Journal of Survey in Fisheries Sciences 10(1S) 4774-4785 2023

Fintech Issues and Challenges in India

Dr. S. P. Sreekala,
Prof and Head, Centre for Research and Development. School of Management,
KPR College of Arts Science and Research, Coimbatore
[email protected]

Dr S. Revathy
Associate Professor
Department of Corporate Secretaryship, PSG College of Arts and Science Coimbatore
[email protected]

S. Rajeshwari
Assistant Professor Department of Management
KPR College of Arts Science and Research
[email protected]

M. Raja Lakshmi
M.Phil., Research Scholar Jayagovind Harigopal Agarwal Agarsen College,
(Affiliated to University of Madras) Madhavaram, Chennai-60

Abstract

New finance technologies (FinTech) have erupted around the arena. Consequently, there was a good-sized
increase in educational literature on FinTech over the last five years. Research tends to be scantily connected
without a coherent research schedule. Significant research gaps and important questions continue to be. There is
an awful lot of painting to be done before this area becomes a long-time educational discipline. This paper offers
coherent studies on subject matters formulated via attention organization meetings with policymakers and
teachers and is also based totally on a crucial evaluation of the literature. We outline seven key research gaps
with questions that might shape the idea of an educational look. If these are addressed it would assist this
location to grow to be a long-time educational area.

Key Words: Financial Technology, Fintech, Financial Services, Indian Financial System, Business Finance.

INTRODUCTION traditional transaction machine with

modern, green techniques. Peer-to-peer
Fintech, the abbreviation for economic
lending, peer-to-peer fee technology,
technology refers to an area made by
digital wallets, blockchain, and mobile
corporations’ that supply monetary
banking is a additional example of the way
offerings efficiently by using technology.
technology is being used in financial
In the twenty-first century, it is a rising
transactions. These are searching for to
type of carrier. Implementing era in the
amplify the advantages and obtain
economic sectors for cell bills, loans, cash
excessive monetary transaction efficiency.
transfers, or even asset control, new start-
Additionally, they assist in reducing
up companies are trying to replace the
consumer charges.

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OBJECTIVES OF THE STUDY technological innovation. The business

fashions and techniques of monetary
• To know about the current status of
establishments are challenged with the aid
fintech industry in India
of improvements in payments, lending,
• To identify the major issues in fintech asset control, and insurance, but these
industry in India. innovations also gift opportunities for each
set up marketplace gamers and
• To make suggestions based on the study
inexperienced persons. Innovation can also
FINTECH IN INDIA boom risks for specific monetary
institutions, clients of these
With an ever-increasing reliance on data
establishments, and the whole monetary
generation, the phrase "fintech" is used to
device. Despite its children, India's
characterize new technological
FinTech enterprise is increasing fast
breakthroughs inside the financial services
because to a widespread marketplace, a
enterprise. Originally used to describe the
startup ecosystem that values innovation,
backend technology employed by way of
and benevolent authorities policies and
most important monetary establishments,
rules. This younger and vibrant industry is
the phrase has come to refer to all
populated via some of startups, but non-
technological improvements inside the
banking financial enterprises (NBFCs) and
financial industry, inclusive of those in
traditional banking institutions are
financial literacy and education, retail
catching up. There had been severa
banking, investing, and many others. One
outcomes of this latest disruption inside
of the most sizeable developments
the banking and economic offerings
anticipated to have an instantaneous effect
enterprise.
on the worldwide financial quarter is

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Journal of Survey in Fisheries Sciences 10(1S) 4774-4785 2023

FinTech in India has the potential to beyond ten years. India is one of the fastest
provide sensible solutions to troubles growing fintech marketplaces in the
confronted by conventional financial international, with FinTech adoption fee of
establishments, which include poor 87% as compared to the global average of
penetration, a dearth of credit score 64. In India, there were greater than 6,636
records, and a transaction financial system fintech agencies, which ended in a $50
based on cash. The Indian banking and billion market in 2021; through 2025, it is
economic offerings enterprise may want to expected to grow to $one hundred fifty
undergo full-size alternate if regulators, billion.
marketplace individuals, and buyers can
paintings together. Currently, FinTech THE EVOLUTION OF THE FINTECH
provider carriers are altering how INDUSTRY
companies and consumers deal on a
The fintech industry as we know it today
ordinary foundation. Since it picked up
did not exist before the late 1990s and
steam following the introduction of net
early 2000s. Nonetheless, fintech’s origins
offerings in the country the FinTech region
can be traced back to the advent of
has skilled large growth in India during the

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computer systems and the growth of The evolution of the fintech industry has
electronic banking in the financial services been rapid and dynamic, with significant
industry in the 1970s and 1980s. These changes taking place year after year.
early innovations set the stage for fintech’s
expansion and development in the latter
half of the 20th century and beyond.

1.0 (1886-1967) is about infrastructure Diner’s Club introduced theirs in 1950,

American Express Company followed
This is an era when we can first start
with their own credit card in 1958.
speaking about financial globalization.
It started with technologies such as the
Fintech 2.0 (1967-2008) is about banks
telegraph as well as railroads and
steamships that allowed for the first- This period marks the shift from analog
time rapid transmission of financial to digital and is led by traditional
information across borders. The key financial institutions. It was the launch
events on this timeline include of the first handheld calculator and
first transatlantic cable (1866) the first ATM installed by Barclays
and Fedwire in the USA (1918), the first bank that marked the beginning of the
electronic fund transfer system, which modern period of fintech in 1967.
relied on now-archaic technologies such
as the telegraph and Morse code. The There were various significant trends
1950s brought us credit cards to ease that took shape in the early 1970s, such
the burden of carrying cash. First, as the establishment of NASDAQ, the

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world’s 1st digital stock exchange, The release of Bitcoin v0.1 in 2009 is
which marked the beginning of how the another event that has had a major
financial markets operate today. In impact on the financial world and was
1973, SWIFT (Society For Worldwide soon followed by the boom of different
Interbank Financial cryptocurrencies (which, in turn, was
Telecommunications) was established followed by the great crypto crash in
and is to this day the first and the most 2018).
commonly used communication protocol Another important factor that shaped the
between financial institutions facilitating face of fintech is the mass-market
the large volume of cross border penetration of smartphones that has
payments. enabled internet access for millions of
people across the
The 1980s saw the rise of bank globe. Smartphone has also become the
mainframe computers and the world is primary means by which people access
introduced to online banking, which the internet and use different financial
flourished in 1990s with the Internet services. 2011 saw the introduction
and e-commerce business models. of Google Wallet, followed by Apple
Online banking brought about a major pay in 2014.
shift in how people perceived money &
their relationship with financial Fintech 3.5 (2014-2017) is about
institutions. By the beginning of the 21st globalisation
century, banks’ internal processes, Fintech 3.5 signals a move away from
interactions with outsiders and retail the western dominated financial world
customers had become fully digitized. and contemplates the expansion in
This era ends with the Global Financial digital banking around the globe, with
Crisis in 2008. improvements in fintech technology.
It puts the focus on consumer behaviour
Fintech 3.0 (2008-2014) is about start- and how they access the internet in the
ups developing world. For example, in
As the origins of the Global Financial China and India, markets that never had
Crisis that soon morphed into a general time to develop Western levels of
economic crisis become more widely physical banking infrastructure and so
understood, the general public developed were open to new solutions more
a distrust of the traditional banking quickly.
system. This and the fact that many This era is marked by an increasing
financial professionals were out of work, number of new entrants and their last
led to a shift in mindset and paved a mover advantages.
way to a new industry, Fintech 3.0. So,
this era is marked by the emergence of Fintech 4.0 (2018-today) is about
new players, particularly fintech disruptive technologies
startups, alongside the already existing Blockchain technologies and open
ones (such as banks). banking are continuing to drive the
innovation of the future of financial

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services. The game changers here of the market. The reality is that both
are neo banks that challenge the pricing sides need each other just as much as
and complexity of traditional banks, they need to compete with each other.
while earning customers’ trust through On the one hand, fintech startups have
simplified, digital-only experiences and taken funding from banks and often rely
low-to-no fees. on banking, insurance, and back-office
partners to deliver their core products.
Machine Learning, on its part, is Banks, on the other hand, have acquired
transforming the way people interact fintech startups or invested in them to
with banks and insurance companies, leverage new technology and ways of
receiving bespoke offers and support. thinking to upgrade their existing
Germany’s N26, for operations and offerings. Hopefully, this
example, relaunched its premium retrospective look into the evolution of
account in 2019 to cater to the specific fintech will help to sum up the long way
needs and tastes of its subscribers, such we have come until today and put into
as discounts in coworking spaces and in perspective the busy times ahead of us.
online travel booking sites.
ML also has security applications: One thing is certain: Fintech is growing,
British Revoluta, for example, unveiled and fast. And innovation in fintech is
a new AI solution in 2018 to combat reaching more and more areas of the
card fraud and money digital economy. The increasing number
laundering, developing deep insights of unicorns (privately held startup
and predictions around customer businesses with a value of over $1
behaviour to dynamically identify new billion) is an indicator of this.
card fraud patterns without human
intervention. Another major event in this KEY PLAYERS IN THE GLOBAL
period is the new wave of integrated FINTECH MARKET
payment providers, with platforms that The report presents a detailed analysis of
can offer payments as an additional the following key players in the global
strand to an already comprehensive fintech market, looking into their capacity,
business management system. And market shares, and latest developments
lately, mainstream use cases for like capacity expansions, plant
NFTs, like creators strengthening their turnarounds, and mergers and acquisitions:
earning power with digital
representations of their contents, or • PayPal Holdings, Inc.
artists ensuring royalty distributions, or • Ant Group
NFTs as tickets or membership cards. • Stripe, Inc.
• Intuit Inc.
FINTECH TODAY • Adyen Group
• Coinbase
As technology is becoming ever more • Square Capital, LLC
central in the finance industry, we tend • Avant, LLC.
to consider banks and fintech startups as • Klarna Bank AB
opposing forces fighting for their share • Nu Pagamentos S.A

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Journal of Survey in Fisheries Sciences 10(1S) 4774-4785 2023

• Others • Peer-to-peer (P2P) or digital

lending, another segment of
The comprehensive report investigates the fintech, is worth $43.16 billion in
macro and micro aspects of the industry. 2018 and expected to rise to $567.3
The EMR report gives an in-depth insight billion in 2026 with a CAGR of
into the market by providing a SWOT 26.6%. (Reports and Data, 2019)
analysis as well as an analysis of Porter’s
• In a survey, 56% of participants
Five Forces model.
said that they recognize the
FINTECH INDUSTRY GROWING importance of blockchain
technologies. (PwC, 2020)
• The global fintech market is
expected to grow at a CAGR of • Even if they recognized its
23.58% from 2021 to 2025. importance, 57% of participants
(Research and Markets, 2020) said they are unsure about how to
respond to blockchain
• Artificial intelligence is one of the technologies. (PwC, 2020)
leading technologies in the fintech
market, with a market share of
38.25% in 2019. (Research and THE CHALLENGES FACED BY
Markets, 2020) FINTECH COMPANIES IN THE
CURRENT ECONOMIC CLIMATE
• Blockchain and regulatory
technology (regtech) are the The Challenges
fastest-growing segments of the Fintech corporations, which use modern-
fintech industry. (Grand View day, progressive generation to enhance and
Research, 2019) (Transparency automate economic services, have faced
Market Research, 2018) several challenges within the modern
• Blockchain is worth $70 to $75 financial weather.
million in 2018, with a CAGR of The pandemic effects
50% in the next six years.
(IndustryArc) One of the number one demanding
situation is the uncertainty due to the
• This puts Blockchain technology Covid-19 pandemic. In addition, the
on track for a $20 billion worth by unexpected and severe monetary downturn
2024. (Transparency Market has brought about a decline in purchaser
Research, 2018) spending and improved uncertainty for
• Blockchain can cut regtech costs companies, making it difficult for fintech
by as much as $4.6 billion companies to are expecting and plan for
annually. (Quinland and destiny growth and ventures.
Associates, 2016) Regulatory challenges
• Regtech is estimated to be worth Another undertaking for fintech businesses
$120 billion in 2020 with a CAGR is the multiplied regulatory scrutiny. As
of 52.8% (Grand View Research, those corporations become more
2019)

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mainstream and disrupt traditional you can navigate those challenges and
monetary establishments, regulators have discover methods to live aggressive.
begun to take a better observe their
The modern financial climate has
operations to make sure they comply with
presented several challenges for fintech
legal guidelines and rules. These stringent
corporations, together with uncertainty
regulation and compliance requirements
because of the pandemic, multiplied
can cause brought charges and delays for
regulatory scrutiny, opposition from
fintech corporations, making it hard to
conventional financial establishments, and
compete with established economic
cybersecurity issues. Yet, despite those
institutions.
challenges, fintech businesses have the
Market Saturation potential to thrive by using being capable
of navigate these challenges and find
Fintech businesses additionally face
methods to live competitive in the
excessive competition from traditional
marketplace and grow.
monetary establishments, which have
launched into a similar route by adopting CHALLENGES TO FINTECH
comparable technologies and commercial INDUSTRY IN INDIA
enterprise fashions to stay aggressive. As a
India, domestic to extra than 23 fintech
end result, it's far making it hard for
unicorns, has speedy emerge as a powerful
fintech groups to distinguish themselves
global fintech hub. However, the industry
within the crowded fintech marketplace to
has skilled some of the risks and regularity
attract and accumulate clients.
issues due to the fintech area's fast growth.
Cyber Security The federal monetary regulatory
authority's pinnacle worries are the upward
Additionally, Fintech companies also face
thrust in privateness violations,
challenges related to cybersecurity and
cyberattacks, and go-border legal and
data privateness. As they accumulate and
regulatory problems added on by the
save sensitive financial statistics, they're at
economic services industry's rapid
a higher chance of cyber-attacks and
digitization. Other considerable problems
information breaches. Such adversaries
the fintech sector faces consist of
can result in reputational damage, legal
information confidentiality and purchaser
liabilities, and financial losses in the event
protection. Following are the primary
that they fail to protect their clients’
challenges to Fintech in India.
statistics. Despite these demanding
situations, many fintech companies were Emotional attachment to cash
capable of adapt and continue to grow.
In a country where human beings adore
Some have taken gain of the elevated
cash, the fintech area is operating to
demand for digital financial services for
establish a cashless economy. In India,
the duration of the pandemic, whilst others
using cash is related to faith, way of life,
have shifted their attention to digital bills
and emotional attachment. The first
and lending. However, for fintech groups
mission the fintech region is attempting to
to be triumphant within the current
triumph over is that this dependency to
monetary weather, they will want so that
coins. Here, the problem is in gaining

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popularity over cash. Credibility is a also appear to be constrained by the strict

challenge for any innovation in its early regulatory requirements.
ranges, and the fintech enterprise is not
Problems with the net
any exception. The truth that our fintech
business area is in transition and we have Fast internet is the basis of finance. Indian
now not absolutely embraced digital net service companies are nonetheless
solutions for our economic needs or vying for clients by way of supplying
absolutely rejected the traditional banking better bandwidth and quicker speeds for
gadget is every other huge thing secure and relaxed information delivery.
contributing to those boundaries. Since we India's different topography, extensive
are dealing with cash, most people are still populace, and stark division among the
hesitant to completely consider fintech. metropolis and the village are all very
Therefore, it's going to require effort and important concerns. The nation should
time to win humans over and earn their cope with the problems if it's miles to
believe in a nonetheless-new product. One assemble a compelling fintech narrative
of the important thing solutions to the and come to be a virtual superpower. The
credibility issue for fintech companies is infrastructural problems skilled with the
teaching the purchaser approximately the aid of the fintech companies in India must
products and services. With its be lessened with the aid of some of
demonetization programme and the Digital authority’s digitization projects, which
India Campaign, the Indian government is includes the Digital India campaign and
helping India in shifting beyond the use of the setup of optical fibres at some stage in
currency. Indian communities.
Banking regulations Cybersecurity
The banking industry is very regulated, Traditional economic institutions now
has giant operational and transaction offer better services and products thanks to
expenses, and uses very steady commercial fintech. The hidden risks of cybersecurity,
enterprise fashions. Indian fintech which in general incorporate data
businesses require complete regulatory breaches, third-celebration protection
frameworks that could manage risks. threats, malware risk, application security
Policies should be created so as to lessen risk, cloud-primarily based protection
ability dangers. Numerous guidelines threats, in addition to virtual identification
unavoidably maintain down the increase of dangers, are the enterprise's middle
Fintech startups inside the Indian trouble. A properly-balanced innovation is
economic quarter. In addition to being required to deal with the cyber chance,
difficult to conform with, those rules prevent hackers before they can access
additionally make it hard for Fintech crucial statistics, and decrease the hidden
corporations to join the Indian markets. dangers associated with monetary services.
The new Fintech corporations are
CONCLUSION
sometimes faced with sizeable obstacles
due to uncertain and restrictive felony Some of the principal forces influencing
frameworks. Due to their state-of-the-art the Fintech revolution in India are supplied
working fashions, fintech businesses can aspect enablers like exponentially

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