India's fintech market to reach $1 trillion by 2030: CEA

India is among the fastest growing fintech markets in the world, with a market size of $31 billion in 2021 that is expected to reach $1 trillion by 2030, according to chief economic advisor V. Anantha Nageswaran.

"A major shift towards a more equitable distribution of investment across sectors including insurtechs, wealthtechs, etc, has started taking place. We are talking about bridging the digital divide and the economic divide. Therefore the focus now is on how the combination of technology and finance is enabling access to finance and access to opportunities," Nageswaran says at the Global Fintech Fest 2022 (GFF 2022) in Mumbai on Tuesday.

The next wave in the fintech sector could be the cash flow lending to MSMEs using account aggregator, UPI and OCEN (Open Credit Enablement Network), says Nageswaran. "The lending potential of $3 trillion next year will be based on GST invoices and bank statements made available on account aggregator and banks adopting OCEN. The government is now pivoting from digital financial inclusion to digital financial empowerment. This is being done through Jan Dhan 2.0, strong gender focus, PM SVAnidhi Scheme, eKYC and digital onboarding and protection of digital customers," he adds.

Meanwhile, Reserve Bank of India governor Shaktikanta Das flagged certain material concerns regarding the unbridled mushrooming of digital lending apps.

"The fintech road ahead will witness ever growing traffic in addition to the large number of existing players who are already there. It is, therefore, imperative that every player on this road follows the traffic rules for his/her own safety and the safety of others," Das said at the Global Fintech Festival.

The need of the hour is to ensure assurance of safety after following a process of green-lighting (whitelisting) and due-diligence by the regulated entities, he said, adding that the RBI, in association with other relevant agencies, is taking steps to address this issue and take further steps as may be necessary.

The emergence of fintech players and the growing popularity of their innovative products have challenged the existing players in financial services in maintaining their market share, margins and customer base.

The incumbent firms are responding to these challenges by adopting various strategies, which include making investments in fintech companies and partnering with them, Das said.

"A wave of changes brought in by fintech have had a positive impact in terms of enhancing inclusion and further penetration of financial services. At the same time, these developments have also ushered in an era where enormous amount of consumer data is being generated and leveraged upon by a few entities (the so called BigTechs) by virtue of their huge customer base. Such developments raise concerns on concentration risk and potential spillovers as their level of engagement with the financial system strengthens in the years to come. Therefore, potential risks to public policy objectives of maintaining competition, market and business conduct, operational resilience, data privacy, cyber security and financial stability need closer attention," Das said.