Fintech, i.e. the technology that enables banking and financial services, is a very fast growing space in India, especially for the start-up domain. Fintechs are offering services in the form of products, applications, processes and models. The fast growth is enables by the rising digital penetration in India and use of smart-phones.
Even a common man can feel that technology is disrupting the Indian financial sector at a high rate. From bank transfers, to payments and loans, every financial function today has a scope to use more and more technology.
According to NASSCOM, the Indian fintech market is expected to grow at a CAGR of 22 percent for the next five years. A KPMG report states that the transaction value for the Indian fintech sector is expected to reach USD 73 billion by 2020.
A study from accounting firm Ernst & Young (EY) examined fintech adoption rates across 20 major economies. It found 69 percent of Chinese consumers had used at least two fintech services in the last six months. India came in second with 52 percent of consumers using fintech, followed by the United Kingdom at 42 percent.
"India comes out a clear second, where it's fair to say there's a large digitally-savvy population," says Thomas Bull, leader of the EY FinTech Adoption Index. Keeping in view the pace at which India’s payment landscape is growing, it won’t be a surprise if India takes over China in a few years!
Let us look at growth of some fintech start-ups in India over time to get a flavor of the market.
“Targeting the rapidly growing segment of 300 million smartphone users, Sqrrl seeks to use the growth capital to reach out to a million users across India by 2019,” says Co-founder Sanjeev Sharma. Launched recently, Sqrrl is an investment and wealth management platform aimed at helping young Indians build the habit of savings and investments. The app allows users to invest in high performing (zero-commission) mutual funds based on their investment needs, risk horizons, as well as their goals.
Sqrrl has customers in more than 500 cities in India and is aspiring to reach more than five million customers over the next five years. Commenting on the reasons for investment in the platform, Rajesh Sehgal, Managing Partner, Equanimity Investments, says, “I have found Indian millennials to be pretty money savvy and adapting naturally to technology platforms like Sqrrl to achieve their short-term and long-term financial goals. The Sqrrl team is working hard to reach out to the broader Indian population with its highly intuitive offering available in nine Indian languages. We look forward to working with them and supporting this cause of helping young Indians become financially strong and independent in the long run.” Needless to say that with the saving and investment space heating up, Sqrrl faces tough competition from seasoned players like Paytm, Zerodha, and Scripbox.
Paytm is India’s largest mobile commerce platform which provides services like mobile recharge and bill payment utility. The company has an aggressive growth strategy. For instance, Paytm is investing in Creditmate to raise upto USD 10 million. The idea is to leverage Creditmate’s widening loan portfolio and asset valuation technology. Last year also, the company had invested in the same company.
As part of its plans, Paytm has recently launched payment bank and is also entering wealth management services. Besides, it has tied up ICICI Bank to offer short term and interest free loans.
Mswipe Technologies, a finteh start-up which makes point of sale (PoS) machines for merchants, recently raised USD 10 million in funding from B Capital Group and DSG Consumer Partners. The start-up will use the fresh capital to expand its payment acceptance network through tie-ups with retail merchants for card and digital payments, and to strengthen its product development capability.
“At Mswipe, we are at the forefront of the payments revolution by powering acceptance infrastructure at the merchants’ end, enabling them to accept card and digital payments in a hassle-free manner. B Capital’s expertise in the sector and its exceptional network in Asia will be an important ingredient as we shift orbit and execute our next phase of growth,” Manish Patel, chief executive of Mswipe, said in a statement.
The Indian market has about 14 million merchants with low PoS penetration. Seeing this market opportunity, the company recently launched a proprietary PoS machine named Wisepad G2TM , which supports contact-less payment methods like Near Field Communication (NFC).
Founded in 2008 by Yashish Dahiya and Alok Bansal, PolicyBazaar.com is India's largest insurance website and comparison portal. PolicyBazaar has received a fresh round of funding of USD 200 million. It is now aiming for 80 percent growth year on year, and wants 10 million transacting customers by the end of 2020.
As of now, PolicyBazaar accounts for 25 percent of all life insurance policies being taken in India, 7 percent of India’s retail health insurance business. It processes 300,000 transactions per month. In fact PolicyBazaar’s elevation as a Unicorn has set the fintech industry on fire, as the niche promises new developments, and new growth.
“We have 50 percent market aggregation share in terms of business volumes. The insurance market is growing by only 30 percent. So the challenge for us is to keep growing 100 percent y-o-y for the next three years, at least. To enable this blistering rate of growth we need to ensure that more and more people buy insurance online. The only way to achieve this is by serving the customers better. This is the only tack which will help us sustain our growth,” says Ashish Gupta, CTO & CPO, PolicyBazaar.
Today, the Indian government is also keen on growing usage of the fintech space. The National Payments Corporation of India (NPCI) has launched its interoperable payments system, Unified Payments Interface (UPI). Further, the RBI is looking to regulate the P2P lending platforms and get them to register as non-banking financial corporations (NBFCs).
Indian fintech startups are also going global. Bharat Interface for Money (BHIM), India's national mobile wallet, is associated in an Indo-Singapore collaboration to boost cross-border payment services. Payment services provider Network for Electronic Transfers of Singapore (Nets) and National Payments Corporation of India (NPCI) have already set up a cross-border payment connection to support real-time fund transfer between accounts in both nations.
Jawed Ashraf, High Commissioner of the Republic of India to Singapore, said: "A digital revolution, anchored on the biometric identity of a billion plus people, is sweeping through India. It has prompted financial inclusion, digital payments, and innovation on an extraordinary scale.
"Singapore, a global financial hub, has emerged as a leading centre for fintech. Our partnership will not only support our two nations' progress in fintech, but also help drive our international competitiveness and success in this area," Ashraf said.
Now, Nets and NPCI are exploring the use of BHIM, to make payments at Nets terminals. Launched in 2016, BHIM is an initiative to enable fast, secure, reliable cashless payments using cell phone.
The future of the sector is very bright. Today the banks and financial services do not see fintech start-ups as disruptors/competitors. They see them as partners who can take them to the next level by going digital.
Additionally, today’s consumers are increasingly incorporating technological innovations in their daily lives. With mobile data getting cheaper and supportive government regulations, private sector is keen to make high investments.