India’s fintech sector may be young, but it is growing rapidly, driven by a large market base, an innovation-driven startup landscape, and support for government policies and regulations.
Several new companies populate this emerging and dynamic sector as traditional banking institutions and non-bank financial companies (NBFCs) are catching up.
NASSCOM predicts that the Indian fintech software market alone could reach $ 2.4 billion by 2020, doubling its current growth rate.
Simply put, fintech refers to the variety of financial services that can be made available on digital platforms. This new disruption in the banking and financial services industries has had a huge impact. The main service offerings for digital platforms include:
Peer-to-peer (P2P) lending services: Businesses are using alternative credit models and data sources to provide faster and easier access to capital for consumers and businesses. P2P loans allow online services to directly match lenders with borrowers, who can be individuals or businesses. Some examples are Lendbox, Faircent, i2iFunding, Shiksha Financial, GyanDhan, and MarketFinance.
Payment services: Businesses allow individuals and businesses to accept payments online and on mobile devices without the need for business accounts. Transfers are made directly to the beneficiary’s bank account to avoid fraud. Some examples are Mobikwik, Paytm, and Oxigen Wallet.
Bank Transfer Services – Some offshore registered startups try to fill in the gaps in bank transfer transactions (both incoming and outgoing) as the current process is cumbersome and expensive. These startups aim to break the current monopoly of companies like Western Union and MoneyGram. Some examples are Instarem, FX, and Remitly.
Personal Finance Services or Retail Investment: Fintech companies are also increasingly concerned with providing personalized financial information and services to individuals, including how to protect, manage, and invest their personal finances based on their specific needs. Some examples are FundsIndia.com, Scripbox, PolicyBazaar, and BankBazaar.
Various software services – Companies offer a range of cloud computing and technology solutions that improve access to financial products and thereby increase the efficiency of day-to-day business operations. The scope of fintech is rapidly diversifying at the macro and micro levels, from delivering accounting software online to creating specialized digital platforms that connect buyers and sellers in specific industries. Examples of this are Catalyst Labs in the agricultural sector, AirtimeUp, which allows village retailers to do mobile top-ups, cash, with which SME customers can offer payments and promotions through a mobile platform, Profitbooks (accounting software online for non-accountants). , StoreKey and HummingBill.
Equity financing services: This includes crowdfunding platforms that allow you to finance a project or business by raising funds from a large number of people. These internet-mediated platforms are becoming increasingly popular around the world, as access to venture capital is often difficult to secure. These services are especially aimed at the early stages of business management. Some examples are Ketto, Wishberry, and Start51.
Cryptocurrency: Since India is a more conservative market with cash transactions still dominating, the use of digital financial currencies like “Bitcoin” has found little attractive compared to international markets. However, there are a few bitcoin exchange startups in India: Unocoin, Coinsecure, and Zebpay.
Fintech services companies are redefining the way businesses and consumers do business on a daily basis.
Because of this, global investment in FinTech companies has skyrocketed to an all-time high: from $ 4.05 billion in 2013 to $ 19.2 billion in 2015 to $ 12.2 billion in 2014.
In India, the scope was much smaller but with similar growth rates: investment in the Indian fintech industry increased by 282% between 2013 and 2014, reaching $ 450 million in 2015.
In addition, India has a largely untapped market for financial services technology startups: 40% of the population is currently not affiliated with banks and 87% of payments are made in cash.
With the penetration of mobile devices increasing from 85 to 90% in 2020 from 65 to 75% today, and with the increase in internet penetration, the growth potential of fintech in India cannot be overstated.
In addition, it is estimated that up to 90 percent of small businesses are not linked to formal financial institutions.
These gaps in access to institutions and services offer important opportunities to develop fintech solutions (such as financing, financial management) and broaden the market base.