PhonePe, Paytm, Cred, Instamojo, Razorpay, MoneyTap are some of the most heard startup names. Do you know what they have in common?
Yes, you guessed it right! All of the above are FinTech startups. Moreover, some of these are Indian startups that have entered the elite Unicorn Club, meaning the startup has a value of over 1 billion dollars.
Did you know that out of the total number of Unicorn startups in India, about one-third of them include FinTech startups? Well, you know now.
By now, you must have guessed that India has a pretty good number of FinTech startups gunning for expansion. Unicorn FinTechs are proof of this. So today, let’s explore the FinTech industry in India. Let us discover how the Indian FinTech industry is faring in comparison with the world.
FinTech and India
Bengaluru, alternatively known as the Silicon Valley of India, can be called the startup capital of India. A majority of the startups, FinTech or otherwise, have originated from there. Other startup hubs include Mumbai, Delhi, Hyderabad, and Gurugram to name a few.
The various active segments that fall under the umbrella of FinTech include digital payments, lending, InsurTech(Insurance Technology), investment platforms, and many more.
Let’s have a look into how the FinTech industry flourished in India.
Key Growth Drivers of FinTech
- Soaring Smartphone Penetration
Every individual is equipped with a smartphone these days which is like having the whole world in your palm. This device has been instrumental in making the digitization of financial services available to every stratum of society.
- Increased Banking Penetration
The Jan Dhan Yojana has helped create bank accounts for even the underserved community by the banks and financial institutions. This has enabled the financial inclusion of the lower-income groups which were forgotten by the traditional banking methods.
- Government Initiatives
The various government initiatives which include Digital India, demonetization, and APIs such as UPI, Aadhar have pushed the economy in the direction that has created ideal situations for the growth of the FinTech industry.
Challenges to FinTech’s Growth
- Cyber Threat
More technological advancement comes with an added threat of cyber-attacks. Due to the digital nature of FinTechs, their systems are very susceptible to hackers’ intrusion.
- Regulatory Complications
Due to the complex nature of the FinTech industry, the regulatory bodies have been facing difficulties in governing the sector. Their main concerns include the heightened possibility of fraud and scams.
- Heavy Competition
The FinTech industry is such wherein the competition has just gotten steeper with passing time. There is a constant need for the business plan of startups to be innovative and creative. The project finance modeling has to be designed in a way that it propels the growth of the startups over time.
Let’s Talk Numbers
You must be wondering that the title here says India to be one of the largest Fintech hubs in the world, but there has been no evidence to support the statement. So here are the facts for the said statement.
According to an article by the Economic Times, there are 2174 FinTech startups currently operational under the different segments. This makes India one of the leading FinTech hubs in the world.
According to the EY Global FinTech Adoption Index 2019, India had an 87% adoption rate compared to the global average of 64%. If we have a look at the past index, we can see that in 2017, India’s adoption rate was 52% which was again higher than the global average of 33%.
A report by the Boston Consulting Group (BCG) and FICCI states that the Indian FinTech industry is at the cusp of remarkable value creation. The current value of the industry is approximated at $50-60 bn which is expected to grow to $150-160 bn by 2025.
The pandemic has seemed to have affected many businesses by slowing down their pace. But the same cannot be said about FinTechs. In fact, it was during this period that a couple of FinTech Unicorns emerged.
Some of the Unicorns are Cred, Groww, Paytm, Phonepe, Razorpay, Zerodha, Policy Bazaar, and BillDesk.
So it’s the amount of scope for growth in the FinTech industry and the innovations brought in by the various startups that make India one of the leading hubs in the entire world.
So here we had a look at how India fares in the Fintech space along with the world. But have you ever wondered whether the banking sector will look at this stupendous growth of FinTechs as an opportunity or threat?
We’ll leave you with this thought! Until next time!