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For visitors to post-pandemic India, one of the great changes in society cannot go unnoticed. It is the country’s transition to a cashless economy.
India proves to be fertile ground for fintech start-ups
Anyone who visited before the pandemic hit knows how cash-dependent the country used to be.
The pandemic has spurred this change and now most Indians, whether shop owners or street vendors, prefer to use their mobile phones to receive payments, the majority of which is done via UPI. I’m here.
UPI, short for Unified Payments Interface, was developed by the National Payments Corporation of India (NPCI) and went live with 21 banks in 2016. Its ecosystem has grown to 358 banks as of September this year.
Its transaction volume, which grew at a steady rate before the pandemic, saw a significant increase during the pandemic, demonstrating that the transition to digital is well underway. UPI currently processes approximately 6.5 billion transactions per month.
India’s fintech market is pegged at $31 billion, making it the third largest in the world after the US and China. Inc42 The market opportunity is expected to exceed $1 trillion by 2025. India’s fintech adoption rate is also the highest in the world, at 87% against his global average of 64%.
And the country lives up to the hype. This May, India has already celebrated her one unicorn, Open. Open, a Bengaluru-based, Google-backed neobank, has secured new funding in a Series D round that has surpassed his $1 billion valuation. There are now over 20 fintech unicorns in the country, with many in the pipeline ready to join the fast-growing list.
Despite such impressive growth, 2022 has not been a good year for the global startup industry. Layoffs and funding cuts have affected many Indian fintech companies. According to various media reports, the Indian start-up has already laid off more than 10,000 employees this year, following last year’s high when many companies continued to hire large numbers.
However, market turmoil has not discouraged domestic and foreign players.
UK banking super app Revolut is gearing up for its India launch with the recent appointment of Saleem Arshad as Chief Technology Officer (CTO) for its India operations and the opening of a new headquarters in Bangalore. increase.
Tide, another UK-based financial platform that offers digital banking services to small businesses and entrepreneurs, has also announced its intention to launch services in the country and is now allowing users to sign up for early access. to We plan to start full-scale operations in Japan by the end of the year.
That said, domestic players such as challenging banks Jupiter, Niyo and INDMoney will not be left behind in the race.
The regulatory landscape in India is also evolving along with the fintech industry. At the recently concluded Global Fintech Fest 2022 in Mumbai, the Governor of the Ministry of Finance and the Reserve Bank of India (RBI) made a number of speeches emphasizing his intention to further develop and support the growth of Fintech in India. I was.
India’s Royal Bank (RBI) recently held its first global hackathon on the theme of ‘Smarter Digital Payments’, created a new fintech arm to lead the sector, and created its own Central Bank Digital Currency (CBDC) I am also working on .
Ashwini Vaishnaw, the country’s IT minister, also said one of the government’s key focus areas is to build a “robust” digital infrastructure and regulatory framework for the fintech sector with a view to social inclusion. said it is.
However, according to a new report by Matrix Partners India and Boston Consulting Group (BCG), Indian fintech firms are making a “significant contribution” to the economy, with annual payments transactions exceeding $800 billion. You may not make a profit. Next 2-3 years.
A survey of 125 founders and executives at fintech companies found that 70% of them will not be profitable in the near future due to increased focus on scale rather than profitability and compliance I thought it was possible.
Vikram Vaidyanathan, Managing Director of Matrix Partners India said: Indian fintechs are big, offer superior value to customers and are resilient through the once-in-a-lifetime crisis caused by Covid.
But to continue to be successful, new priorities such as profitability and governance will require “new power,” said Yashraj Erande, managing director and partner at BCG.
Growing together in partnership with incumbents and public utility private innovation will be an important moat, adds Erande.
In conclusion, India has proven to offer fertile ground for Fintech startups. But will that be enough to make you profitable? Only time will tell.
