FinTech Industry in India

Future of Financial Services

FEBRUARY
2021
Valuation | Investment Banking | Restructuring
Transaction Services | Transaction Tax
1 Background Page No. 03

Fintech Landscape
2 in India Page No. 08

Factors impacting
3 Fintech Sector Page No. 23

4 Funding & Valuation Trends Page No. 29

5 Future of Fintech Sector Page No. 34

6 Conclusion Page No. 38

 1
Background
1. Background
FinTech, a combination of the words “finance” and “technology,” is a term that refers to any technology that seeks to
enhance and automate the delivery of financial services in newer and faster ways than was traditionally available.

Commencing as a term referring to the back end technology used by large financial institutions, it has expanded to
include technological innovation in the financial sector, including innovations in financial literacy and education, retail
banking, investments, etc.

FinTech can take the form of software, a service, or a business that provides technologically advanced ways to make
financial processes more efficient by disrupting traditional methods.

FinTech describes a variety of financial activities, such as money transfers, depositing a check with your smartphone,
bypassing a bank branch to apply for credit, raising money for a business startup, or managing your investments,
generally without the assistance of a person.

Financial FinTech Technology

Services

Sector initiated to flourish in the 1990s when the Internet and e-commerce business models soared and in the
following decade banking in most parts was already completely digitalized. The Global Financial Crisis in 2008, in
which many people lost their trust in traditional banking systems, security and transparency has become more
important than ever. This shifting mindset and the technology of cloud computing made it possible to invent new
customized solutions and standard procedures such as providing access to banking profile, payment and transfer of
money with automatically converted currencies.

The demonetization drive in 2016 in India, can safely be called another landmark moment which redefined the
FinTech ecosystem as it was understood until then and put many FinTech startups in India on the map. The ban on INR
500 and INR 1,000 currency notes, which wiped out 86.4% of cash from the economy overnight, forced the public to
switch to digital payments and online transactions.

FinTech Industry in India - Future of Financial services 04

1. Background
India is one of the largest Fintech markets in the world

India is amongst the fastest growing FinTech markets in the world. India has Asia’s highest FinTech investment
activities (VC, PE and M&A) with deal value of around $647.5 Mn across ~33 deals, as compared to China’s $284.9 Mn
during the quarter ended June 30, 2020.

According to Accenture, existing FinTech companies have gained one-third of new revenue at the cost of traditional
banks. India along with China accounted for the highest adoption rate of 87% (global adoption rate is 64%) out of all
emerging markets in the world.

As per the MEDICI India FinTech Report, 2020 edition, India has seen explosive growth in the number of new ventures
launched in the FinTech space. Between 2010 and 2015, India saw 1216 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 to following factors:

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
& Digi locker to innovate.

Source: Traxcn, Crunchbase, IMF World Economic Outlook Database 2019 FinTech Industry in India - Future of Financial services 05
1. Background
India has around 2174 FinTech startups as on June 2020. Availability of a technically skilled workforce and the
presence of most parts of the financial services and technology ecosystem make Bengaluru and Mumbai the top two
headquartered cities for FinTech companies.

Number of FinTech startups by segments

Payments
747 405
Lending
365 WealthTech
Personal Finance Management
313 InsureTech
58 RegTech + Cybersecurity
111 Other Segments*
173

*Other segments includes Blockchain, Cryptocurrency, AI/Machine Learning, Loyalty/Rewards/Coupons, B2B FinTech,
Banking tech, BigData Analytics, Crowdfunding, Digital Cards, Neobanks, Remittances, Capital Market Tech and Trade
Finance.

Total investments in India’s FinTech sector crossed the $10 Bn mark over the last 4.5 years, i.e. from 2016 to H12020.
Amid the COVID 19 crisis, India has seen a 60% increase in FinTech investments, i.e. $1467 Mn in H12020 compared
to the $919 Mn for the same period last year. Stage-wise breakup of total FinTech funding in India during
2019-H12020 is as follows.

Stage-wise Breakup of Total Fintech Funding ($5.4 BN) in India - 2019 - H12020
2000 120
1,818.0
97
100
1500 1,452.5
80
53
1000 868.8 60
48
40
484.3
500 330.2
26 3 20
7 165.5 180.8 105.3
4.55 18 3
0 8 0
Angel Seed Series A Series B Series C Series D Series E Series G Others
Total Funding (Mn) Total No of Deals

India is one of the 2nd Highest

3rd largest FinTech
largest Fintech Funded Sector in India
ecosystem globally
markets in the world (after E-commerce)

Source: MEDICI India FinTech Report 2020 2nd Edition FinTech Industry in India - Future of Financial services 05
06
1. Background
Within the financial services industry, some of the key used technologies include artificial intelligence, big data,
robotic process automation (RPA) and blockchain.

Artificial Intelligence (AI) and Machine Learning (ML)

Artificial Intelligence and Machine Learning are some of the most used technologies in FinTech, offering the potential
to play an even bigger role in the finance industry as developments continue. AI and ML is used in various forms. AI
algorithms can be used to predict changes in the stock market, give insights into the economy, customer spending
habits and allows financial institutions to better understand their clients. Some of the FinTech applications of AI and
ML include  credit scoring, fraud detection, regulatory compliance, and wealth management, among others. Chatbots
are another AI-driven tool that banks have started using to help with customer services.
 
Big Data and Data Analytics
Data from customers and markets is of high value to FinTech companies. Through large datasets, information about
consumer preferences, spending habits and investment behavior can be extracted and used to develop predictive
analytics. Predictive analytics refers to predicting how consumers are likely to behave using past information and a
mathematical algorithm. The collected data also helps in formulating marketing strategies and fraud detection
algorithms.
 
Robotic Process Automation (RPA)
Robotic Process Automation (RPA) refers to the technology that focuses on automating process of manual and
repetitive tasks to robotics instead of humans in order to streamline workflows in financial institutions. These tasks
just involve the input of information into a system and do not require much skill. Thus companies are replacing
manual workforce with RPA which can complete the task quicker and more efficiently. RPA can be used to increase the
productivity of the financial company. The most widespread applications of RPA in finance are:

Regulatory Communication
Statistics and Transaction
compliance and marketing
data collection management
management through e-mails

Blockchain
Blockchain technology is another financial technology which is being adopted at a large scale in the financial industry,
primarily due to its capability to securely store transaction records and other sensitive data. Each transaction is
encrypted, and the chances of successful cyber-attacks are relatively low when blockchain technology is employed.
This technology is also the backbone of many  cryptocurrencies. A blockchain is a decentralized, distributed, and often
times public, digital ledger consisting of records called blocks that is used to record transactions across many
computers so that any involved block cannot be altered retroactively, without the alteration of all subsequent blocks.
This allows the participants to verify and audit transactions independently and relatively inexpensively.

FinTech Industry in India - Future of Financial services 07

 2
Fintech
Landscape
in India
2. Fintech Landscape in India
FinTechs have been rapidly transforming the financial services sector, including lending, wealth management,
insurance, digital payments, regulation, capital markets, supervision and underlying Enabling Techs.

The FinTech landscape in India can be classified in the following categories:

Fintech

Lending WealthTech Insur Tech Payments RegTech

Digital Digital Digital Insurance Tax

Intermediaries Accounting
Lenders Insurers Advisor Compliance

Investment Robo Thematic Discount

Platforms Advisors Investing Brokers

Prepaid Payment Payment Payments P2P & Payment

Instruments Aggregators Bank Solutions

FinTech Industry in India - Future of Financial services 09

2. Segment - Lending
Lending
Lending can be broadly divided into two key subsegments – digital lending and intermediaries. Both the segment use
data and technologies like artificial intelligence and machine learning for screening and advancing loans and provid-
ing aggregation services.

Digital Lenders
Retail Lending (Direct to Consumer FinTechs)
The retail lending segment generally involves a suite of services like personal loan, loan against salary/pay day loans,
gold loans amongst others. The sector has attracted multiple start-ups to engage, profile and underwrite new-to-credit
and not-so-creditworthy or sub-prime customers. Online-only solutions act as direct lenders and offer various secured
and unsecured loans on their own books. Along with the standard data point for credit checks, the platforms may
consider alternative data such as education and employment history to determine credit eligibility.

Merchant Lending (Direct to Businesses FinTechs)

FinTechs generally tend to focus on fulfilling the credit needs of the underserved and untapped segment. According to
a news article, only 16 per cent of MSMEs in India receive formal credit leaving more than 80 per cent of these
companies under-financed or financed through informal sources. This presents a huge opportunity to formalise
lending in the hands of FinTechs. Major services in this segment include invoice discounting, SME lending, channel
finance, credit scoring and collections.

Intermediaries
P2P Platforms
P2P platform aggregates lenders and borrowers, facilitates matching of lenders with borrowers. The lenders earn an
interest rate based on the profile of borrower. 

Aggregators
Aggregators list all the lenders and allows borrower to compare and find the most suitable lender according to their
requirement.

Key Segment Some Players

P2P lending

Personal and Other loans

Pay Day Loans

PoS Credit

SME Financing

Aggregators

FinTech Industry in India - Future of Financial services 10

2. Segment - Lending
Regulations governing the Lending FinTechs in India

Digital Lenders P2P Lenders*

Nodal Authority Reserve Bank of India

Compliance with ‘Master Directions -

Compliance with set of Master Non-Banking Financial Company –
Compliance directions & circulars governing Peer to Peer Lending Platform
NBFC licensing and service in India (Reserve Bank) Directions, 2017’
(“P2P Directions”)

FDI Regulations 100% Foreign Direct Investment allowed

Minimum Capital NA INR 2 Crore

*Deposit and Lending Restrictions - P2P lender cannot raise deposit or loans; cannot lend on unsecured basis.
Exposure Limits on the Platform - Same lender and borrower - INR 50,000; Lender or borrower across all P2P lending
platforms - INR 10 lacs

Key Trends emerging in the Lending segment

Today the digital lending segment is focusing on needs of underserved and underfunded businesses and individuals.
Currently these customers rely majorly on unregulated sources of financing which generally charge exorbitant rate of
interest that tends to make the underlying businesses unviable. As per BCG estimates the total market size for FinTech
lending is estimated to be US$ 1 Tn (INR 72 Tn) by 2023. The FinTechs in the lending segments are focusing on
reduction of delinquencies in the loan books, raising funds at lower costs, targeting/screening customer using AI and
ML to determine their credit worthiness. Some likely trends that are and may emerge within this industry are as
follows:

Increasing Partnership between Lending FinTechs and Large Banks or NBFC

Technology adoption fuelling financial inclusion at a greater pace
Increase in use of data analytics with the help of AI and Machine learning will enable the lending companies with
predictive capability
Emergence of trusted independent platform for credit underwriting

The key challenge in lending still remains on the recoverability. As per a recent news article, as of August 2020 the
FinTechs saw their bad assets shoot upto 6% from 2.5% in August 2019 based on data available from CIBIL. The same
will most likely propel FinTechs to apply more cautious approach before lending.

FinTech Industry in India - Future of Financial services 11

2. Segment - WealthTech
WealthTech
WealthTech is categorised as products and services offerings ranging from financial services software, investment
platforms, online investing tools and robo-advisors to digital brokerages. WealthTech players leverage advanced
technologies such as AI and analytics to transform traditional investment and wealth management services. India has
over the years witnessed a rise in working and wealthy population and accordingly has seen massive advancements in
the WealthTech space.

The WealthTech Segment majorly includes the following:

Investment Platform: These are digital platforms that are designed to invoke investments/interest from retail
investors. They enable users in their investing activities without the intervention of a broker or other middlemen.

Robo Advisor: Robo-advisors are automated services that offer users advice on investment options based on risk
appetite, requirements and goals. The platform is enabled by machine learning and artificial intelligence.

Thematic investing: An increased participation of retail investors in the financial markets have led to start-ups that
focus on enabling retail investors with tools and data that allow them to create customized baskets of stocks reflecting
their strategy and views on the market.

Digital discount brokers: Start-ups have created tech-first, low-cost brokerage offerings to empower retail investors
and traders with the right tools for investing

Key Segment Some Players

Investment Platforms

Robo Advisors

Thematic investing

Discount brokerages

FinTech Industry in India - Future of Financial services 12

2. Segment - WealthTech
Growing AuM under Robo Advisory
45,000.0 27,353.9 30,000.0
40,000.0
21,814.1 25,000.0
35,000.0
30,000.0 16,900.7 20,000.0
25,000.0
12,593.4 15,000.0
20,000.0 42,292.0
8,884.7
15,000.0 30,338.0 10,000.0
5,786.3
10,000.0 3,370.5 21,075.0
1,675.1 14,026.0 5,000.0
5,000.0 8,750.0
2,927.0 5,517.0
- 1,299.0 -
2017 2018 2019 2020 2021E 2022E 2023E 2024E

AuM (In $ Mn) User (In 000s)

Source : Statista

The SEBI has undertaken various initiatives to ensure that Wealthtech as a sector in India flourishes under regulatory
watch. These initiatives include:

1. Regulatory Sandbox for WealthTech firms to experiment on pilot basis

2. Allowing e-commerce entities to sell Mutual funds from their platforms
3. Permitting investments into Mutual Funds through payment FinTechs, albeit with a cap on the investment amount

These steps, coupled with various other initiatives undertaken by the Government, is aimed at ensuring ease of doing
business by the Wealthtech firms within the regulatory framework, while trying to reach to the vastly penetrated
Indian Wealth Management Market.

Key Takeaways
The growth in WealthTech Industry in India  is likely to be propelled by the following factors : 

Increasing personal wealth and incomes

Increased participation from retail investors
High adoption rate of mobile & online channels
Increased availability of financial information

As per recent reports, the Indian WealthTech market is expected to grow to about US$ 63 Bn by 2025 from currently
US$ 20 Bn.

Wealthtech is not only enabling digital and hassle free onboarding but it is also providing increased visual insights,
providing informative analysis and a transparent operating system which is leading to quicker adoption of this
technology.

FinTech Industry in India - Future of Financial services 13

2. Segment - InsurTech
InsurTech
InsurTech landscape is quite nascent in India at this stage. The current insurance penetration is quite low, i.e. 2.76% in
life insurance and 0.93% in non-life insurance compared to the global average of 6.5%. The current InsurTech space
in India is being dominated by few new-age insurers like Toffee, Digit and Acko with their ability to attract and garner
popularity among the millennial population.

The key trends in InsurTech entails the following:

Digital Insurance Advisors are aggregator platforms that enable customers to search, compare, find and buy insurance
products at affordable premiums from multiple carriers. As per IRDAI, the number of web aggregator platforms has
increased from 11 in 2013 to over 25 in 2019.

The Digital Insurers are adopting the practice of offering insurance policies to customers on the point of purchase of
a product or services thereby gaining access to large ecommerce consumers. Further they are not only focusing on
issuance of policies but also claim initiation and settlement digitally which enhances overall customer satisfaction.
Certain startups focus on developing platforms that digitalize claims process using technology that provides quicker
payouts.

Emergence of Sachet Insurance which are small ticket insurance. Most of the sachet offerings are disease-specific
(vector-borne), travel-specific, for home appliances (mobile, home protection, cycle theft) or for lifestyle needs
(marathon, fitness). For example, Max Bupa has tied up with Mobikwik to offer disease insurance covering dengue,
malaria. These are not comprehensive product but are a good starting points for inculcating insurance habits.This
allows getting covered by insurance policy in an affordable manner.

Key Segment Some Players

Digital Insurance Advisor

Digital Insurers

Claims

FinTech Industry in India - Future of Financial services 14

2. Segment - InsurTech
A comparative analysis of gross domestic premium earned

Gross Direct Premium Earned for 6 Months Period Ended (In INR Bn)

Insurer 30-Sep-18 31-Mar-19 30-Sep-19 31-Mar-20 30-Sep-20 2 Year CAGR

Digital

Digit 2.74 6.21 12.04 9.95 13.00

Growth 127% 21% 60% 8% 118%

Acko 0.23 1.19 2.08 1.66 1.49

Growth 419% 26% 39% -28% 155%

Traditional

ICICI Lombard 73.05 71.84 68.73 64.40 64.92

Growth -2% 7% -10% -6% -6%
New India Assurance 117.62 121.48 131.55 135.44 141.00
Growth 3% -3% 11% 7% 9%
SBI General 20.64 26.42 36.76 31.14 36.20
Growth 28% 18% 18% -2% 32%
Source: IRDAI

Regulations governing Insurtech

Nodal Authority Insurance Regulatory and Development Authority of India (“IRDAI”)
Guidelines on Insurance e-commerce dated March 9, 2017
Compliance
(“Insurance e-Commerce Guidelines”)
FDI Regulations 100% Foreign Direct Investment allowed

Insurance e-Commerce Guidelines enable insurers and insurance intermediaries to set-up Insurance Self-Network
Platforms (“ISNPs”) to sell and service insurance policies. Further the IRDAI has issued Insurance Regulatory and
Development Authority of India (Insurance Web Aggregators) Regulations, 2017 (“Web Aggregators Regulations”) with
the objective to supervise and monitor Web Aggregator as an insurance intermediary who maintains a website for
providing interface to the insurance prospects for The Web Aggregators Regulations lay down the eligibility criteria for
registration as Insurance Web Aggregator, Minimum Capital and Networth requirements, Activities to be undertaken,
Remuneration and other directives as required. 

Key Takeaways
InsurTech is changing the entire landscape of insurance industry. InsurTech not only focuses on issuance of policy
digitally but also on aggregation of details of various insurance policy providers, claim settlement and also the new
age context based insurance policy (Sachet insurances) which enables policy holder to be protected against a specific
situation. To maintain profitable growth and to make sure that the products reach the target audience, insurers and
intermediaries to maintain profitable growth and to make sure that the products reach the target audience, insurers
and intermediaries have started partnering with service providers to form mutually beneficial relationships and design
the products for mass appeal with customizations.

FinTech Industry in India - Future of Financial services 15

2. Segment - Payments
Payments
Digital payments FinTech have been the most funded and torch bearer of FinTech revolution in India. Innovations like
UPI, biometric payments, e-wallets are a testimony of forward thinking of the RBI and the governments which has led
to the payments revolution in India.
Factors such as cut in merchant discount rates, adoption of NFC payments which enables transaction with a tap and
UPI 2.0 with features like linking of overdraft, invoice in the inbox and others have led to faster adoption of digital
payments by merchants and users.
The payments ecosystem majorly encompasses the following :
Prepaid Payment Instruments: PPI’s are instruments of payment that facilitate buying of goods and services,
including the transfer of funds, financial service and remittances, against the value stored within or on the instrument.
PPI’s can be classified as below
Closed System PPIs: These are PPIs issued by an entity for facilitating the purchase of goods and services from that
entity only. No cash withdrawals are permitted. These instruments cannot be used for payment or settlement for third
party services. The issuance and operation of such instruments is not classified as a payment system and does not
require approval / authorisation from the RBI.
Semi-closed System PPIs: These are PPIs issued by banks (approved by RBI) and non-banks (authorised by RBI) for
purchase of goods and services, including financial services, remittance facilities, etc., for use at a group of clearly
identified merchant locations / establishments which have a specific contract with the issuer (or contract through a
payment aggregator / payment gateway) to accept the PPIs as payment instruments. These instruments do not also
permit cash withdrawal, irrespective of whether they are issued by banks or non-banks.
Open System PPIs: These are PPIs issued by banks (approved by RBI) for use at any merchant for purchase of goods
and services, including financial services, remittance facilities, etc. Cash withdrawal at ATMs / Points of Sale (PoS)
terminals / Business Correspondents (BCs) is also allowed through these PPIs.
Accordingly, the FinTech landscape consists of semi-closed and open system PPIs only.

Mobile and Digital wallets (Payment Aggregators): Digital Wallets are like a virtual Pre-Paid Card where you can
store value the money for usage. It also allows access to link your bank account, Credit card or Debit Card to make
transactions in an easy, effortless manner
Payment gateway: Payment gateways are a platform which allows an entity to receive payments on their website.
Some start-ups are further integrating their core payment gateway business with a suite of cash management services
and other banking services to help their small and medium enterprise (SME) customers.
Payments Bank: Payments banks is an Indian new model of banks. These banks can accept a restricted deposit but
cannot issue loans or credit cards. Payments bank provide online and mobile banking.
Innovative and proximity payment solutions providers: These payment platforms are enabling payments through
sound waves, scanning, tapping like NFC payments, Tap payments on credit and debit cards, etc. This allows for
contactless payments services.
Peer to Peer (P2P): Enables direct transfer of funds between two people without having to store money in a digital
wallet thereby enabling quicker transactions

FinTech Industry in India - Future of Financial services 16

2. Segment - Payments
Key Segment Some Players

Mobile Wallets

Payment gateway

Payment solution providers

P2P

Payments Bank

Rate of adoption of Digital Payment Rate of adoption Digital Payment (Apr-Sep

(FY2018-20) 2020)
30,000 12.5 15.0 4,000 1.7 2.0
1.6
1.5
1.2 1.3
20,000 10.0 3,000 1.5
5.4 1.0
10,000 21,317 5.0 2,000 1.0
0.9 3,140
8,770 2,610 2,900 2,980
- 1,096 - 1,000 2,180 0.5
1,510
2018 2019 2020 - -
Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20
Value (In INR Bn)

No. of Transactions (In Bn) Value (In INR Bn) No. of Transactions (In Bn)

Source : Business Standard and entrackr.com

Regulations governing the ‘Payments’ FinTech entities in India

The Payment system in India is regulated by the Payment and Settlement Systems Act, 2007 (“P&SS Act”). The P&SS
Act has designated the RBI to act as an enabler to regulate and supervise the payments system in India. A “payment
system” is defined to mean a system that enables payment to be effected between a payer and a beneficiary,
involving clearing, payment or settlement service or all of them, but does not include a stock exchange. Systems
enabling the operation of credit or debits cards, smart cards, prepaid payment instruments qualify as payment
systems.

FinTech Industry in India - Future of Financial services 17

2. Segment - Payments
Regulations for each category of the ‘Payments’ FinTech entities are stated herewith:

Payment Payment Payment Banks

Aggregators ("PA")# Gateways ("PG")@ ("PB")

Nodal Authority Reserve Bank of India

Directions for Opening

and Operation of ‘Guidelines for
Master Directive on Guidelines on
Accounts and Licensing of Payments
‘Issue and Operation of Regulation of Payment
Settlement of Payments Banks and Operating
Compliance Prepaid Payment Aggregators and
for Electronic Payment Guidelines for Payments
Instruments (“PPI Payment Gateways
Transactions Involving Banks (“Payment
Master Directions”) (“PAPG Guidelines”) Intermediaries (“PG Guidelines”)
Directions”)

FDI Regulations 100% Foreign Direct Investment allowed

Minimum INR 5 Crore Minimum INR 15 Crore

Minimum Capital of INR
Initial Networth on submission of on submission of NA
100 Crore
application application

Minimum INR 15 Crore Minimum INR 25 Crore

Subsequent within 3 years from within 3 years from NA NA
Networth
receiving final receiving final
authorization from RBI authorization from RBI

33.33 times of its

Leverage Ratio NA NA NA
net-worth

*Other regulations in relation to loading, co-branding and cross-border transactions, allowable debits and credits etc. The
provisions of Prevention of Money Laundering Act, 2002 and Rules framed thereunder, as amended from time to time are
also applicable to all PPI issuers.
#Other regulations in relation to governance, on boarding of merchant’s settlement and escrow account management,
security & fraud prevention and risk management framework.
@NCPI has also issued ‘UPI Procedural Guidelines’ and ‘UPI Operating and Settlement Guidelines’ which provide for
entities who can participate in UPI, their roles and responsibilities, permissible transactions that may be carried out by such
payment services providers, their liabilities and rules for settlement of UPI transactions.

Key Takeaways
The Digital payment FinTechs have been the flag bearer in the Indian FinTech space despite India being a cash preferring
society. The following are the key emerging trends:
Majority of payment apps are now eyeing to become more than just a payment app and offering varied services apart from
the regular payments platform. The classic example being PayTM. PayTM not only offers traditional payment and wallet
services but also increases customer interaction by providing PayTM mall, PayTM games, enabling purchase of mutual fund
units and has a complete spectrum of services and goods under its umbrella. PayTM is moving towards becoming a Super
App. Even other service providers for example Phonepe is enabling a platform to buy insurance from its app. This is leading
to higher customer engagement.
A major push in digital payments is caused due to proactive government measures. While Demonetization is a thing of the
past, the government is focusing on systematic reduction of cash payments. The government has introduced Radio
Frequency Identification (RFID) based Fastag system which enables toll payments directly from the prepaid or savings
account linked to it or directly toll owner.

FinTech Industry in India - Future of Financial services 18

2. Segment - RegTech
RegTech
The Financial Service sector is full of regulations. In an attempt to reduce the burden of these regulatory terms,
financial institutions are starting to turn to new technology solutions.
Regulatory Technology (RegTech) has established a solid foundation within the FinTech ecosystem to overcome the
above and come up with solutions that are targeted to new and complex regulations, litigation and regulatory
remediation areas faced by financial institutions (FI), combined with overall reduction in their cost compliance.
A prominent example of RegTech is emergence of eKYC in onboarding customers. A few other examples are tax
assistant (eg clear tax), credit scoring platforms, accounting platforms like KhataBook, EasemyGST.

Key Segment Some Players

Accounting

Tax Compliance

Key Takeaways
With formalization of the economy, Regtech are gaining importance. The RegTechs are focusing on easing compliance
procedures and automating routine time consuming tasks.

Majority of the RegTechs are also focusing on enabling the user to fill in the base data and tend to automate end results.

FinTech Industry in India - Future of Financial services 19

2. Monetization Models
In this section we will try to understand how the FinTech Companies earn their revenue

Monetization Method Key Metrics FinTech Segments

Earn revenues based

AuM, Value of
Spread Based on annual percentage Payments, Wealth
transaction
rate or a flat fee

Market dynamics and

Software as a service Earn fees from
size, number of RegTech
Based subscription
competitor

Cost of funds and

average lending rates,
quality of loan and
Net Interest Based Earn from NIMs Lending
investment book,
control on non
performing assets

Direct selling of No. of policyholders,

Earn premium or
services through number of services InsurTech
service charges
platform provided

FinTech Industry in India - Future of Financial services 20

2. Regulatory Framework
in general
The FinTech landscape in India has witnessed a significant growth in the past decade. The Government of India (“GoI”),
for ensuring protection of customer and economic interests, foster innovation and competition and harnessing robust
and sustainable growth environment for FinTech entities, has undertaken several regulatory measures. FinTech entities
are regulated by various regulatory bodies in India. Depending on the product or service offered by the entity, the
regulatory body governing each vertical would regulate those specific entities. FinTech entities fall within the purview
of regulation by one or more of the following regulatory bodies:

Reserve Bank of India (“RBI”)

Securities Exchange Board of India (“SEBI”)
Ministry of Electronics and Information Technology (“MEITY”)
Ministry of Corporate Affairs(“MCA”) and
Insurance Regulatory and Development Authority of India (IRDAI)

However, the RBI currently regulates the majority of FinTech entities dealing with payments, lending, other FinTech
entities etc.
 The FinTech Regulatory Ecosystem can be depicted as follows:

Source: Financial Stability Institute, BIS (2020) FinTech Industry in India - Future of Financial services 21
2. Regulatory Framework
in general
Regulatory Timeline of Indian FinTech

Source: RBI Bulletin November 2020

NPCI – National Payments Corporation of India

UIDAI – Unique Identification Authority of India
IMPS – Immediate Payment Services
DBT – Direct Benefit Transfer
JAM - Jan Dhan-Aadhaar-Mobile
UPI – United Payment Interface
BBPOUs - Bharat Bill Payment Operating Unit FinTech Industry in India - Future of Financial services 22
 3
Factors
impacting
Fintech Sector
3. Factors impacting
Fintech Sector
India remains one of the largest markets where the structural enablers to setup and incubate FinTech companies have
come together strongly. The following factors are likely to drive the growth of the Indian FinTech sector, in the medium
to long term.

Government & Regulator Initiatives

The government and regulators are prima facie catalyst for the growth of FinTech sector in India. As Niti Aayog CEO
Amitabh Kant  highlighted  in a recent media statement, FinTech market in India is likely to expand to $31 Bn in 2020.
The government programs which have played a key role in propping up FinTech are:

UPI
Jan Dhan Yojna
Startup India
Licence for payments banks
Digital India programme
Recognition of P2P lenders as NBFCs
Regulatory sandbox by RBI for FinTech
National Common Mobility Card (NCMC) among others

India Stack
IndiaStack is a set of APIs that allows governments, businesses, startups and developers to utilize an unique digital
Infrastructure to solve India’s hard problems towards presence-less, paperless, and cashless service delivery.

It is the most ambitious societal initiative globally, aimed at putting up a public digital infrastructure based on open
APIs in order to promote public and private digital initiatives. It has played a catalytic role in India’s digital foundation
and evolution. An upsurge is evident as a result of Aadhaar and UPI which are the most prominent components of the
stack over the years. A number of incremental developments were introduced on various parts of the stack during the
last 18 months ending June 2020.

Due to data access to third parties, regulators must continually recalibrate regulations and policies, develop
thresholds which are based on risk, keeping cybersecurity subjection in check, and maintaining a high degree of
consumer confidence.

FinTech Industry in India - Future of Financial services 24

3. Factors impacting
Fintech Sector
Funding Environment
As FinTech is a highly regulated sector and its business model often rely on scale of economies, the startups tend to
require very long runways before they grow profitable. The business of FinTech is characterized by high up-front
investments and low marginal costs at the later stages of growth. For FinTech companies to grow, availability of
Funding through VC and PE firms is imperative. These companies can ideally be established in jurisdictions where
ample of early stage funding is available and prospective investment rounds later can be secured.

In 2019, India received the highest amount of funding, i.e., $3.96 Bn, which is 2.4 times more than 2018’s funding
amount of $1.66 Bn This was majorly attributed to the funding raised by Paytm and One97 in the same year with $1
Bn and $688 Mn, respectively. For the period 2019-H12020, total number of funding deals were 263.

Technological Advancements
The rise of smartphone usage is amongst the key factors of boosting the technological advancements and enabling it
for mass adoption. In addition to it, other factors that are playing a crucial role in the transformation are mentioned
below:

Identity confirmation technologies like biometric, face recognition, and iris scanning.
Instant payments.
Internet of things.
Online KYC and digital signatures.

Technology is changing the way the finance industry operates and delivers services. The overall market is undergoing
a major transformation leveraging new and cutting-edge technologies. Big Data and analytics offer tremendous
potential to understand the needs of customer and offer personalized products & services and drive operational cost
efficiencies that give rise to altered business models. This technological advancement has majorly driven the growth
of FinTech across the globe.

Focus On Underserved Areas Of Banking

FinTech is also equally about customer experience and data. The biggest impact from new technologies often comes
not from the technology itself, but from how they enable to reorganize production, as well as consumption, in a
completely new way. That is why, perhaps surprisingly, FinTech may have less of an impact in regions where people
and businesses already have good access to financial services, and more of an impact in places where people previ-
ously haven't had access to any kinds of financial services. This includes the unbanked, rural regions, as well as small
and micro businesses.

Adoption of technology by banks

The continuously increasing collaboration between banks and FinTech startups in the form of supplementary offerings,
partnerships, acquisitions, incubators and investment is also one of the key drivers of India’s FinTech growth as well.
Technology and IT infrastructure is the foundation of FinTech. The FinTech infrastructure backbone has been strength-
ened tremendously with the host of options available to market participants such as BBPS, Bharat QR, India Stack, UPI.

FinTech Industry in India - Future of Financial services 25

3. Factors impacting
Fintech Sector
Greater adoption on the consumer end
In the era of digitalization, FinTech companies are transforming in a sea way, providing new variant of services, and
adopting new technology to meet customer expectations. Another most important element for FinTech companies is
to concentrate on its customers. They must find innovative and cost effective ways to acquire and retain customer
loyalty in an environment where the obstructions to churn are lower. For e.g. gaining customer trust, providing a
seamless experience by reducing friction in digital transactions.
Key factors that influences consumer adoption of FinTech includes

Ease of setup, configuration and operate

Range of functionality and features
Can be used with smart phones
Compatibility with daily operations and infrastructure
24/7 availability of services
Transactions are paperless

The average adoption rate over 27 markets in 2019 was 64%. Top 10 countries’ consumer FinTech adoption rate in 2019 were as
follows:

71% 71% 72% 73% 75%

UK Ireland Mexico Netherlands Peru

76% 82% 82% 87% 87%

Columbia South Africa Russia India China

Cost of Operations
Most FinTech companies have a cost advantage over incumbents. They leverage technology to seamlessly on board,
leading to lower customer acquisition cost, reduce servicing cost for customers and reduce cost of distribution
E.g. Payments Bank leverage technology to expand customer base while limiting physical presence

Source: Global FinTech Adoption Index 2019 by EY FinTech Industry in India - Future of Financial services 26
3. Factors impacting
Fintech Sector
Challenges Impacting the Sector
Uncertainty in Regulation 
India is one of the few jurisdictions with a specific Payments and Settlements law to provide for regulation and
supervision of payments and settlement systems in India and to designate the Reserve Bank as the authority for the
purpose. After the regulatory fillip, India still has a way to go in terms of providing security to business platforms. A
few regulations including regulations for safe investment exits, its stand on cryptocurrency, payment regulations by
NPCI etc. are still evolving and real time changes in the regulatory scenario shall need to be incorporated considering
the dynamism of the FinTech industry. Further, cross border payments are currently not being channelized through
new age startups and get conducted through age old banking channels. A uniform standard of practice (across
jurisdictions), a common translated language and standardised KYC norms coupled with commensurate regulations
can open up a vast window of foreign transfers through FinTechs.

Discovery of Platforms
Because of sudden rise in FinTechs opportunities, many players have started participating and opening up their
respective FinTechs in similar or overlapping spaces. There are number of FinTech startups making it crowded to create
a brand recall among all. To capture growth, market share and customers in this otherwise fragmented market will be
challenging for players, unless consolidation becomes the order of the day.

Data Security Risk 

Data leaks, platform downtime and information theft has become quite rampant in the FinTech space. Data, artificial
intelligence and machine learning are the backbone of FinTechs . Developing strong mechanism to protect data is of
paramount importance and players shall have to invest deeply in mechanisms to control this risk and comply with
regulatory requirements towards data security. Further, control of data and choice of sharing the personal data with
various apps and websites should be exercised as a strong prerogative by Indian mass; awareness and digital
education to that extent is still lacking leading to data leaks and inappropriate use of confidential data.

Lack of trust and awareness

Due to lack of technological advancements, awareness and adaptation to these FinTechs, the penetration of these
services has so far remained restricted to metros and top tier cities. This inequality of access and its lack of rural
penetration and mass adaptation in lower tier cities shall remain the major hindrance and the major growth driver as
well for the sector. Till then, the reliance on local lenders and preference for cash transactions shall continue.

Systemic Risk
With the huge growth of the FinTechs and the rampant growth in underlying delinquencies due to the nature of the
credit flow, its imperative to have prudential regulation controlling the system wide risk proliferation. Traditional
banks give advances sourced from Deposits, whereas these Fintech companies lend from Debt Funds/ Equity Funds.
Thus, the risk can permeate to various categories of people including investors, consumers and enablers.

Sources/References for text data : MEDICI – India FinTech Report 2020,

PwC report on Redefining the FinTech experience: Impact of COVID 19,
Matrix Partners State of India’s ‘Fin+Tech’ Union, NASSCOM Community Blog,
Google searches. FinTech Industry in India - Future of Financial services 27
3. Factors impacting
Fintech Sector
Impact of COVID 19 on FinTech sector
The ongoing spread of COVID 19 has profoundly impacted economies and financial systems across the world,
including the provision of digital financial services and the functioning of FinTech markets. Many Fintechs, including
insurtech companies, are shoring up their capital and funding from investors and lenders. Because revenues for many
of them are transaction and volume based they have implemented cost-saving measures, including workforce
reduction. While the overall sector continues to grow as displayed by investment sentiment, there is certainly a shift
in consumer preferences witnessed due to compulsion of online transactions.

No uniform impact
FinTech firms are not a monolithic sector, but rather comprise a range of firms, which deliver different financial
services, based on different business models. Therefore, the impact of COVID 19 on market performance is not
uniform across FinTech business verticals or geographic jurisdictions. Some well-established FinTech who have
received adequate funding are showing positive growth. However, FinTech companies involved in unsecured lending
sectors or cross-border payments may witness a downfall because of the market conditions created by COVID 19.

Changes due to Consumer demand

The kind of product or service of a FinTech firm is one of the major factors that affect the funding and growth of that
firm. Also, it cannot be denied that the changes in consumer demand due to the pandemic is huge. The curve has
shifted to industries that hadn’t gathered much attention before. FinTech companies involved with banking and
business to business transactions are less vulnerable. Digital investment management companies, retail trading and
brokerage companies, health insurance, multi-line insurance are likely to face low-medium impact while trade finance,
unsecured SME lending are expected to impact highly.

Digital Payments
Aadhaar Enabled Payment Systems (AePS) empowers a bank customer to perform inquiries, payments, cash
withdrawals, and cash deposits on an Aadhaar-linked bank account using Aadhaar as an identifier. AePS volumes have
been steadily increasing since the start of 2019. However, it grew exponentially during the COVID 19 forced lockdown
crossing 400 Mn monthly transactions in April & May 2020.

Digital Technology Providers

Technology providers witnessed good growth in the early Coronavirus-hit market as traditional banking industry
employed digital solutions to meet the consumer’s demands. It can be expected to see this trend in a post-COVID 19
world.

Digital Investment Services

According to a recent report, FinTech companies in retail brokerage witnessed some of the highest usage numbers
early in the COVID-19 affected market as the volatility was at an all-time high. Over 12 lakh accounts were opened
with the Central Depository Services (India) Ltd. in March and April this year. Zerodha added 3 lakh accounts in March
and is now averaging 1.5 to 2 lakh new customers a month, which is almost 100% more than what Zerodha was
adding in the pre-COVID days. This can be an expected scenario in the coming future since consumers will continue to
react to extreme market fluctuations.

Source: S&P Capital IQ FinTech Industry in India - Future of Financial services 28

 4
Funding &
Valuation
Trends
4. Funding & Valuation Trends
Unicorns in FinTech
A unicorn company, or unicorn startup, is a private company with a valuation over $1 Bn. According to Hurun Global Unicorn
List 2020, India is home to 21 unicorns, collectively valued at $73.2 Bn and FinTech company Paytm is India's highest valued
unicorn, at $16 Bn. India has added three new unicorns to the list in 2020. Along with being the highest valued Indian unicorn,
FinTech company Paytm is also the highest gainer in the Indian unicorn category. Out of total unicorns in India, ~1/3rd are
FinTech companies.

FinTech
Unicorns

FinTech Industry in India - Future of Financial services 30

4. Funding & Valuation Trends
Valuation of some FinTech Companies
Name : PayTM
Founded : 2010
Segment : Payments PayTM Valuation (INR Bn)
Paytm provides an app-based wallet for consumer
1,155.1
payments. It also provides a web-based wallet for mobile
recharge, bill payments, travel bookings, hotel & ticket 734.8

booking, booking cylinder, gold purchase, donations, etc. It 389.0 437.2

offers banking services, credit cards, loans, and investment

platform for insurance, mutual funds, and more. It also
offers Paytm Mall for online shopping of mobile, clothes, Months

groceries, accessories, electronics, toys, and more.

PolicyBazaar Valuation (INR Bn)

Name : PolicyBazaar
78.5
Founded : 2008 68.5
Segment : InsurTech
PolicyBazaar provides an online insurance comparison
31.0
platform for individuals. It offers insurance quotes for life,
14.0
health, auto, and more. It also provides claims processing
services.

Months

Name : BankBazaar BankBazaar Valuation (INR Bn)

Founded : 2008
Segment : WealthTech 20.1

Bankbazaar is an online financial product distribution &

12.7
comparison platform. It enables users to compare loans
such as personal loans, home loans, auto loans, and
education loan products; debit & credit cards; investments
such as savings account, fixed deposits, and more.
Months

LendingKart Valuation (INR Bn)

Name : LendingKart
18.3
Founded : 2014 17.4
15.4 15.1
Segment : Lending
LendingKart is a lending company that enables SMEs and
entrepreneurs to apply for working capital loans. It evalu- 4.7 5.2

ates the creditworthiness of a customer’s business by 1.2

leveraging big data and analytics.

Months

Post money valuation post March 2015 is considered , as available from Venture Intelligence
Source : Venture Intelligence FinTech Industry in India - Future of Financial services 31
4. Funding & Valuation Trends
Funding in Fintech Sector - 2020
Other, 4.5%
WealthTech, 5%
Accounting , 5%

B2B Lending , 10% Payments, 39%

Consumer
Lending , 16%

InsurTech , 20%

Source : Bloomberg Quint

Snapshot of Funding in 2020 by some of the prominent FinTech players in India :

Latest round Total Funding

Companies Segment Month
($Mn) ($Mn)

IndWealth WealthTech Jan-20 12.2 57.2

Digit Insurance InsureTech Jan-20 83.9 187.6

PineLabs Payments Jan-20 NA NA

BharatPe Payments Feb-20 74.2 141.5

Coverfox InsureTech Mar-20 2.1 31.9

CapitalFloat Lending Apr-20 14.4 128.8

Navi Technologies Lending Apr-20 26.8 70.4

BankBazaar WealthTech Jun-20 6.0 117.5

Turtlemint InsureTech Jul-20 30.0 61.0

Groww WealthTech Sep-20 30.0 59.2

Acko InsureTech Sep-20 60.0 205.2

RazorPay Payments Oct-20 100.0 207.1

Mobikwik Payments Nov-20 7.1 179.7

PhonePe Payments Dec-20 700.0 1,277.2

Source : CapitalIQ FinTech Industry in India - Future of Financial services 32

4. Funding & Valuation Trends
Unicorns Entry Latest available Valuation ($Bn)

PayTM 2015 16

Billdesk 2018 1.5

PolicyBazaar 2018 1

PineLabs 2020 1.5

Zerodha 2020 3

Razorpay 2020 1

Source : Venture Intelligence, News articles FinTech Industry in India - Future of Financial services 33
 5
Future of
Fintech Sector
5. Future of Fintech Sector
Financial technology is a term that has been garnering rapid followers over the fast few years. There has been a
gradual evolution in terms of including technology for back-end services to incorporating it more for customer centric
services to make the overall process efficient.

Future of FinTech industry looks promising and growing rapidly on the back of

Rise of start-ups in FinTech industry

Penetration of smart phone users
Continuous build-up of the digital infrastructure
Over all streamlining of financial process in many industries

In a report, by Research and Markets, as of March 2020, the FinTech market in India is expected to expand at a
compound annual growth rate (CAGR) of ~22.7% during the 2020-2025 period.

F i n t ec h M a r k e t S i z e ( I NR B n )

7,000.00 6,207.41
6,000.00
5,000.00
4,000.00
3,000.00
1,920.16
2,000.00
1,000.00
-
2019 2025

Source: Business World News dated September 11, 2020

Some recent developments in FinTech

Securities and Exchange Board of India (“SEBI”) relaxes the norms to enter the mutual fund business :

To facilitate innovation and enhanced reach to more investors at a faster pace including tech-enabled solutions, SEBI
has relaxed the norms to allow FinTech startups and other entities to enter the mutual fund business.
Until now, the regulator required entrants to have five years of experience in the financial services business and
demonstrate three years of profitability, and to maintain a net worth of INR 50 crore.
Now, entities can be considered eligible to sponsor MFs, if they maintain a net worth of INR 100 crore, until the time
they can demonstrate profitability for five years.

FinTech Industry in India - Future of Financial services 35

5. Future of Fintech Sector
Expansion of scope of products :

FinTech firms are piloting instant loan products and expanding the scope of their digital equated monthly instalment
(EMI) products at offline stores, as demand for credit continues.
Digital EMI, or ‘Buy Now Pay Later’ credit products, were largely offered offline at white-good and electronic stores.
This model, pioneered by companies such as Bajaj Finserv Ltd, is now seeing traction in newer segments such as auto
dealers, fashion retail stores, restaurants and small-town traders, with banks more comfortable with small loans.
PhonePe has been running successful pilots around khata (digital ledger) and ATM services with kiranas as well as
small and medium enterprises (SMEs) and their focus will be on enabling ‘hyperlocal commerce’ for these 100 million
kiranas and SMEs, as well as for the at-home and gig entrepreneur segments.

Investment in Unified Payments Interface :

With the surge in digital payments brought about by the COVID 19 pandemic, UPI seems to have been the biggest
winner as peer-to-merchant (P2M) transaction volumes have risen 12%, 8% and 11% month on month between July,
August and September 2020, respectively. During the same period, credit card transactions have grown 6%, 8% and
4% respectively.

70000

60000

50000
Amount (INR Cr)

40000

30000

20000

10000

April May June July August September

Credit Card UPI

Source: RBI, NPCI
Note: Only includes peer to merchant or retail payments

Whereas UPI, the most talked-about payments innovation, has recently shown a significant rise in failure rates,
underscoring the need for greater investment. Ten of the top 30 banks using the country’s UPI network recorded
failure rates of over 3% for the month of September 2020, latest data showed, nine of these ten banks are
state-owned.
Frequent outages in digital delivery of financial services in India could be a concern in a post-COVID world, where
such transactions are of significant importance for consumers and providers alike.

FinTech Industry in India - Future of Financial services 36

5. Future of Fintech Sector
SEBI Proposes New Norms To Ease Public Listing For Startups:

SEBI has created an Innovators Growth Platform (IGP) framework for listing of startups on stock exchanges and it has
issued a consultation paper which was open to the public for suggestions till January 11, 2021.
It has provided many recommendations, few of them are:

a. Providing differential voting rights (DVR) to promoters, retaining superior voting rights (SR) for existing institutional
investors holding over 10% of capital, and easing delisting requirements as well as takeover norms.
b. Reducing the time period of holding 25% of pre-issue capital to one year from two years
c. The removal of the present limit of 10% on Accredited Investors (AIs) and the pre-issue capital held by these
investors may be considered for the entire 25% of the pre-issue capital required for meeting eligibility conditions
norms.
d. The threshold for disclosure of the aggregate shareholding is proposed to be increased from the present 5% to 10
% and whenever there is a subsequent change of 5% (instead of present 2%) in the shareholding.
e. Family trusts should be included in accredited investors definition which currently covers only individuals and body
corporate.

RBI’s Regulatory Sandbox Settles On Cross-Border Payments As Next Area Of Focus:

RBI announced cross-border payments as the theme for its second cohort and MSME lending for the third cohort under
the regulatory sandbox initiative.
Further, the daily average turnover of OTC foreign exchange instruments in India is approximately $40 Bn. The Cohort
is expected to spur innovations capable of recasting the cross-border payments landscape by leveraging new
technologies to meet the needs of a low cost, secure, convenient and transparent system in a faster manner as per RBI.
The eligibility norms for applicants are relaxed by reducing net worth requirement from INR 25 Lakh to INR 10 Lakh
and allowing partnership firms and limited liability partnerships to participate in the regulatory sandbox.

As the needs and demands for financial transactions are increasing, payments and the banking industry have also been
evolving continuously. The best kind of consumer experience and quick responses to regulatory changes will matter the
most. There's huge untapped market available with varied products and various strata of population to tap into; the
valuations and funding have been very supportive of the industry so far. Evolution of the participants, strengthening of
regulatory makeup and providing free flow of capital to this sector shall be few of the largest determinants of the trajecto-
ry of growth for the FinTech industry.

FinTech Industry in India - Future of Financial services 37

 6
Conclusion
6. Conclusion
The landscape of banking and financial sector has undergone a phenomenal transformation since 2008 Global
Financial Crisis, demonetization and COVID 19, owing to financial technology firms, popularly known as ‘FinTechs’.

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 India’s FinTech sector. Lending is the second largest segment in India’s FinTech Sector followed by
InsurTech, WealthTech, Neo Banks, RegTech etc.

Over the past few years, India has essayed several guidelines and reforms such as granting multiple licenses for
differentiated banking to small finance banks, payment banks and introduced the unified payment interface to include
the unbanked population of India in the formal financial services folder, strengthening the major FinTech segments
such as payments and lending ecosystem.

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.

FinTech has been known for their coming of age technology owning towards offering the most convenient and flexible
options for consumers. It is not surprising that going forward, financial services will offer a customized and local
offering to their customers using data analytics. 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 FinTech market in
the upcoming decade.

Out of total 21 unicorns in India, ~1/3rd are FinTech companies, Paytm being the highest valued unicorn, at $16
billion. The FinTech market in India was valued at ~INR 1,920 Bn in 2019 and is expected to reach ~INR 6,207 Bn by
2025, expanding at a compound annual growth rate (CAGR) of ~22.7% 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.

FinTech Industry in India - Future of Financial services 39

Services
Investment Banking
Valuation (Category 1 Merchant Bank)

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FinTech Industry in India - Future of Financial services 40

Contact Us

Management
Rajeev R. Shah Manish Kaneria Mitali Shah Ravishu Shah
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+91 79 4050 6070 Co - Head Valuation Banking & Restructuring Co - Head Valuation

[email protected] +91 79 4050 6090 +91 79 4050 6050 +91 22 6130 6093
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