India has emerged Asia’s biggest destination for FinTech deals, leaving behind China. With around 33 deals valued at $647.5 million, India has the highest investment in the FinTech segment compared China’s $284.9 million during the quarter ended June 30, 2020, according to a research report released by RBSA Advisors, a transaction advisory firm offering valuation, investment banking and transaction services.
Total investments in India’s FinTech sector crossed the $10 billion mark over the last four-half years i.e. from 2016 to first half 2020. Amid COVID 19, India has seen a 60 per cent increase in FinTech investments to $1467 Mn in first half 2020 compared to the $919 million for the same period last year. Availability of a technically skilled workforce and the presence of most parts of the financial services & technology ecosystem make Bengaluru and Mumbai the top two headquartered cities for FinTech companies.
FinTech has been known for their coming of age technology offering the most convenient and flexible options for consumers. The more and more advances in technology financial services adapt to upgrade their strategies, more growth in this sector is foreseen. This is just the beginning of a huge growth in FinTech market in the upcoming decade.
Out of total 21 unicorns in India, around one-third are FinTech companies, Paytm being the highest valued unicorn, at $16 billion. The FinTech market in India was valued at Rs 1,920 billion in 2019 and is expected to reach Rs 6,207 billion by 2025, expanding at a compound annual growth rate (CAGR) of 22.7 per cent during the 2020-2025 period.
“While the FinTech industry is still in its early adoption stage, we believe it is well-positioned to witness long-term growth in the coming years. The changes will be more focused on digital lending (alternative finance) and open banking. FinTech growth will ultimately create outsized opportunities for firms and help empower them in the digital age,” Rajeev Shah, MD and CEO, RBSA Advisors said.
According to MEDICI India FinTech Report 2020 2nd Edition, India had the second-highest number of new FinTech startups in the last three years, right behind the US. Also, within FinTech segments, digital payments have been at the forefront of leading the sector. Lending is the second largest segment in the FinTech sector followed by InsurTech, WealthTech, Neo Banks, RegTech etc.
Existing FinTech companies have gained one-third of new revenue at the cost of traditional banks, as per reports. India along with China accounted for the highest adoption rate of 87 per cent (global adoption rate is 64 per cent) out of all emerging markets in the world. Between 2010 and 2015, India saw 1,216 new FinTech startup founded. The period between 2015 to June 2020 has seen phenomenal growth in new startups across payments, lending, wealth and others.
India’s evolution as a progressive FinTech nation is due its ability of solving for identity in the form of Aadhaar for formalization, getting everyone a bank account or equivalents (PMJDY) to store money, building scalable platform(s) to move money (IMPS, UPI, BBPS, etc.) & allowing banks and FinTech companies and wealth/insurance/ lending players also to access platforms like UPI, GSTIN & digilocker to innovate.
Initiatives led by the government and regulators for Digital India like demonetization, Jan Dhan Yojana, Aadhaar, etc. aided by the growing internet and smartphone penetration, has led to the adoption of FinTech. “As more and more customers get on the digital board, FinTech’s will have to focus on building trust and consumer engagement. Especially given the time when cybersecurity is extremely vulnerable. To be critical and to stay ahead of the competition than other FinTech brands, it is necessary to focus on the security along with making the procedure simple for consumers”, says Ravishu Shah, MD and Co-Head Valuations, RBSA Advisors.