Fintechs in a happy space – The Hindu BusinessLine

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The market is growing and investments are flowing in

India’s fintech firms have taken giant strides in the past half-a-dozen years in transforming financial services delivery through automation. This has benefited businesses across a wide range of industries, as improved access to capital has allowed them to reach their goals faster.

Growth drivers

In recent years, fintech entities have benefited from various government and regulatory initiatives. These include Jan Dhan Yojana, the implementation of Aadhaar, demonetisation and the introduction of GST, among others. Fintech adoption has been aided by the increasing ubiquity of the internet and smartphones, as well as low data rates.

Other drivers include the relatively easy availability of capital and a robust financial ecosystem, more than 65 per cent of the populace being below 35 years, leading to the rise of millennials and other favourable demographic communities receptive towards innovative technology, the low penetration of financial services pan-India with vast cohorts of people still unbanked in rural regions, the emergence of SMEs and more.

In India’s fintech space, there are several segments offering solutions in niche financial domains. Apart from the traditional payments business, these include digital payments lending insurance, peer-to-peer lending and wealth management, among others. All of these segments offer immense growth opportunities for fintech players.

Significantly, the nation’s emerging start-up ecosystem is assisting in the infusion of capital into the fintech sector. In the quarter ending June 2020, the country is reported to have attracted the highest investments in fintech, with 33 deals worth $647.5 million whereas China stood at $284.9 million in this period. As a result, the country has surpassed China as the most popular destination for fintech deals in Asia. As per KPMG’s Pulse of Fintech H1 2021 report, disruptions have transformed into opportunities for the sector in India, with $2 billion in fintech investments during the January to June 2021 period. Meanwhile, total investments in India’s fintech industry have passed the $10-billion milestone between the calendar year 2016 and H1 2020.

Besides the integration of advanced technologies in financial services, a technologically skilled workforce has facilitated the faster growth of fintech start-up entrepreneurs. Fintech start-ups are creating unique products that can appeal to younger cohorts in a country with one of the fastest-growing start-up ecosystems and the world’s second-largest internet user base. Millennials and other new-age consumers are eager to move away from heavy cash usage and instead use their phones to make quick payments with a few clicks. Additionally, the deployment of digital technology has ensured a tremendous customer outreach while providing flexible and convenient offerings for customers. Moreover, the increasing use of data analytics is allowing the industry to provide local and customised offerings to consumers.

In the coming months, the fintech industry is poised for mega IPOs (initial public offerings) where at least three start-ups are slated to raise $3.7 billion. A gainful listing by these fintech players could then encourage more domestic fintech firms to make their advent on the Indian bourses in the years ahead.

As businesses move towards digitalisation, fintech start-ups can leverage the opportunity for creating new alliances with non-digitised and non-tech services. Broad B2C and B2B partnerships with entities from banking, NBFCs, e-commerce and logistics are expected to provide new business opportunities.

Going by a recent Boston Consulting Group and FICCI report, the country’s fintech companies are slated to become thrice as valuable in the next five years, touching a valuation of $150-160 billion by 2025.

The writer is Founder, Clix Capital

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