Indian Fintechs Valuation to Triple in 5 Years
The total valuation of the 2100+ fintech industry is estimated at $5060 bn:
The Federation of Indian Chambers of Commerce & Industry (FICCI) and Boston Consulting Group (BCG) recently unveiled `India Fintech: A $ 100 Billion Opportunity’ report, which details the findings from the study that the 2 entities undertook to size the value-creation potential and identify imperatives for India’s fintech growth.
STRONG GROWTH
India has some 2100+ fintechs, 67% of which are set up over the last 5 years alone. The total valuation of the industry is estimated at $50-60 billion. The industry’s growth has been undeterred by the pandemic, as it has seen the emergence of 3 new Unicorns and 5 new Soonicorns ($500 million+ valuation) since January 2020. The fintech industry’s strong growth is due to India’s deep-rooted customer demand, diverse capital flows, strong tech talent and enabling policy frameworks.
Dilip Chenoy, Secretary General, FICCI says: “The fintech industry in India has been growing at a fast clip. Fintech players are redefining the business models across different segments of financial ser vices industry, helping improve service delivery and contributing to digital financial inclusion. This is a clear area of focus for us in FICCI and through our multiple initiatives, we will continue to promote this industry both in India and abroad.”
$25 BN INVESTMENT NEEDED
Over the next 5 years, India’s fintech industry is expected to continue its strong upward trajectory. Prateek Roongta, Managing Director & Partner, Boston Consulting Group India, says: “We believe India’s fintechs are at the precipice of significant value creation of $100 billion over the next 5 years. To actualize this potential, the industry would require investments to the tune of $20-25 billion till 2025. Consequently, the number of Indian fintech unicorns will more than double over the next few years.”
Ruchin Goyal, Managing Director & Senior Partner, Boston Consulting Group India, says: “The landscape will be defined by fintechs that pursue their strategic play with deep, relentless discipline. Tomorrow’s fintech winners are expected to `master the core’ by innovating on product, user experience or through deep-tech capabilities. India will also see the emergence of ecosystem orchestrators and multinational fintechs, as it evolves into a global fintech powerhouse.”
INTERNATIONAL EXPANSION
To develop a close understanding of the fintech industry’s multinational ambitions, BCG and FICCI conducted the BCG-FICCI Fintech Survey 2021, which revealed that 39% of Indian fintechs surveyed have presence outside India and 73% are actively considering international expansion opportunities. South-East Asia was the most soughtafter destination for international expansion, followed by North America.
To ensure that Indian fintechs achieve their potential, all stakeholders - fintechs, financial institutions and policymakers - have a role to play. Imperatives for stakeholders have been identified in the report:
Agenda For Stakeholders
1. Indian fintechs should drive deep differentiation by focusing on their core offerings. Globally, successful fintechs have built their propositions in a dedicated focus-area. Fintechs should look at identifying the right collaboration models to get the best of their relationship with financial institutions.
2. To navigate international expansion challenges successfully, fintechs should prioritize the geographies and build their capabilities and networks in those markets.
3. Financial institutions need to explore a wider set of collaboration options with fintechs, including ones that can help them upscale their innovation capabilities.
4. Financial institutions must prioritize use-cases where fintech integrations can deliver the greatest impact and pursue them with alacrity.
5. Policy makers must evaluate enhancements to existing frameworks (for example, regulatory sandbox, increase in thresholds for investments in fintechs, etc.) to enable a higher degree of collaboration between FIs and fintechs. India should look at evaluating and green-lighting new ` leapfrog’ initiatives (virtual bank licenses, blockchain infra, etc) to enable the next wave of fintech innovations. They must also explore supporting fintechs through regulatory referrals and provide proof-of-concept grants for startup fintechs.
DEEP DIFFERENTIATION
In conclusion, the report says over the next 5 years, India’s booming fintech industry is estimated to add another $100 billion in market-valuation. Most successful fintechs would create deep differentiation on their core offerings, while some may be able to capture the ecosystem-play, it says. It also points out that a number of Indian fintechs will also expand offerings beyond domestic borders. To facilitate this growth, all stakeholders have a role to play. Fintechs, financial institutions and policymakers can collectively script the next, global success story for India’s fintech sector.