India’s fintech industry has been expanding at an exponential rate, enabling it ton gain a significant share of the global fintech market, according to the Boston Consulting Group’s ‘State of the Fintech Union 2022’ report.
As per a recent estimate, the Indian fintech market has received $29 Bn in funding across 2,084 deals so far, gaining 14 per cent of the global funding,
Moreover, India’s CAGR in the fintech sector grew by 20 per cent, which was higher than that of the US, the UK, and China which witnessed a growth of 16 per cent, 15 per cent, and 10 per cent, respectively, according to the fintech report.
With 7,460 fintech companies, India is now third behind the US (22,290 fintech companies) and China (8,870). In addition, the Indian fintech ecosystem has 23 unicorns (out of 106 in total) in this sector, compared to 172 in the United States, 30 in the United Kingdom, and 36 in China.
Additionally, the volume of digital payments increased from 125 Mn in 2021 to 165 Mn in 2022, registering a growth of 32 per cent. While the volume of digital investment in the country increased by 100 per cent from 4.5 Mn in 2021 to 9 Mn in 2022. Meanwhile, the neo banking volume rose from 2.5 Mn to 4 Mn, reporting a 60% growth in just one year, the report stated.
Currently, India has reached a scale to establish a strong position in the global financial services market and be benchmarked for its speed of innovation, customer inclusion, and growth.
“Clocking over $800 Bn annual payments transaction value, Fintechs have made a strong contribution to the Indian economy, and play a powerful role in the provision of full-fledged financial services to all Indians. We see this collective segment to be mission critical for the $5 Tn Indian economy,” stated the report.
Besides, several major fintech began operating in 2008, with neobanks being the most recent entrants. While the number of fintech companies increased between 2014 and 2021, funding was limited until 2015, when the sector received a significant financial boost.
Furthermore, the Covid-19 pandemic boosted the payments space, leading to a 210 per cent spike in funding between Fiscal years (FY) 2020 and 2021.
“With rising funding and valuations, we have seen an acceleration in the rate at which Fintechs have become unicorns vs the past,” the report added.
The report further said that, “We have a game-changing 5 years ahead of us as the financial services landscape is expected to have many strong actors on the stage, like large Incumbents, niche as well as diversified non-banks, new-age and mature fintech, aggregators and Financial Service Providers.”
It, however, mentioned that, “More than 70 per cent of respondents believe most fintech may not be profitable in the next 2-3 years. While the scale is an important driver of profitability, early-stage focus on ‘unit economics’ is a critical orientation needed.”
In order to continue making innovative investments and growth, fintech companies will need to reassess their financial position and implement cost restraints if necessary, the report noted.