India’s FinTech Scene Matures: Consolidation & Credit Gaps Define 2025
New Delhi – India’s financial technology landscape in 2025 isn’t defined by flashy new launches, but by a quiet strengthening of existing infrastructure and a persistent struggle to unlock credit for the nation’s vital MSME sector, according to new reports and industry analysis. This breaking news reveals a system shifting from rapid growth to sustainable durability, but one still grappling with fundamental access issues.
UPI Dominates, Becoming Financial Infrastructure
The Unified Payments Interface (UPI) continues its reign as the backbone of India’s digital payments revolution. Government data shows UPI now handles a staggering 85% of all digital retail transactions, processing over ₹24 lakh crore annually. But its evolution isn’t just about volume; it’s about integration. UPI is increasingly functioning as a foundational layer, incorporating features like lines of credit, recurring payments, and merchant services.
“2025 really highlighted how technology and policy are converging to reshape financial services,” explains Akshay Mehrotra, Managing Director and CEO of Fibe Group. “We’re seeing innovations *within* UPI, simplifying access to credit and even streamlining GST processes. Consumers now expect seamless experiences, and that’s driving the evolution.” This shift signals a move away from UPI as a mere innovation and towards its role as essential financial infrastructure, akin to a digital railway for money.
The Persistent MSME Credit Gap: A ₹30 Lakh Crore Problem
Despite the advancements in digital infrastructure, a significant hurdle remains: access to credit for Micro, Small, and Medium Enterprises (MSMEs). Estimates from M1xchange and Deloitte place the credit gap between ₹20-25 lakh crore, while SIDBI suggests it’s closer to ₹30 lakh crore, particularly impacting service sector companies and smaller suppliers. This isn’t a new problem, but one that continues to stifle growth.
Sundeep Mohindru, founder of M1xchange, emphasizes that while regulatory improvements and digital tools have helped, the gap persists. “There’s still a massive need for reliable working capital and better utilization of verified transaction data for credit assessment.” Lenders are increasingly adopting cash flow-based lending models, leveraging digital invoicing, GST data, and platforms like the Reserve Bank of India’s Trade Receivables Discounting System (TReDS) to mitigate risk. TReDS allows MSMEs to discount invoices without increasing their balance sheet leverage, but adoption isn’t universal.
Export Challenges and the Need for Real-Time Financing
Indian exporters are facing a challenging global landscape in 2025, marked by volatile trade conditions. Longer payment cycles, currency fluctuations, tariffs, and complex documentation are creating significant liquidity pressures, especially for smaller businesses. Pushkar Mukewar, co-founder and CEO of Drip Capital, notes a fundamental shift in the environment.
“Documentation gaps, long payment cycles, and currency volatility are creating uncertainty,” Mukewar explains. “Exporters need real-time, structured financing solutions aligned with global supply chains, not traditional banking processes.” He points to increased participation from global banks, development institutions, and private equity as a positive step, but stresses the need for shared data frameworks and interoperability.
Last-Mile Inclusion and the Power of Trust
Financial inclusion efforts are focusing on last-mile delivery, leveraging assisted digital models and business correspondents to reach underbanked regions. Anand Kumar Bajaj, founder of PayNearby, highlights the importance of building trust alongside access. “When technology and local trust combine, economic participation grows significantly,” he says, pointing to the success of UPI and initiatives like Digital Banking Units.
This trust-based approach is particularly evident in women’s financial inclusion. PayNearby’s data shows that female customers conduct 66% more transactions with female agents, demonstrating the power of community-based financial services. Agent banking is not only boosting family income but also expanding access to formal financial services within communities.
Data, AI, and Interoperability: The Future of India’s FinTech
Data integration and the application of Artificial Intelligence (AI) are emerging as central requirements for the next phase of financial development. From underwriting to payments and compliance, AI is playing an increasingly important role. However, the key to unlocking further progress lies in interoperable systems that allow secure data sharing between lenders and platforms. India’s Digital Public Infrastructure – UPI, Aadhaar, and Account Aggregator frameworks – are paving the way for consent-based data sharing.
Mukewar emphasizes that future progress isn’t about capital availability, but about coordination. “Enabling seamless financing requires shared data frameworks, interoperable systems, and deeper collaboration between regulators, lenders, and technology platforms.”
The year 2025 represents a crucial transition for India’s financial system. While stability has improved, structural limitations – particularly around MSME credit and exporter liquidity – remain. The coming years will determine whether the nation’s digital infrastructure and regulatory clarity can translate into broader, more consistent access to finance, solidifying India’s position as a global FinTech leader. Stay tuned to Archyde.com for continued coverage of this evolving landscape and expert analysis on the future of Indian finance.
