Why are global tech giants eyeing fintech in India?

Welcome to Finance Wrap India, a simplified fortnightly guide to everything finance, told through the voice of experts on LinkedIn and put together by LinkedIn News India editor?Preethi Ramamoorthy.?

In this edition, we delve into:

?? Why tech giants want to enter India's fintech space

?? Why finance is struggling to attract tech talent

?? Top conversations among finance professionals in India

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India’s fintech landscape is growing – and global tech giants want a piece of it.

Recent evidence of that came during Prime Minister Narendra Modi’s visit to the U.S. in June, where he met with executives of top tech companies. Post the interaction, Google CEO Sundar Pichai announced that the company will set up a global fintech operations centre at Gujarat’s GIFT City. He said that the move will “cement” and “build” on India’s fintech leadership? — founded on the United Payments Interface (UPI) and Aadhar ID system — and “take it globally”.

Google is not the only player entering the arena. Apple and HDFC Bank are exploring tie ups, including an UPI-integrated Apple Pay app. The company is further gearing up to launch its credit card, dubbed ‘Apple Card’, in India soon.

Earlier, WhatsApp payments service was launched in November 2020 in India, rolled out for more users in June 2021, and then made available on the WhatsApp mobile app for all users in India.

“India has set the stage for groundbreaking advancements in the payments ecosystem. This transformative landscape presents countless opportunities for leadership, startups, and the industry’s overall growth,” says Dr Ritesh Jain, Fintech Founder & Board Advisor at Infynit.

Experts point to the fintech industry’s rapid rate of growth as the driving factor of this trend. With a fintech adoption rate of 87% against the global average of 64%, India is one of the fastest growing fintech markets in the world. According to a Bain report, India has seen a significant rise in fintech investment, with about $35 billion invested across segments, more than doubling India’s share of global fintech funding since 2016.?

“The Indian fintech sector has experienced significant growth over the years, driven by a combination of factors such as increased smartphone penetration, digital infrastructure development, and favourable government policies,” says Ram Rastogi, President at the Fintech Consumer Association of India.

However, the entry of tech companies in financial services across emerging markets such as India could present challenges to regulators. The Reserve Bank of India in its report last year flagged “monopolistic practices, antitrust issues, cybersecurity risks, and challenges around data privacy” as key concerns.

Rastogi says now is the time for more homegrown companies to make their mark. “In view of the significant potential of digital payments and the need for multi-fold penetration from its current state, it is imperative that other budding homegrown fintech, existing and new players (Banks and Non-Banks) shall scale-up their consumer outreach and achieve overall market equilibrium.”

How will the entry of international tech firms impact India’s fintech market? Share your thoughts in the comments below.

Banking, financial services, and insurance (BFSI) firms in India are struggling to hire tech talent, reports The Economic Times. Only three in 10 tech candidates are accepting offers from finance firms, according to data from executive search firm Ciel HR Services and Native.

This is delaying the hiring process by two-three months, especially when the finance sector is looking to accelerate its digitisation drive. Two finance firms recently announced their plans to hire tech talent in India. While Deutsche Bank plans to hire thousands for its technology operations at Deutsche India, UK's NatWest Group announced that it would hire 3,000 engineers for its global capability centres here.

Tech is being used across various functions in finance, experts say.

Anil Ghelani, CFA , Head Passive Investments & Products at DSP Mutual Fund cites the example of the investment industry which is incorporating more tech into its functions. “Technology, data, automation and machine learning is changing the way we do business across all our three pillars — research and investment management function, sales, marketing, and customer outreach as well as for back office and support functions,” he says.

The Big Four professional services firms too are revamping their tax practices, shifting from traditional advisory methods to technology-driven solutions.?

“The heartbeat of finance’s digital revolution lies within its tech professionals,” says Sanchit Jain , a doctoral fellow specialising in finance at IIM-Bangalore. “Their roles span various domains, including data analytics, software development, cybersecurity, artificial intelligence (AI), blockchain, and robotic process automation (RPA). The rise of fintech has further intensified the demand for tech talent as companies seek specialised skills to breathe life into their digital dreams,” he says.

But why don’t tech professionals want to switch to the finance sector? They are resisting shifting to the BFSI sector due to compensation disparities, says Aditya Narayan Mishra, CEO, Ciel HR Services. Moreover, tech companies in the consumer and products space are wooing candidates with 40-100% higher salaries, in addition to stock options, the report says.

In such a scenario, it’s important for core finance professionals to keep themselves abreast of tech’s evolving role in the industry, experts say. “Awareness of technology is a must,” says Peeyush Chitlangia, CFA Chitlangia, Founder, Finshiksha. “However, this does not imply only coding. If you know that, great. But even if you don’t, awareness of how technology works, its usage in various segments, and designing of products and services has to be something one should pay attention to.”?

Here’s what finance professionals on LinkedIn are talking about:

How is data transforming the finance industry? "From customer insights to risk management and regulatory compliance, a robust data strategy is critical for success in the fintech industry," says Vipin Swami.

See his full post below:

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