India’s fintech story has moved fast. It has changed the way people handle money, borrow, save, invest and transact, and it has done this at a scale few countries have managed. Over the last decade, hundreds of fintech firms opened up formal financial services to people who had never used them before. Costs came down, service quality went up, and access widened. Of course, not everything was perfect. Some products grew too quickly, and in more than a few cases, risks went too far.
That said, digital finance has become part of the country’s core infrastructure. India accounted for about 49 per cent of global real-time payment transactions in 2023. UPI alone processed about 18.39 billion transactions worth over 24 lakh crore in June 2025. FY 2024 to 25 saw about 185.8 billion UPI transactions.
In a country with more than one billion internet subscribers and smartphone access in more than 85.5 per cent of households, digital financial tools are becoming second nature.
This reach changes the nature of the conversation. The sector is no longer centred only on aggressive scale. There is far more discussion today about regulation first thinking. Founders are spending more time engaging with the regulator, and investors are asking tougher questions on compliance before scale; the next phase of fintech will not just be about speed but will depend on following regulatory intent in full and the ability to build trust while staying within the boundaries of a regulated system.
Most founders know for a fact that trust is the most valuable asset for any fintech venture and while VC capital-funded incentives have shown success in changing user behaviour towards adoption of digital financial services, sustained usage and sustainable economics can only be delivered with adequate user trust.
How It Started And How It Shook Out
India’s early fintech boom was sparked by Aadhaar, UPI, and the broader India Stack; these digital public infrastructure rails made it possible for private companies to innovate on top of a reliable and regulated standardisation framework and led to intense investor interest as executing new solutions was immensely faster and scalable.
Between 2016-2023, fintech startups attracted more than USD 35 billion in venture investment. India now ranks third globally in fintech investment volumes. Estimates suggest that 10,000 fintech firms are active, and roughly two dozen of them reached unicorn status.
But scale without durable foundations rarely lasts. Many fast-growing lending companies and some well-known card and wallet businesses eventually ran into problems, amongst others. ZestMoney, OneCard and others had to wind down or pivot sharply as regulatory tightening caught up with them, with regulators responding with clearer and firmer rules.
RBI’s 2022 Digital Lending Guidelines cleaned up disbursal practices and forced explicit and informed data consent, as it was being observed that many users were either being converted to borrowers without proper understanding of the terms or digital access to data was being misused for strongarm collection practices.
In the capital markets, Sebi tightened norms for online advisory and distribution and repeatedly cautioned users against products positioned as regulated when they were not. In some of its latest sets of cautionary advisories, it has flagged unlisted bonds and the popular digital gold segment as being unregulated and risky.
The overall message has been straightforward that innovation cannot outrun responsibility.
The impact was visible as light KYC wallets vanished and payments banks saw their revenue streams cut off once lending and higher value deposits were restricted, while BNPL players dependent on prepaid instruments were forced to rethink their business models. At the same time, hundreds of small-ticket unregulated lenders disappeared, card-issuing fintechs faced clearer rules on risk ownership and customer control, and NBFC P2P platforms reworked their flows, with some even stopping the creation of new portfolios.
Why Fintech Matters
Despite all this turbulence, the underlying case for fintech remains strong and it is increasingly evident that technology-driven, nimble, entrepreneurial solutions are not easily viable within large or traditional financial institutions.
Financial inclusion has improved in a way that few countries have achieved. As per the World Bank’s Global Findex 2021, 78 per cent of adults in India have a formal account compared to 35 per cent in 2011, a very heartening increase. Imagine how India’s growth story would have turned out if less than half of our adult working population had bank accounts? In large part, the credit for this goes to government schemes and not fintech enterprises per se. But when it comes to the usage of financial services, including bank accounts for payments, savings, etc., fintechs have had a very important role to play.
Despite this, access to credit remains a major challenge and fixing this can be one of the biggest contributions of the fintech sector. There is a clear demographic imbalance in who receives credit and for what purpose. For example, women are less than half as likely to receive credit as men, despite on average having superior credit scores.
Rural and small borrowers are also disadvantaged as serving them is costlier for traditional lending institutions. The estimated credit gap stands between USD 250 and 300 billion, with a majority of this gap faced by MSMEs, who contribute about 30 per cent of GDP and employ over 110 million people, contributing over 45 per cent of India’s exports, yet many still depend on high-cost informal lenders.
It is anybody’s guess how this economic contribution of MSMEs could be enhanced with the proper provision of credit. In essence, this gap between credit demand and supply is holding back national back and prosperity.
Fintechs, along with banks and NBFCs, are helping close this gap. Alternative data, digital underwriting and designs that are more gender aware and less biased are opening up new segments. Microfinance institutions have also benefited from digitisation and continue to be significant contributors to the economy. Alternative data-based underwriting for micro enterprises contributed to loan origination growing by about 28 per cent year on year in FY22-23.
This is not unique to India. Brazil’s Nubank crossed 80 million customers by offering simple credit and savings tools. A McKinsey study suggests that digital financial inclusion can raise GDP in emerging markets by up to 6 per cent through better productivity and lower income volatility.
In India, too, fintech has contributed well beyond access. It has lowered transaction costs, made data-driven credit allocation easier, and supported a bulk of bharat who reside in the informal economy. As more people adopt digital payments and investment platforms, the spillover effects on consumption, tax compliance, and productivity are strong.
Where Fintech Needs To Go
From here, in the author’s opinion, three priorities will shape the sector.
Finance runs on public confidence. Customers expect clarity on pricing, data use, and grievance processes. Many global banks collapsed not because of bad balance sheets, but because trust vanished. For fintechs, this may in some cases mean pacing down scaling to build robust checks and balances.
The collaboration model is already working. Co-lending, API based integrations, and open banking frameworks combine startup agility with the balance sheet strength of banks and NBFCs. This increases reach and reduces risk.
Alignment With Our Vision Of The Future
Climate finance, sustainable development, and gender focused financial inclusion are increasingly central to public policy and national priorities. In the public domain comprising of retail savers, investors and institutions, there is a much greater awareness of the urgency of protecting our environment, development that considers nature and gender and much more, which can be described under the universally understood Sustainable Development Goals or SDGs.
Fintechs can direct institutional and retail capital into SDG-aligned investments. Investors themselves are asking for this. VC and PE funds are now far more focused on governance, compliance, medium to long-term impact on society and the planet, alongside profitability.
India’s fintech journey began with access and affordability. What will define its future is responsibility and resilience. Growth that respects rules is not slower growth. It is simply better growth, and it is the only kind that becomes part of the country’s financial backbone
India’s rapid shift towards digital payments is evident in the National Payments Corporation of India’s data, which shows UPI transactions rising from just 17.9 million in FY2017 to 915 million in FY2018, before surging to 12.5 billion in FY2020. The momentum has only accelerated since then, with annual volumes touching 83 billion in FY2023 and estimated to cross 185 billion transactions in FY2025.
A closer look at UPI trends also highlights a widening gap between transaction volume and value, as shown in dual-axis analyses for 2025. Monthly values—for instance, about Rs 24 lakh crore in June 2025—continue to climb even as the average ticket size falls, indicating deep mass adoption for everyday, low-value payments across India.
India’s progress in financial inclusion over the past decade has been equally significant. According to the World Bank’s Global Findex database, financial account ownership among adults rose from 35 per cent in 2011 to 78 per cent in 2021, marking one of the fastest inclusion expansions globally.
Sustainable finance has also gathered momentum, with India’s green bond issuances increasing steadily between 2017 and 2024. Cumulative issuances are now estimated at around USD 55 billion, driven by rising investor interest and the country’s broader climate transition agenda, according to data from the Climate Bonds Initiative and the IIMB Green Finance Report.
The MSME sector continues to be a critical pillar of India’s economy. As per the MSME Annual Report 2024, the sector accounts for 30 per cent of the country’s GDP, contributes 45 per cent to exports, and provides employment to more than 110 million people, underscoring its central role in growth and livelihoods.
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the publication |
