New solutions expand options for local and foreign players
By Francesco Rao
Over the last two years, the pandemic has accelerated the digitization process in India. This is especially true when it comes to Fintech, where there has been a rapid increase in innovation.
Many Indian banks are looking for technology companies to develop digital assets, investing directly or using them as service providers, with a major growth in Fintech investments. Government initiatives to centralize digital payment methods are also contributing to this trend, with the aim of further accelerating their diffusion after the sharp increase in online and contactless transactions during the lockdown. This has opened up business opportunities for innovative technological players, including those in Europe.
In fact, in the coming months, an increasing number of small businesses will be able to take on an important role in internationalization processes, thanks to their ability to generate unique intellectual property in technological content, which can be protected in terms of economic enhancement but at the same time open to sharing and integration with other technologies.
“A great opportunity for start-ups and Fintech SMEs, including Italian ones, to create value through sharing innovative projects based on research and development intended for application in the global market,” declares Roberto Guerrini, vice president of IC&Partners S.p.A., strategic consultant in the development of industrial projects through the adoption of enabling technologies and exploitation of intellectual property.
“A huge role in driving India’s economic growth will be played by Fintech operators such as payment aggregators, banking service providers, B2B and B2C, e‑commerce marketplaces, offline retailer aggregators (such as digital accounting apps), non-bank lender SMEs, and Neo Banks,” says Raghav Kanoria, co-founder of the Calcutta Angels Network and founder of Neoleap Accelerator. “Both to facilitate access to financial services and to solve other problems, Fintech allows companies of all types to explore their potential.” Although India needs a clearer regulatory framework regarding legal aspects, compliance and licensing in the industry, perhaps with a separate regulatory body for transparency in digital payments.
The growth potential of the sector in India is certainly considerable, given the large yet untapped market and the steady increase in the spread of the Internet and mobile phones, which is expected to increase to 85–90% from the current 65–75%. To date 40% of the Indian population and, according to some estimates, 90% of small businesses are not connected to formal financial institutions, while 87% of payments are made in cash.
Fintech is also opening new horizons in formal finance through the innovative and dynamic use of technology in lending processes. Kanoria observes: “While traditional banks (around 100) and NBFCs (around 1100) in India only use technology for scoring calculation; in Fintech, machine learning, algorithms and data points such as social media, call logs, as well as purchase history and payments to public utility providers are used to increase efficiency and provide greater access to credit.”
Fintech investors in India have recently changed their strategies and are investing more in new credit startups. “NeoBanks are introducing Fintech into their current business models as a service line, developing it organically or purchasing Fintech. And, complex areas such as trade finance and B2B start-ups are also receiving support in this new wave, Kanoria concludes.