India has come a long way from being a cash concentrated economy to an economy with the second-highest fintech adoption rate in the world. We started using technology to administer money in the early 1990s with the use of FETs. With the rise of personal loan apps in the country offered by some of the best loan apps in India, the country is responding great to its fintech adoption.

How do banks make money?

Before learning how fintech apps are getting successful today in India, understand how banks make money. As per banking experts, the most fundamental process by which banks make money is lending money at an interest rate higher than what they pay to customers depositing cash with them. So, you can deduce that the interest banks pay you on short-term borrowings, and deposits come from the interest banks collect on interest payments and loans from their debt securities. 

While the history of banks in managing the finances of the Indian populace is impressive, the technology used by fintech institutions is helping people manage their financial transactions with fewer complexities. Fintech services are more intelligent and manage finances in a simple, easy, and less time-consuming manner.

What is the current state of the fintech industry in India?

In the absence of physical contacts during Covid, the Indian consumers relied heavily on virtual financial services to access and disburse funds. As a result, the Indian fintech market saw an unprecedented surge in demand. 

With the increasing adoption of fintech, India is also witnessing growth in the consumer credit segment. The Indian consumer credit market is backed by growth in unsecured lending categories such as personal loans, credit cards, and consumer durable loans. Thus, the consumer credit market is also expanding alongside the fintech category. 

In a country as big as India, the consumption base is huge apart from a largely untapped market. While up to 80% of the Indian population now have a bank account, and around the same percentage have access to a mobile phone, financial inclusion levels are low. Almost half of the total Indian bank accounts are inactive, with no deposits or withdrawals made over a year for those accounts. So, a large chunk of the Indian population is still not integrated with the formal banking system.

With much of the payments still made in cash, there is immense scope for growth in the finance sector. Smartphone and internet penetration is still steadily climbing, so the growth potential for fintech in India looks promising. Also, upon closely analysing small businesses, many small businesses in India are not linked with formal financial institutions. So, MSME is a sector where fintech services have great expansion opportunities and scope.

The three major categories of the fintech industry

The fintech industry has three major categories: lending, transactions, and investments. While the lending category is maturing, the transactions space is matured, and the investments division, nascent.

Let us look into all the three fintech industry categories:

  • Lending services offered by fintech apps

Fintech companies like some of the best loan apps in India are offering various services to help customers avail credit facilities from financial institutions. Multiple companies are entering the lending space via personal loan apps and contending for a license from RBI. The MSME segment has a considerable potential to grow in the coming couple of years.

Fintech personal loan apps are offering lending services at B2B and B2C levels using new-age technology like Data Science and Machine Learning. Some of the best loan apps in India are using purchasing behaviours, ML algorithms, social media analysis, and payment cycles to increase efficiency and offer greater access to credit. The difference between a personal loan app and a bank is that the fintech companies provide services fast and easy compared to banks.

  • Transactional services offered by fintech companies

Technology was used to manage money in India even before the announcement of demonetisation of currency notes. Demonetisation in 2016 left India with no other option than to switch to digital transactions and to use virtual money. Traffic on payment apps and digital wallets in the country increased by leaps and bounds. The average wallet balance on online payment platforms increased by a considerable amount. 

Interestingly, digital transactions saw a significant hike almost immediately after the announcement. In fact, there was an unprecedented hike in the download of fintech apps within under 18 hours of the announcement. 

Again, the disruption in the telecommunication industry leading to the industry offering internet at nominal costs and the availability of low-cost smartphones fuelled the adoption of fintech transactional services in India. The almost free of cost internet offering by Jio was a stepping stone in making India more digital. The number of internet users skyrocketed post the offerings by Jio. 

Also, the introduction of UPI brought about a significant shift in the transactional services offered by fintech companies. The use of digital apps and services for financial management made the country go digital. The use of fintech transactional apps also brought a reduction in tax evasions and money laundering.

  • Investments made using fintech apps

India has always been falling behind in making investments using fintech apps due to a lack of financial literacy. Only a few users invest in mutual funds and stock markets using fintech apps. Even with the convenience of a mobile app, lower fees, and accessible interfaces, the use of fintech apps is still at a nascent stage. 

If we talk about adoption in this space, most middle to lower-income groups haven’t adopted fintech for investments. Nevertheless, considering the more significant growth opportunity in the fintech space, big industry players are foraying into the fintech investments space. Also, interestingly, many individuals are using fintech apps to buy gold in India.


With fintech adaptability in India, the sector has faced issues like user awareness around security, regulatory headwinds, etc. The industry is facing inconstancy in regulatory policies, with the significant issues being data localisation forms and payment policies. The regulatory policies are affecting all three categories of fintech. 

Industry experts think that the fintech apps and services may not see disruption as we saw in the e-commerce segment. Nevertheless, with the increasing consumption of digital financial services, the fintech sector is on the path to a steady climb for the next few years. In the growth story of fintech apps and services, banks, NBFCs, and AMCs would have a large role to play.