SUMMERTHAN’22
Fintech Wave in India
Financial Technology (Fintech) Companies basically means application of technology for
creation of new and improved financial products & services, in an economically feasible manner,
there by targeting new market segments which were previously not possible for traditional banks
and financial institutions.
How did the Fintech Wave start?
The beginning of fintech wave relates back to the 19th century. From the use of telegraphs &
morse code to ultimately integration of Unified Payments Interface (UPI) with Credit Cards,
Fintech Companies have truly leveraged technology thereby creating value for customers.
Where are we now?
Even though it seems that Banks & Financial Institution and Fintech Companies are rivals to one
another and are fighting for their share in the market, the reality is both sides are as much
dependent on each other as they need to compete with each other.
On one hand, Fintech Companies depend on Banks & Financial Institution for funding, on the
other hand, Banks & Financial Institutions have hired fintech firms to leverage new technology
in order to offer better quality products & services.
The increase in usage of smartphones and easy access to internet facilitates are facilitating the
transition from Fintech 3.0 to Fintech 3.5.
(Source: Statista Reports)
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What are the Segments in Fintech Industry?
Segments in the Fintech Industry can be broadly classified in the following six
categories
1. Payment Tech
• Facilitates transfer of funds for various cases, such as P2P (Person to Person), P2M
(Person to Merchant) etc.
• Transition towards a cashless & paperless economy.
• Rise of Unified Payments Interface (UPI) acted as a turning point for firms in Payment
Tech.
2. Investment / Wealth Tech
Includes digital brokerages, online investing tools and robo-advisors.
3. Lending Tech
• Focus is on fast personalized credit facilities for customers.
• Buy Now Pay Later (BNPL) is a recent innovation which helps users to pay for the
goods & services at a future data, interest free.
4. Digital Banking Tech
• Enables the users the access of banking products and services via an online platform.
• Services such as Request for Statement, NEFT, RTGS, IMPF, Management of
Cheques, Cash Withdrawal etc.
5. InsurTech
Major Products and services include
• Insurance Infrastructure API
• Underwriting Services
• Claims Management
• Customization of Insurance Policy
6. Reg Tech
Regulation Technology Companies aims at easing the life of customers w.r.t compliance
of laws and regulations.
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Following shows a distribution of Fintech Companies in India by Segment.
(Source: Statista Report)
What is Valuation of Indian Fintech Industry?
The astounding Indian Fintech Market is currently valued at $30.8 billion, and it is expected
to grow at an impressive CAGR of 24.6 % to reach $111.8 billion by 2026. Numerous factors
have contributed for the same:
• Rising internet adoption
• Ground-breaking programmers like Aadhar, UPI, and OCEN, the government's digital
motto
• Higher percentage of literacy
• Cheaper data costs
(Source: Silver Mile Report)
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What are the most prominent Fintech Investors in India?
Since 2014, 1219 fintech deals have raised more than $23.6 billion for Indian fintech start-ups.
The top 3 Indian fintech investors are
• Sequoia Capital
• Accel
• Tiger Global Management
Although InsurTech funding is expanding more quickly, payment tech still dominates in terms
of raising capital. Growth stage funding has been increased significantly (series B, series C).
Which are the most popular fintech firms of India?
The Story of fintech unicorns in India started back in 2015 when Paytm became India’s first
fintech unicorn. The success story of Indian fintech companies continued producing 21 unicorns
in just 7 years with 11 unicorns from 2021 alone. Razorpay, which is presently valued at $7.5
billion, is the most valuable fintech unicorn in India. Cred follows with a $6.4 billion valuation.
The top five fintech unicorns, each valued at over $5 billion are PhonePe, Pine Labs, and Paytm.
The most profitable fintech company is Zerodha, a unicorn start-up that was bootstrapped, with
a profit of 1122.30 CR in FY21. Bill desk, Mobikwik, Oxyzo, Razorpay, and Groww are some
of the other profitable unicorns.
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Leading Unicorns in India as on April 2021, by market valuation
(Source: Statista Report)
What are the growth drivers for Fintech Firms in India?
• 1.2 billion enrolments and widespread identification formalisation.
• The Jan Dhan Yojana has a high level of financial penetration with over 1 billion bank
accounts.
• A high number of people own smartphones: 1.2 billion mobile subscribers.
● For companies and startups, there is the India Stack Set of APIs.
• Indians' disposable income is rising.
• Important government programmers like UPI and Digital India
• India will add 140 million middle-class and 21 million high-income families by 2030,
which would fuel demand and growth in the country's FinTech sector.
What are the challenges associated with the Fintech Firms?
• Cyberattacks: Because of process automation and data digitalization, financial systems
are more susceptible to attacks from hackers.
• Recent hacking incidents at banks and debit card companies serve as examples of how
simple it is for hackers to infiltrate networks and do irreversible harm.
• Data Privacy Issue: For consumers, the most crucial questions concern who is to blame
for cyberattacks, as well as for the exploitation of sensitive personal information and
financial information.
• Regulation is a challenge, particularly for cryptocurrencies, in the newly-emerging
FinTech industry.
Due to the variety of FinTech products available, it is challenging to provide a single, all-
encompassing solution to these issues. In the majority of countries, they are unregulated and
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have turned into a haven for scams and frauds.
What are some recent developments in the Fintech World?
Release of RBI's Account Aggregator Framework
The RBI Account Aggregator structure gives clients substantial control over their data while
enabling them to share information with their financial service providers. By bridging the gap
between financial information providers (FIPs) and users (FIUs) through a carefully managed
consumer consent design that puts the needs of the customer first, it can democratize data. New
customer use cases for instant products and services will develop as more users join the AA
ecosystem.
Credit Fair, a fintech start-up, raises $10 Millions to provide consumers and small
businesses with customized lending solutions.
Credit Fair, a fintech business focused on lending, has raised $10 million in a seed investment
round that includes a combination of debt and equity. The LC Nueva AIF fund took the lead in
the round. Capital A, Sattva Family Office, Nitesh Damani of Khel Group, Nikhil Chandra
Gupta, and current investors Anand Ladsariya, Alok Agarwal and Neeraj Goenka, participated
in the equity round. While Vivriti Capital, Caspian Impact, and InCred Finance took part in the
loan funding round.
Cred: New Entry to Fintech Unicorn Club
Cred, a fintech firm, achieved unicorn status after raising $215 million at a $2.2 billion valuation
in a funding round. It was co-led by Coatue Management LLP. and Falcon Edge. Capital Cred's
most recent Series D round was completed only a few months after the Kunal Shah-led business
received $81 million at a $806 million valuation.
FINTECH START-UP JIFY RAISES $10 MILLIONS IN SERIES A FUNDING
According to [Link], a fintech company, Accel and Nexus Venture Partners contributed $10
million to the company's Series A round of funding. According to a press release from [Link],
the money will be used "to expand its fintech product offering, scale up customer acquisition
across industries and cities, as well as increasing adoption within the workforce." In addition to
keeping tabs on user spending, the fintech platform supports smart budgeting, assists in setting
up realistic savings goals, and provides access to straightforward financial counselling along
with its digital card.