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Picture Courtesy: PIB

Context:

Prime Minister Shri Narendra Modi addressed the Global Fintech Fest 2025 in Mumbai, Maharashtra where he thanks to the efforts of India's fintech community and also talks about India's approach is based on three key principles - Equitable access, Population-scale skilling and Responsible deployment in the field of AI.

What is Fintech?

Financial Technology, or fintech, involves the use of technology to improve and automate the delivery of financial services. 

Status of Fintech in India:

• India has emerged as a global powerhouse in the fintech space, with the sector currently valued at over $110 billion. It is expected to grow exponentially, reaching around $420 billion by 2029, driven by a compound annual growth rate (CAGR) of 31%.

• One of the highest consumer adoption rates, with nearly 87% of the population engaging with fintech services. 

• To extend financial services beyond urban centers, fintech players are leveraging Self-help groups (SHGs) for grassroots-level outreach.

Picture Courtesy: The Business Research Company

Evolution of Fintech in India:

• In the initial phase of fintech development in India, banks began adopting digital tools to improve services, for instance integration of core banking systems and ATM networks becoming more widespread. 

• Introduction of the Immediate Payment Service (IMPS) in 2010, which allowed real-time fund transfers and laid the foundation for a cashless economy. 

• Digital India Campaign and Infrastructure Development: Launched in 2015, the Digital India initiative aimed to build a digitally empowered society by enhancing digital infrastructure and promoting digital literacy. 

• Demonetization move in 2016, which involved the withdrawal of high-value currency notes, acted as a major trigger for the adoption of digital payment methods across India. 

• Covid-19 pandemic surges the demand for contactless transactions and online financial services. 

• Development of Open Network for Digital Commerce (ONDC) for helping small merchants access markets across the country. 

Key Drivers Behind Fintech Growth

• Digital Adoption and Connectivity: Widespread smartphone use and affordable internet access connect over 80 crore internet users, including rural populations.
• 5G is expected to cover 65% of mobile subscriptions by 2029, enabling faster and more reliable services. 

• Government Initiatives: Digital India, JAM Trinity (Jan Dhan-Aadhaar-Mobile), and financial inclusion schemes have created a strong foundation. 

• Payment Innovations: UPI provides seamless, interoperable, zero-cost digital transactions. 

• Expansion of Digital Lending and Credit Access: AI-based credit assessment increases access for MSMEs and gig workers. 

• Blockchain and Central Bank Digital Currency (CBDC): Blockchain boosts transparency and security in transactions. RBI's Digital Rupee aims to modernize payments, reducing cash dependency. 

Challenges in the Fintech Sector:

• Rapidly changing rules create compliance challenges. Borrowers are given a mandatory "cooling-off" period to exit the loan by repaying the principal without any penalties.  

• Rising digital transactions have led to increased cyber fraud. 

• Digital lending platforms sometimes charge high interest which can range from around 11% to over 29% annually for personal loans and employ harsh recovery methods. 

• Fintech companies collect large volumes of sensitive data, often without strong privacy safeguards. 

• Rural and semi-urban regions face barriers like low internet penetration and digital literacy. 

Government measures for Fintech:

• e-PRAVAAH Portal - The e-PRAVAAH portal (Platform for Regulatory Application, Validation and Authorisation) is a digital initiative launched by the Reserve Bank of India (RBI) to simplify and centralize the process of submitting applications for regulatory approvals, authorisations, and licences. 

• RBI Retail Direct Portal: It enables individual investors to directly participate in the government securities (G-Secs) market. Designed for ease of use, the platform facilitates smooth, online buying and selling of G-Secs by retail investors.  

• To support innovation and regulatory understanding, the RBI launched the FinTech Repository—a structured database of fintech developments, innovations, and use cases in India. 

• Finquery is a recent RBI initiative designed to provide a structured platform for direct communication between fintech companies and the central bank. 

• Reserve Bank Innovation Hub (RBIH) is testing AI™, an AI/ML-powered solution aimed at detecting and curbing the use of mule bank accounts—fraudulent accounts used to launder illicit funds. 

Steps to Revitalize and Strengthen India’s Fintech Ecosystem:

• Clear policies on digital lending, data privacy, cryptocurrency, and embedded finance. 

• Implement zero-trust security and AI-driven fraud detection and stricter penalties for breaches and mandatory compliance. 

• Develop multilingual, voice-enabled fintech apps and Expand UPI Lite, offline payments, and feature-phone banking. 

• Expand global UPI adoption and cross-border payments, recently Qatar adopted 

• Enforce consumer protection in Buy Now Pay Later and embedded finance models. 

• Government-backed venture funds and tax incentives for emerging tech sectors. 

Source: PIB