FINTECH INDUSTRY

The Indian

OVERVIEW

Industry Snapshot

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USD 66 billionof Fintech transactions in 2019

Source: ‘Emerging technologies disrupting the financial sector’ by PwC and ASSOCHAM

Source: EY Global FinTech Adoption Index 2019

20%Growing at a CAGR of over

Funding Trends in the Fintech Sector in India

VC Funding in India doubled from USD1.9 billion in 2018, to USD 3.7 billion in2019

Number of Fintech start-ups in India in 2019

USD 3.7 billionof VC funding in 2019

>2,000

10.8 billion UPI transactions in 2019, up from 3.7 billion transactions in 2018

India is currently tied with China for the highest FinTech adoption rate globally at

87%, which is significantly higher than

the global average of 64%

In total, 198 deal were made in theyear 2019 as compared to 193 of2018.

Source: India Fintech Report 2019

Source: Accenture

The payments industry accounted foraround 58% of the total funding raisedin 2019

The InsurTech industry accounted foraround 14% of the funds raised

10.8 % of the funding went to Fintechlending startups

Source: NPCI

Source: Accenture

MARKET AND INDUSTRY SEGMENTS

Digital Payments

Alternative Lending

InsurTech

RegTech

WealthTech

BankTech

Electronic payment solutions comprising remittances, andenterprise and merchant payments

AI, data analytics and otheradvanced technology-based credit-scoring solutions to enable lendingto underserved retail and MSMEborrowers with no or limited credithistory

Use of new and advancedtechnologies to expand thedistribution and customizationof insurance products forunderserved and unservedmarket segments

Technology solutions for personal wealthmanagement, and retail investing, includingAI-based robo-advisory solutions

Fintech solutions for banks and financial institutions in open banking,blockchain and smart contracts, trade finance, capital markets, liquiditymanagement, anti-money laundering, forex and treasury, credit analytics,asset liability management and other areas of finance

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Tech-enabled regulatory compliancemanagement and automation

Key Fintech Industry Segments in India

INDUSTRY GROWTH DRIVERS

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Changing DemographicsAs the demographic landscape in the country evolves, so do the channels ofcommunication with consumers, and modes of provision and consumption offinancial services. With a median age of around 28 years, and a growingcommon internet and smartphone userbase, the average tech-savvy youngprofessional in India seeks access to financial services and products on digitalplatforms. Both Fintech startups and financial service incumbents arecompeting and collaborating to meet the digital needs and expectations of theevolving demographics.

Availability of FundingThe Fintech industry has been one ofthe biggest recipients of risk capital inIndia in the last few years, which hasfueled continued innovation andgrowth in the sector.

Unmet Financial Needs Large swathes of the Indian population stillhave limited access to the formal financialservices ecosystem in India, largely due to thelack of awareness of various financial services.Among the financially underservedpopulation, and the inability of the traditionalfinancial services sector to effectively reachout and cater to the underserved segments.This gap in the market has created anopportunity for Fintech startups to buildinnovative technologies and business modelsto profitably serve the underservedpopulation in ways the incumbents could not.

Collaborative InnovationA telling feature of the Fintech ecosystem in India is the synergistic collaborationobserved between financial service incumbents, such as banks and other large financialservice providers, and the Fintech startups. Capital from the incumbents often supportthe innovation and efficiency of the Fintech startups, in developing new technologies,business models, and revenue streams, for mutual gains or for the common good ofthe industry.

Government Policies and InitiativesThe Government of India has arguably been thebiggest patron of the Fintech industry in India andhas played a vital role in accelerating the growth ofthe sector. The Indian Government has not onlyadopted some of the more progressive regulationsin the world with respect to the Fintech sector, butit has also actively created institutions andinitiatives, such as the recently conceived Fintechsandbox, to further the development of the sector.

T&A’s POINT OF VIEW

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The Fintech industry in India hasthree generic growth avenues aheadof it:1. To reduce operating costs and

improve efficacy of thetraditional financial services, byreplacing the legacy systems ofthe Indian banking and financialservices sector, thereby bothreducing service costs for theend-customers and improvingprofitability for the financialservice providers.

2. To create and improve access tounbanked and underserveddemographic segments in India,primarily through thedevelopment of advanced credit-assessment systems based onadvanced machine learning, bigdata and alternative data.

3. To create new variants oftraditional financial products orservices to compete withincumbent financial serviceproviders, thereby adding to thediversity, innovativeness andcompetitiveness of the financialservices sector.

However, one area that the IndianFintech industry currently lacks in, isniche technological expertise. Inorder to become a true world leaderin Financial Technology, India mightneed to pivot from being a jack-of-all-trades to a technology specialist.