India’s FinTech connectivity is no more provincial, UPI is now accepted in seven different countries across the globe, recent additions being Nepal, Sri Lanka, and Mauritius. This expansion brings us to the impact of India’s digital infrastructure on the global FinTech landscape.
The approach to DPI blends scalability, interoperability, and innovation, guided by principles such as open APIs, interoperability with consent, and a multi-layered architecture comprising identity, payments, and data.
According to a recent Nasscom report, India’s DPIs hold significant promise, with over 30 countries exploring the adoption of UPI, and Aadhaar, to address similar socio-economic challenges.
By 2030, DPIs have the potential to triple economic value, driven by the evolution of existing digital entities and the emergence of new technologies like AI and Web 3.0.
India’s financial services began its journey towards liberalisation only in the 1990s, and early glimpses of FinTech innovation emerged in the form of mobile wallets between 2005 and 2010. Fast forward to the present day, and we proudly stand as the third largest contender in this dynamic arena.
In a panel discussion featuring FinTech founders, the spotlight shone brightly on the transformative impact of India’s Digital Payments Infrastructure. Before delving deeper into its implications, here is a quick look at the milestones achieved by India’s remarkable DPI journey and its influence on the FinTech landscape.
India’s DPI Journey
Lowering the Barriers to Entry
DPI has revolutionised the FinTech sector by significantly reducing the cost of onboarding and enabling greater financial inclusion. Reeju Datta, Co-founder of Cashfree, highlighted this aspect, stating, “The cost of onboarding has gone down, DPI is helping in financial inclusion.”
The infrastructure has paved the way for more players to enter the market, fostering innovation and competition.
Kunal Varma, from Freo, emphasised how DPI has empowered entrepreneurs and enhanced infrastructure accessibility, stating, “DPI has facilitated entrepreneurship, the power has gone up, it has also enhanced what qualifies as a company.”
With easier access to infrastructure like UPI and IndiaStack, entrepreneurs have more tools at their disposal to create impactful financial solutions.
Journey towards profitability
While DPI has opened doors to new opportunities, achieving profitability remains a significant challenge for many FinTech startups. Tashvinder Singh noted, “The highway has been set up, more opportunities have been created, costs have come down but the journey towards profitability is still there due to the competition.”
Despite the advantages DPI offers, sustained profitability requires navigating a highly competitive landscape and focusing on revenue generation.
Reeju Datta stressed this point, noting,
If FinTechs focus upon revenue, they will become profitable. Unit positive models in place can supplement the case.Reeju Datta, Co-founder & CEO, Cashfree Payments
Moving away from a focus solely on growth metrics towards sustainable revenue generation is essential for long-term viability.
Evolving standards of Innovation
Krishnan Vishwanathan, Founder of Ring, emphasised this shift, stating, “It led to the rise in the bar of innovation. Identifying the opportunities is a small part but the journey matters more.” In a rapidly evolving industry, FinTech companies must continuously innovate to stay ahead, leveraging DPI’s infrastructure to create value for their customers.
FinTech companies are increasingly focusing on building inclusive products tailored to the needs of diverse Indian consumers. Kunal Varma highlighted this approach, stating, “You can build a business for Bharat, introducing vernacular languages in our products for the customers and of course the diversity in products.”
By leveraging DPI to reach underserved populations and offering localised solutions, FinTechs can tap into vast market potential.
Sustainability of lending ventures
Lending has a lot of competition today, as the space is saturated in terms of the number of companies offering the services.
Tashvinder Singh of Niyogin stated,
It is not just viability but also something that India needs. The market has moved to focus on unit economics, returns on lending propositions are way more than on payments.Tashvinder Singh, CEO & MD, Niyogin FinTech Limited
By providing access to credit and leveraging DPI to gather unique data insights, FinTech lenders can address the needs of underserved segments and drive economic growth.
Singh talked about the income augmentation that adds to the benefit of being able to derive unique data points concerning the segment.
Compliance and Regulatory Landscape
Recent actions by the regulator against the FinTech giants has sparked conversations like never before, the significance of complying is again taking the centre stage.
It isn’t going to be easy, playing a long term game is the way and the regulator is only doing its job. This is going to separate businesses from those chasing intermittent milestones. This is not going to work for those chasing vanity metricsKunal Varma, Co-founder & CEO, Freo
I understand that the cost of compliance is not high, it is the short sightedness on the industry’s end.Krishnan Vishwanathan, Founder, Ring
Tashvinder Singh discussed the evolving efficiency and regulatory landscape influenced by DPI, stating, “Efficiency is coming in everything we do. We need to stay within the rails and steadfast innovation.”