Financial technology – better known as fintech – refers to the use of technology in carrying out financial services. Once used primarily for back-office banking functions such as managing customer data and executing transactions, today it is virtually indispensable in the banking sector. The increased penetrations of smartphones and low data rates have contributed enormously to the development of fintech and fintech players.

Advances in money management

As the dependence on smartphones grew, so did the demand for more intuitive banking services. Banks soon launched proprietary apps to enhance customer convenience. There was also the explosion of mobile payment apps and services such as UPI, which can be integrated with our bank accounts. These offer a seamless payment solution for online shopping, P2P payments, and even investment. According to a May 2019 report published by PwC and ASSOCHAM, the adoption rate for fintech in India is the second-highest globally, at 57.9%. Many functions that earlier took hours and long bank queues are now completed in minutes with technology. Identification technology has replaced paper-based KYC, UPI or NEFT payments have supplanted cheques, and banking apps can help open bank deposits and accounts.

Fintech for MSMEs

Fintech products are built for a tech-savvy audience that demands a smooth, streamlined banking experience. It has broadened the scope of banking services while also making transactions far easier than before. There is a higher degree of financial inclusion, as well as helping the MSME sector to take greater advantage of banking services and financial products.

The use of technology enables credit assessment to be less biased against small businesses. Bank skepticism has long been a problem for MSMEs in obtaining credit. Now they can apply for loans more easily through apps, and data analysis helps in determining creditworthiness without biases posing a hindrance.

Among NBFCs, the MSME lending segment has seen the rise of new business models, due to the evolution of fintech lenders with innovative approaches to credit underwriting. These lenders leverage digital data as well as surrogates to evaluate creditworthiness. They also combine this with data analytics to provide more efficient underwriting.

Leveraging data for financial solutions

Fintech startups are also working to bridge gaps in insurance, wealth management and remittance. Data analytics and data-driven customer insight have become a focal point for players across the BFSI sector. There is greater collaboration between financial service providers to operate alongside an open-architecture framework to deliver their services.

The adoption of technologies such as AI, machine learning and blockchain allows for greater transparency in banking. New banking models, such as neobanking and cloud banking, have also been introduced.


Fintech, therefore, has already brought considerable changes to India’s banking sector. Going forward, we can expect more innovation from fintech players as they search for new solutions to the financial issues faced by the MSME sector.