Key fintech industry trends for 2023 in India

Over the past year 2022, fintech has grown by leaps and bounds. More and more businesses have embraced fintech software and have augmented their systems with fintech automation to boost performance.


Countless companies across the globe have benefitted tremendously from the innovations being made in the sphere of financial automation. This growth is only predicted to continue as the new year 2023 rolls in.

 

The development of the fintech industry is deemed to turn over a new chapter in the year 2023. The anticipation for new, even more, advanced technology is high, and very much warranted.


Consequently, we are bound to see new fintech industry trends with this new chapter just around the corner.

Growth of the fintech industry in 2022 for India


Key sectors or segments driving growth

The fintech industry in India has grown to cater to both consumers as well as MSMEs.


The main sector or segments of fintech that were the driving force behind the industry’s growth in India in 2022 included PayTech, LendTech, digital banking, InsurTech, WealthTech, Finance Fintech, and RegulationTech.




Investments

India’s fintech investment trends, in line with global trends, have seen significant development over the past few years. It has been deemed to be one of the world’s fastest-growing and largest Fintech markets.


According to the database of Tracxn, USD 20.8 billion was the total volume of Fintech funding till June 2021, with 36 percent of the funds raised in the last two years and amounting to USD 8.6 billion.



Average transaction value per user

According to Statista, a leading provider of consumer and market data, the average transaction value per user in the Alternative Financing segment in India was projected to amount to USD 15,920.00 in 2022.


Additionally, the largest segment in the market in 2022 was Digital Payments with a total transaction value of USD 133.40 billion.




Competitive landscape

The competitive landscape has also driven the growth of the sector. The overall market opportunity of the Indian fintech sector has been projected to be USD 1.3 trillion by the year 2025, with growth at a rate of 31% CAGR during 2021-2025.


Of this, 47% (USD 616 billion) is to be accounted for by lending tech, 26% (USD339 billion) by insurance teach, and 16% (USD 208 billion) by digital payments.

10 key financial and fintech trends to watch out for in 2023


Rise of digital banking and neobanks

Digital banks and neobanks have gained massive popularity already and are definitely going to be a part of the biggest trends in fintech in 2023.


These are banks that provide highly convenient, virtual banking services such as international remittances, P2P transfers, contactless cards, cryptocurrency purchasing, and more.



Embedded finance solutions

The concept of embedded banking or embedded finance refers to the seamless integration of financial solutions and banking services into a traditional non-financial platform.


As numerous banks have been looking to become service providers to non-financial institutions and non-banks, embedded finance solutions have become one of the exciting future fintech industry trends to watch out for.



Easy access to open banking

Open banking or Open API works by providing bank client data. It has transformed the market by enabling users to pay for goods online with fewer steps, pay in one swipe and obtain loans within seconds.


The concept basically provides bank-related consumer data to third-party services upon consent being given by the consumer.



Centre-backed digital currency

Digital currencies have been on the rise across the globe and are deemed to arrive in India sooner rather than later. In fact, the Indian government announced the Digital Rupee - a Central Bank Digital Currency (CBDC) - from FY 2022-23 onwards.


The budget announcement clearly stated that the CBDC introduction will come as a major boost to the digital economy in India and it is definitely one of the most important fintech industry trends to keep an eye on in 2023.


Suggested read: What is the Digital Rupee, and how does it work?




Blockchain

Blockchain technologies are being implemented more and more actively in the financial sector.


They help establish processes within banks that help keep automatic records of data, protect against fraud as well as identify errors in financial transactions. They even make international transfers and payments easier and cheaper.



Artificial intelligence & machine learning

Artificial intelligence and machine learning are at the core of most developments that have transformed the fintech industry trends.


They have led to the development of services and products that have been truly revolutionary. Smarter, AI and ML-powered processes have improved many processes of banks, insurance, and credit companies.


They have enabled widespread automation, faster processes, and more secure systems.



RegTech

RegTech or Regulation technology has played a big role in transforming how companies stay compliant with complex industry regulations.


The relevance of RegTech is quite high and compliance software is definitely one of the b2b fintech industry trends to watch out for in 2023.



Cloud computing

Cloud computing solutions have made a significant impact as one of the most important fintech industry trends. This impact has been felt particularly by storage and security systems.


Cloud computing has made it extremely easy to store and access stored data from anywhere and at any time. Not only storage, but cloud computing has also made data far more secure.



Robotic process automation

Robotic process automation or RPA is a solution where a “robot” takes over mundane tasks that are repetitive in nature.


They are capable of doing data entry, report generation, information management, and so much more. RPA has been a key driver behind the success of fintechs in 2022 and has been touted to do the same in 2023.



Rise of InsurTech firms

The use of InsurTech has powered platforms that provide services such as insurance comparison, digital insurance, and employee insurance.


The popularity of the InsurTech segment is one of the fintech industry trends for 2023 because it has helped automate tasks and products such as sales platform, claims management, underwriting risk management, insurance product configurator, insurance infrastructure API, and policy admin system.


Interesting read: Fintech vs banks: Why do businesses prefer fintech in India?

What challenges will Indian fintech firms face in 2023?


1. Regulatory and compliance laws

The laws introduced by the Indian government to regulate the rise of fintechs have proven to be a significant challenge for firms and will continue to do so in 2023.


Given that the sector is particularly new and ever-evolving, the laws and regulations that govern them are also evolving. Keeping track of and adapting to these changes has served to be a major challenge for fintech firms.



2. Cyberthreats

Given that fintech firms deal with sensitive data related to customers’ finances they are always susceptible to the possibility of cyberfraud and theft. These threats can lead to monetary losses of immense proportions.


Fintechs not only need to manage this but also send a message to the public about their safety if they want to overcome the challenges of cyber threats.



3. Informal banking population

A significant chunk of India’s population still lives in rural areas where they don’t have access to proper banking facilities.


This section of the population is more used to informal systems and will find it difficult to embrace fintech services, posing a significant challenge.



4. Recession

The onset of a recession in 2023 has been predicted by many. The recession is meant to hit businesses worldwide, regardless of which industry they cater to.


Fintech firms fall under this category as well, they are bound to face the adverse effects of the recession in 2023 and that may slow down growth.

How is Volopay revolutionizing the b2b payments ecosystem in India?


Of all the fintech firms in India driving the growth of the sector, there is one that has had a significant impact on the b2b payments ecosystem - Volopay.


Volopay is an automated expense management system that has transformed how businesses process payments and handle company expenditures.


It has created a comprehensive spend management platform that can automate and manage all the accounts payable needs of a company.


Volopay even comes with highly advanced corporate cards. These cards come with credit facilities as well, making Volopay the complete business expense management package.

Stay on top of latest business payments technology with Volopay