Over recent years, India's fintech sector has shown a remarkable growth trend guided by UPI's command, where PhonePe and Google Pay hold a combined 86% market share. Additionally, the rise of fintech unicorns highlights strong investor confidence.

Regional hubs like Mumbai and Bengaluru account for 42% of fintech start-ups, driving innovation with support from initiatives like the Mumbai FinTech Hub. These developments place India as a global fintech leader.

Let's delve deeper into examining the key growth drivers influencing the market's expansion.

Dominance of UPI Payments

• Unified Payments Interface (UPI) has reformed India’s digital payments outlook, with transaction values reaching INR 125.95 Lakh Crore in 2022, showcasing a 1.75% year-on-year increase.
• Additionally, it has become synonymous with seamless and user-friendly digital transactions. With Paytm holding 8% of the market share and other players contributing marginally, UPI continues to initiate financial inclusion and hasten India’s switch to a cashless economy.

Emergence of FinTech Unicorns

• India's FinTech field has come forth as a leader, with nearly 25% of the country’s unicorns belonging to this space. The combined market value of these fintech unicorns is approximately USD 90 billion.
• Furthermore, the sector’s growth is visible with the contribution of industry giants like Paytm, PhonePe, Razorpay, and PolicyBazaar, additionally showcasing the sector’s innovation and investor confidence.
• The timeline of unicorn events, starting with Paytm and PolicyBazaar in 2018, highlights the swift increase of FinTech startups.

Regional FinTech Clusters

• Regional clusters are driving India's fintech ecosystem, with Mumbai and Bengaluru directing the way.
• Mumbai benefits from the Mumbai FinTech Hub Initiative, fostering innovation and access to global markets, while Bengaluru attracts the highest fintech investments, with INR 8,097.86 Mn in Q3 FY2023.
• As a result, developing hubs like Gurugram, New Delhi, and Hyderabad are decentralizing the ecosystem, carrying forward the nationwide momentum in fintech innovation.

Government Policies and Technological Integration

• Unified Payments Interface (UPI):  The Unified Payments Interface (UPI) was introduced by the National Payments Corporation of India (NPCI) on April 11, 2016.

In May 2024, it processed over 14 billion transactions, reflecting a 49% year-on-year growth from the previous year. In addition to this, the number of banks linked to UPI increased from 414 in April 2023 to 581 in April 2024.

• RBI FinTech Department: It was established in January 2022 to focus on identifying innovation opportunities within the fintech sector. During the financial year 2023–24, the RBI FinTech Department also conducted multiple pilot programs related to central bank digital currencies (CBDCs) and set up over 75 digital banking units across various districts.

Growing Dominance in the Global Fintech Landscape

India's fintech sector is changing immensely, supported by the dominance of UPI, which processed over 14 billion transactions in May 2024. The rise of fintech unicorns represents strong investor confidence and innovation by big players like Paytm and PhonePe. Regional hubs like Mumbai and Bengaluru continue to excel with major investments and government initiatives.

In addition, the establishment of the RBI FinTech Department has guided digital banking units and pilot programs for CBDCs. Subsequently, in 2024, India leads the global fintech market with 164 Mn digital payments. Together, these developments position India as a global leader in fintech and will continue to impact the market in future with increased market presence.