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Fintech Startup Space Making Waves In India

Due to the lack of traditional financing infrastructure with retail banks that are much behind in digitisation, FinTechs have been the answer for the people, as far as borrowing, investing and financial planning are concerned.

Photo Credit : ShutterStock

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The Fintech Tech or financial technology industry in India has come of age, especially after the boost it received post demonetization by Prime Minister Narendra Modi led central government. Now, we can see a sign of its popularity in the data that mobile payments were more than ATM cash withdrawals last year.

India is the third-largest startup ecosystem globally and is currently valued at $31 billion and is expected to grow to $84 billion by 2025. India is one of the fastest-growing fintech markets in the world, and of the over 2,000 fintech in the country today, over 67 per cent have been set up in the last five years. 

Rising transactions resulted in more startups joining the fray and incremental investments chasing them. India was the top destination for fintech investments in the Asia-Pacific (APAC) region, with $1.93 billion raised across 66 deals in the third quarter of 2021, according to the S&P Global Report.  

India, along with South-East Asia, accounted for 70 per cent of all investment in the APAC region. "With the possibility of digital banks and the entry of fintech into the banking ecosystem, we can expect technological innovations expanding the reach and furthering the process of making financial inclusion a reality," says CEO and Co-founder of Vivifi India Finance, Anil Pinapala.  

The fintech landscape has also changed over the years. Apart from payment apps that dominate the sector, business-to-business platforms are also picking up in the fintech space. For the sector to grow, investments will be needed both from private equity players and the primary market.  

With venture capital raising more money, Indian fintech is well placed to attract more capital, especially since China's fintech is no longer a popular destination, thanks to their government's crackdown on the new technology players. "Fintech is a large space and there might be more interest for blockchain, crypto and lending in 2022," says founder of Credit Fair, Aditya Damani, Founder.  

The Fintech industry has been one of the favourites for investors this year. According to a report by PwC India, investments worth $4.6 billion were recorded in the fintech space in India in the first three quarters, as compared to $1.6 billion in 2020. 

“Fintech has been at the forefront of driving innovation in various applications including loans, payments, stock trading, and credit scoring," Says Suhail Sameer, CEO, BharatPe. 

Sameer added that the coming year will witness the rise of Digital Banks, driven by cutting-edge technology. The future belongs to tech-driven banks that offer convenience via digital products.   

FinTech has the potential and already has disrupted the financial system in tier 2 and tier 3 market space. Due to the lack of traditional financing infrastructure with retail banks that are much behind in digitisation, FinTechs have been the answer for the people, as far as borrowing, investing and financial planning are concerned.  

A lower cost of services in FinTechs gives them a major advantage in becoming an integral part of the consumer need. 

Also, there is a healthy adoption of UPI in several cities making people more conversant with digital payments. It augurs very well for the future when these customers can be provided other financial services too.  

The future in this segment is bright. Digital payments are no longer limited to Tier -1 cities. 2020 and 2021 have witnessed a huge growth in the adoption of digital payments across tier-2,3 and 4 towns and cities.

"The migration from cash and in-store commerce to paying online or on-the-go through next-gen payment methods such as contactless payments, digital wallets, mobile payments and QR payments is a clear trend not just in the metros, but also in tier I, II and III cities," states Rishi Chhabra, General Manager – India and Sri Lanka at Fiserv  

The biggest opportunity for us is the huge unmet credit gap amongst millions of SMEs in India. "The last couple of years have been tough for lenders; their balance sheets have been hit hard and lending volumes depressed. Stronger consumer confidence will drive demand for personal loans and purchases via BNPL," mention Rohit Sen, Co-founder, and CEO, NIRA

As for the primary market, there are some important fintech IPOs lined up in 2022 which will give a boost to the sector. Given the growth expectation, if market conditions are right, these IPOs should sail through.

"For the sector to grow, investments will be needed both from private equity players and the primary market. With venture capital raising more money, Indian fintech is well placed to attract more capital, especially since China's fintech is no longer a popular destination, thanks to their government's crackdown on the new technology players.  As for the primary market, there are some important fintech IPOs lined up in 2022 which will give a boost to the sector. Given the growth expectation, if market conditions are right, these IPOs should sail through." Vikas Singhania, CEO, TradeSmart.