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17 Aug 2018 Updated 17 Jan 2020

India

5 things to know about India’s booming Fintech scene

Digital development in India presents many opportunities for Singapore fintech firms to introduce their solutions. Fintech, while a relatively new industry in India, is experiencing rapid growth, and is being backed by structural and policy changes by the Indian government, including demonetisation, unique identifier (UID) based services, a push for digitisation and the introduction of a goods and services tax (GST).

According to PwC’s Fintech Trends Report – India 2017, the Indian fintech market, which totals about 400 companies, is worth about $400 million. The country also offers the highest expected return on investment on fintech projects at 29%, against a global average of 20%. KPMG estimates that in India, the sector was worth around $8 billion in 2016 – a figure it expects to grow 1.7 times by 2020.

India Fintech

1. Fintech is a sector ripe for growth

Multiple factors are contributing to the rapid growth of Fintech in India – the country has a large consumer base that us young, growing and technologically savvy, as well as the right mix of technical skills, government and regulatory support, and a business environment that allows startups to flourish. At the same time, the country has large inefficiencies in its banking system and a large unbanked sector, but high mobile phone penetration, increasing access to the internet, and a growing e-commerce market.

“While the majority of fintech companies in India are less than three years old, those with sustainable business models have already taken off to a good start”, Rajashree Nambiar, CEO and Managing Director of Fullerton India Credit, said.

2. There is strong support from the government and other institutions

The Indian government has been pivotal in fostering the receptiveness of fintech, educating Indian consumers on fintech solutions, and developing several national initiatives including the Jan-Dahn programme, which aims to ensure that every Indian citizen has a bank account; the biometric Aadhaar identification system that is linked to financial services, including the United Payment Interface, a real-time digital payment system to facilitate inter-bank transactions via mobile; and the India Stack application programming interface (API) that helps any organisation create digital payment systems and reduce cash transactions.

“The Indian government is supportive to new ideas and innovations happening from Singapore, and being pioneers in the digital economy, they realise the importance of having it secured. They are looking at solutions to strengthen and safeguard the national systems against emerging threats”, said Vinod Shanmugan, regional sales director of Singapore-based digital security solutions provider V-Key.

3. The unbanked/underbanked sector holds the largest potential

India’s financial services market is almost untapped, with 40% of the population without a bank account and 80% of transactions carried out in cash, according to Swissnex India. The country has large inefficiencies in its banking system and a large unbanked sector, so new fintech solutions have the potential to help the market grow in areas like consumer loans, insurance, digital payments and more.

“The lack of credit/debit cards adoption means that the under or unbanked consumer is more inclined to apply for an e-wallet or leapfrog to the newest fintech innovations as an alternative payment mode”, Aaron Zhang, Regional Director, Mumbai, Enterprise Singapore, said.

4. Financial institutions in India are embracing fintech

Challenges in serving the large Indian population via traditional means, a need for new products to cater to customers’ changing preferences and tastes, as well as changes in the digital ecosystem have led financial institutions in India to look to fintech for solutions to enhance customer service, process automation, and reach the underserved segments efficiently, effectively and affordably.

“Partnering with fintech is actually a symbiotic relationship that is helping traditional financial institutions leapfrog into the digital ecosystem at a much faster pace. Currently, fintech adoption is at a stage where every financial institution irrespective of size is working with multiple fintech partners at various stages of the customer lifecycle journey”, Rajashree Nambiar, CEO and Managing Director of Fullerton India Credit, said.

5. There is space for Singapore fintech companies to take a slice of the pie

The Indian market provides immense opportunity in terms of market size and moreover, fintech is at a nascent stage, hence there is a lot of scope for mature and developed fintech to invest and venture into India, particularly in areas such as data security, cross-border transactions, automated branches and artificial intelligence.

“My advice would be to enter the Indian market with innovative products and solutions backed by sustainable business models”, Mr Nambiar said.

Additionally, it pays to be a first mover in a young and dynamic market like India. “Early entry has allowed us to hone our recruitment strategy over time where it is now our competitive advantage”, Kumar Srinivasan, CEO of enterprise payment solutions provider MatchMove India, said, adding that local help on board would help mitigate potential risks, and can be key to the success of the venture.

Instead of attempting to manage end consumers directly, Mr Zhang advised companies to work with organisations that are looking to upgrade their systems to streamline internal processes or to help them deliver better customer experiences.

Interested in finding out more about India’s startup landscape? Click here.