Fintech and AI: A Combination Driving India’s Economic Growth

As the world rapidly moves towards digitised financial landscape, India emerges as a pivotal player at the vanguard of this transformative journey. The surge of Financial Technology, also known as FinTech, in the subcontinent not only underscores India's current technological prowess but also symbolises the dynamic evolution unfolding in the nation's economic narrative.

Indian fintech startups like Paytm, Phonepay and Zerodha are not just domestic giants but have also succeeded in making their presence felt on the global stage. FinTech startups exist in India with heavy investments from the international markets. India is the third-largest fintech ecosystem in the world, with over 2,100 fintech startups. In 2022, Indian fintechs were the second most funded startup sector in India, accounting for 14% of global funding (Inc 42). According to a report by Tracxn, In 2023 the startups received $2 billion in funding (Inc 42). Despite a decline then the previous years, fintech sector holds their position to be the second most funded industry of India (Invest India).  One of the reasons being, India has the 2nd highest number of smartphone users globally and is the 2nd largest Internet user market (Invest India). Apart from the demographics, Indian startups’ rapid adoption and integration of AI technologies are enhancing India’s stature, positioning it as a global Fintech titan.

The innovative business frameworks, user-friendly digital platforms, and a sizable unbanked population seeking financial services are driving unparalleled growth in India's FinTech sector. However, the narrative takes an intriguing turn with the introduction of a transformative force: Artificial Intelligence (AI). The intertwining of FinTech and AI is not simply an intersection of two technologies; rather, it signifies a symbiotic relationship that bears the capability to reshape India's economic path, steering it towards a future abundant of possibilities and groundbreaking innovations.

A pivotal transformation instigated by the Fintech Industry in India is bridging the divide between urban metropolises and rural heartlands, addressing a crucial need of the time. Government of India initiatives, including PMJDY, DAY-NRLM, Direct Benefit Transfer, Atal Pension Yojana, and others, have played a pivotal role in promoting financial inclusion. These programs have acted as catalysts for the digital revolution, extending the reach of digital financial services to a larger population, particularly in rural areas.

At the forefront of global digital initiatives stands India Stack, a pivotal undertaking aimed at establishing a robust public digital infrastructure through open APIs to promote public and private digital initiatives. India Stack is a set of APIs that allows governments, businesses, startups and developers to utilise a unique digital infrastructure. Some of the notable innovations in Fintech sector have been:

As the torchbearer of the fourth industrial revolution, Artificial Intelligence (AI) is poised to revolutionise the FinTech landscape, paving the way in a new era of capabilities. The integration of AI has the potential to transform banking from a conventional model to one of hyper-personalization. Advanced algorithms meticulously analyse users' financial behaviours, offering bespoke financial advice and product recommendations. This not only instils confidence in customers but also encourages the widespread utilisation of digital banking capabilities in India.

AI's unparalleled pattern recognition, coupled with deep learning, emerges as a formidable tool in combating financial malfeasance. These systems proactively identify, flag, and combat fraudulent activities, safeguarding the financial sanctity of users. For those navigating the complexities of stock market trading, AI-driven robo-advisors prove to be invaluable. Leveraging extensive datasets, these systems provide insights and predictions, ensuring investors stay ahead of the curve, alleviating pressure and steadily growing wealth based on economic dynamics.

Furthermore, AI is reshaping the landscape of credit analysis. Traditional metrics are now complemented by a myriad of data points, ranging from online shopping behaviours to social media footprints, offering a comprehensive evaluation of an individual's creditworthiness. This augmentation enables financial institutions to extend loans with heightened confidence, fostering small business growth and contributing to economic expansion.

Fintech enterprises across the country are now eagerly anticipating significant developments in the upcoming Interim Budget, scheduled for presentation on February 1, 2024. Budget that is going to be unveiled by the Finance Minister Nirmala Sitharaman, is poised to bolster micro, small, and medium enterprises (MSMEs) through enhanced lending solutions. Additionally, a pronounced focus on upskilling initiatives aims to empower the nation's young workforce. Reflecting on the Union Budget 2023, Finance Minister Nirmala Sitharaman underscored the pivotal role of various digital public infrastructure initiatives, including Aadhaar, PM Jan Dhan Yojana, Video KYC, India Stack, and UPI, in supporting fintech services in India. As part of an ongoing commitment to expanding document accessibility, the DigiLocker platform is set to witness an augmentation of available documents for individuals.

Our recent work on the Credit Score Application project, provided accurate credit reports to financial institutions, businesses and individuals. Using Artificial Intelligence and the integration of algorithms, AppVista’s framework provides recently published credit reports about a user and generates a ‘risk score’ in near real-time. If the defined hurdle rate is breached, it automatically triggers emails to identified personnel within the bank, who can then activate mitigation measures. This digital solution also provides hyper-personalised experiences across both digital and in-person channels requiring banks to build the foundational infrastructure, leveraging cloud technology, for their back-end systems.

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