India races ahead with fintech adoption rate of 87%: Economic Survey 2023

India has taken a lead in fintech inclusion, with an adoption rate of 87%—substantially higher than the world average of 64%, according to the Economic Survey 2022-23 tabled in Parliament on Tuesday. 

The rise in adoption of digital financial services was accelerated by the pandemic alongside a strong foundation by the Jan-Dhan, Aadhaar, and Mobile (JAM) trinity, UPI (unified payments interface), and other regulatory frameworks, that further provided a fillip to solutions provided by banks, NBFCs, insurers as well as fintech.  

“The pandemic provided the opportunity for fintech companies to reach the underserved and provide cost-effective financial services to those at the bottom of the pyramid. While globally, the technological solutions cushioned the reverberations of the pandemic, India took the lead…,” it said. 

According to the survey, the introduction of CBDC (central bank digital currency) will also significantly boost digital financial services, besides digitalising documents that played a pivotal role in giving further impetus to these services. 

Large potential for fintech

Underlining various government initiatives and a favourable ecosystem, the survey highlights the large potential for fintech in the country. India has gained third place in digital payments only after US and China, signifying that it has an untapped market.

"These untapped opportunities, along with the favourable ecosystem, creates a large growth potential for fintech in India,” it said. 

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The survey also touched upon setting up and operationalising India’s maiden International Financial Services Centre (IFSC) in GIFT City as the nerve centre of all fintech activities.

"FY23 is a watershed year for IFSC. It marks a decade of India’s maiden IFSC. The vision plan beyond 2022 revolves around elevating GIFT-IFSC to a virtuous self-sustaining trajectory towards becoming the nerve centre of new-age global financial services and activities," the Economic Survey said

"This aspirational pursuit of integrating our economy with the global financial ecosystem has been rich in learnings which are being systematically capitalised to design cutting-edge statutory and regulatory frameworks to lift the centre into a higher orbit of financial innovation and dynamism," it added.

Neobanking platforms

Further, the survey put the spotlight on neo-banking platforms and increased global investment in the segment. 

The growth of these institutions is spurred by the need for on-demand and easier-to-access financial solutions by a young and increasingly digitally savvy demographic. According to the survey, neobanks have eased availability and provided access to financial services to MSMEs and underbanked customers and areas, it said. 

The government also, through various initiatives, has given a push to digital banking solutions. About 75 Digital Banking Units (DBU) across 75 districts announced in Union Budget 2022-23 to take banking solutions to every nook and corner of the country have been launched.