"Nirmala Sitharaman Applauds India's Fintech Sector's Achievements in Two Vital Metrics: Financial Inclusion and UPI-Led QR Code Payments"
During her keynote address at the Global Fintech Fest 2023, Finance Minister Nirmala Sitharaman commended the Indian fintech sector for its outstanding performance in two critical areas: expanding access to credit for new customers and leading the way in UPI-led QR code payments.
Sitharaman described fintechs as powerful tools for enhancing financial inclusion, emphasizing their growing strength and adaptability. To support her assertion, she cited a BCG report that highlighted a significant disparity in new customer acquisitions between fintechs and traditional banks.
"In the lending sector, which forms the core business of banks, fintechs boast a remarkable 36 percent market share for new-to-credit customers, compared to the 22 percent share held by brick-and-mortar banks," stated Sitharaman. "Fintechs are effectively reaching a much wider customer base, an area traditionally associated with traditional banks."
She noted that traditional banks have historically focused on lending based on income statements, primarily serving the salaried class. However, recent developments have seen banks collaborating with fintech companies to expand their outreach to new customers based on social and other spending data points.
"In the realm of payments, Finance Minister Sitharaman underscored a significant contrast between fintechs and traditional banks, highlighting that fintechs hold a dominant 93 percent share in UPI transaction value, whereas banks have a modest 7 percent share. She emphasized this substantial disparity, pointing out that the top three UPI Apps, namely PhonePe, GooglePay, and PayTM, demonstrate this trend. PhonePe leads with a commanding 50 percent market share, followed by Google and PayTM. While many fintechs have enticed customers through cashback incentives, traditional banks have refrained from offering such perks.
The absence of a merchant discount rate or transaction costs for customers and merchants has also discouraged traditional banks from promoting their UPI apps. Nevertheless, banks are actively pursuing these payment customers to provide a comprehensive range of services. Notably, in August, UPI recorded an impressive milestone of 10 billion transactions.
In the field of broking, Finance Minister Sitharaman noted that fintechs hold an impressive 80 percent market share, while traditional brokers account for a mere 20 percent. Equity broking stands out as an area where traditional players have experienced disruption from innovative newcomers, who have introduced margin lending models atop discount broking. Zerodha, in particular, has excelled in attracting customers and subsequently offering them various financial products."
