India’s fintech boom — Is it progressing in the right direction?
“Disruption”- A lesser-known and acknowledged driver of innovation; it has truly pushed sectors to revolutionize and rethink the pillars on which modern society is built. In a somewhat counter-intuitive sense, a debilitating pandemic sped up the already accelerating rate of adoption of financial technology to a staggering 87%.
Is the boom here to stay?
Proving the Potential of Unicorns
2021 was the year that saw 3 entrants in the Indian Unicorns Club from the Fintech sector:
- Controlling 22% of Credit Card Payments in India, CRED entered India’s Unicorn Club within 3 years of its inception
- CRED also offers loans partnered with IDFC First Bank for 48 months at 12–15% interest rates, thus having expanded beyond its initial product offering
- Interestingly, CRED does not target the entire customer base utilizing credit cards, but only the top tier members
- Having a dual vision of making investing simple and promoting investment in the country, it took 5 years for Groww to receive the funding to elevate it to the Unicorn status
- Identification of customer pain points and coming up with an MVP improved the adoption of the product among users
- The increase in the disposable income of the target audience due to the pandemic also resulted in a greater number of users
- A tech-driven insurance provider, it was the first unicorn of India this year
- The pandemic has provided a great boost in the number of people seeking insurances in a digital setting, thus driving up Digit Insurance’s demand
- Tapping into the right segmentation of offering loans in Motor, Travel, and Personal Accessories has helped the company acquire more and more customers in short spans of time.
Capturing the Market and Galloping Ahead
The diversity of the financial services offered to cater to the problems of Indian Citizens have made way for rapid growth by themselves as well as means of acquisition.
Rapid Progress in Payments Sector
- Driven by lower data tariffs, India’s population of Internet users has sharply increased and so has the number of smartphones.
- Paytm, MobiKwik, and Google Pay have benefited from this.
The rise in Provision of Collateral Free Loans
- Teeming with MSMEs and upcoming merchants, companies such as MSwipe, Capital Float, and PineLabs have minimized the gap between customers and their access to collateral-free loans and credit.
Acquisition of PMC Bank by BharatPe
- The primary motive behind the bid made for acquiring the bank was to branch out more effectively into end-to-end banking
- The acquisition would mark the first transition of a start-up into small finance licensed bank from RBI
- If successful, the acquisition has the potential to help BharatPe achieve the goal of expanding its loan book to 5000 Cr within 2 years
At a CAGR of 22%, the Indian Fintech market is optimistically expected to grow to $84B by 2025 from $31B.
While UPI forms a major chunk of the distribution of services provided thanks to its zero transaction fees, Neo-Banks are to look out for. Synergizing with banks to optimize their output delivery, they aim to achieve 3 E’s: Easy Electronic Experiences concerning banking for the unbanked sector.
Therefore, ascertaining whether the direction of the boom is right or not may be an unfair question to answer, since Fintech touches every cornerstone of society in a ripple effect, and unquestionably, it is only here to grow further.