation with Indian and global players fighting for market share. With social networks also focussing on cryptocurrencies, social interactions and financial transactions are likely to have stronger interlinking with the likes of Facebook-backed Libra or blockchain company EOS’ social network Voice. The rise of alternative lending has increased the participation of the underserved segment in the credit market, while collaboration between banks, NBFCs and fintech startups will also go a long way towards improving financial inclusion. And that perhaps will be the overarching trend for fintech in 2020! With inputs from 100X.VC CXO’s Vatsal Kanakiya, Shashank Randev, Yagnesh Sanghrajka, and Harsh Vora, a proprietary investor, trader, and writer.

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