Indian fintech companies must avoid excessive marketing and predatory lending practices and instead focus on financial inclusion and last-mile connectivity, Department of Financial Services (DFS) secretary Vivek Joshi said in a fire side conversation with PhonePe CEO Sameer Nigam at the Global Fintech Festival here on Tuesday. “Banks need help from the fintechs,” Joshi said.
There should be more private sector investment in startups and that would reduce risk, Joshi said, adding that fintechs can create a favourable investment environment by educating investors about making investments in startups, by highlighting success of some early stage fintechs.
Responding to a query on what role will fintechs play in a longer run, Joshi said the biggest role will be to extend the scope of financial inclusion.
Fintechs can also help solve challenges related to farmers and can also help revenue record integration with the digital ecosystem which will further enable banks to give loans to public.
Speaking on the regulatory landscape for fintechs in India, Nigam said that the current regulations encourage consumer protection and fintech startups are subject to higher regulatory scrutiny. “Fintech take time to understand the regulatory environment,” he said. He said that innovations by fintechs in India are happening at such a rapid pace that NPCI and other authorities are finding it tough to keep pace with the same. At the same time, Nigam said fintechs find it hard to get a right product-market match. We are now the “noisy children” and the “lesser cousins” in the room. He added that it was important for fintechs to have some skin in the game. Nigam said the regulation should be re-visited before two many players in the industry get hurt. “No one is thinking about how the startups will be financially viable,” although everyone is expecting the private sector to invest.
In a presentation, Joshi said India’s digital lending market stood at $270 billion in 2022 and is estimated to touch $350 billion by end of 2023. Fintech market, particularly, was at $50 billion in 2021 and is expected to grow three folds to $150 billion by 2025.