Thought Leadership: Fintech (Financial Inclusion)

Date: 25 Sep, 2023

As a developing economy, India continues to provide significant growth opportunities across the financial spectrum whether it is credit, savings, loans, payments, insurance, to name a few. The Indian Fintech sector has played a key role in transforming the financial landscape in the country. It is the world's third largest, behind USA and UK, with an estimated value of $165 Bn in 2023. As per the Department for Promotion of Industries and Internal Trade (DPIIT), there are 3,085 registered startups in the Fintech space as of July 2023. As India moves towards a cashless society, Fintech is playing a critical role in formalization of the financial system and promoting financial inclusion.

The Indian Government has played a key role in the growth of this sector through India Stack – open APIs on which third parties can build their solutions. Fintech companies have leveraged the public digital infrastructure to provide consumers with seamless access to payments, savings, loans, etc. For e.g., Unified Payments Interface (UPI), has given further thrust to digital payments, lending and credit, thus helping the Fintech sector to expand further. According to the data from the National Payments Corporation of India (NPCI), UPI recorded 9.96 billion transactions in July, with a total value of Rs 15.34 lakh crore. This transaction value has increased by 44% Y-o-Y from INR 10.63 Lakh Cr in July 2022. Also, Open Network for Digital Commerce (ONDC) is enabling local commerce across segments, such as mobility, grocery, food delivery, travel, among others. We are already seeing startups build technology layer on top of this to assist brands to leverage the ONDC platform.

Another reason behind the meteoric rise of fintech in India is the high penetration of internet and mobile usage. For instance, over the last decade, smartphone users in India have increased by a staggering 10.2x, from 91 Mn users in 2012 to 931 Mn in 2022. With 600 Mn+ smartphone users, India has surpassed the United States to become the world's second-largest smartphone user base. Also, the introduction of 5G technology has made the internet accessible to every section of society at a low cost, bypassing the conventional trajectory of fixed line and broadband services. With this the internet speeds are also estimated to grow 20x, reaching an average mobile internet speed of 372 Mbps in 2023.

In recent years, India has seized the global fintech spotlight, enticing investors from all over the globe. However, the funding winter has had an impact on the Indian fintech space as well. The sector saw funding drop by 67% in H12023 to $1.4 Bn, a significant drop from $4.3 Bn in the same period last year. The first half of 2023 saw payments, alternative financing, and insure- tech emerge as the top-performing fintech segments. Funding in the payments space surged thrice over H12022, accounting for 55% of total funding. We witnessed seven $100 Mn+ rounds in H12023, including those of PhonePe, InsuranceDekho, Mintifi, and KreditBee.

Globally, there are 187 Fintech unicorns of which 22 unicorns are in India. These are Acko, BharatPe, BillDesk, Chargebee, Paytm, Mobiwik, Oxyzo, PhonePe, Pine Labs, Coin DCX, Coinswitch Kuber, CRED, Slice, Razorpay, Cred Avenue, DIGIT, Groww, Policy Bazaar, Zerodha, Zeta, Open and 1 Card. These unicorns are currently valued at $68 Bn+. Apart from Unicorns, we also have 34 Soonicorns, those who hold the potential of turning into Unicorn in the near future. These include LendingKart, Niyo Global, Jupiter, KreditBee among others. These soonicorns are valued at more over $13 Bn.

The sector is expected to touch $1 Tn by 2030 and one of the key areas to watch out for would be the use of artificial intelligence and machine learning technologies by the fintech companies to improve the efficiency and accuracy of financial services. For instance, AI can analyse vast amounts of financial data and create personalized investment strategies based on an individual’s risk-return profiling. Also, with the rise of the young working population, there is an increased demand for personalized solutions which is leading to the rise of Neobanks. Embedded lending options, digitization of asset-backed lending, and experimentation with decentralized finance (DeFi) are other segments that are growing fast. Also, we expect to see a lot of innovation in the Insure-tech space in the areas of product innovation, seamless claim processing, etc. All these trends have the potential to transform the financial industry and provide more personalized, convenient, and secure services to customers.


The fintech industry continuous to evolve, driven by advances in technology and changes in consumer behaviour. The sector is likely to witness increasing pace of innovation within the remit of regulation. India is still in a unique position to cement its worldwide status as a fintech powerhouse. There are numerous reasons to be optimistic. First, the country is brimming with entrepreneurial zeal. Second, India remains a source of unresolved issues in the areas of payments, credit, and insurance, SMEs, and the financially excluded. With smartphone penetration continuing to rise and rural UPI use taking off, the sector will continue to witness high growth for the foreseeable future. The splendor surrounding India's fintech ecosystem is justified, and it has piqued the interest of both national and global investors, who see the great Indian fintech tale as an unexplored opportunity.

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