How FinTech Is Changing Our Lives
- 4m0•
- 09 May 2023
The waiter drops off your bill after you treat yourself in a big restaurant. You pat your pockets looking for your wallet. You can’t find it. Oh no! You forgot your wallet. What now? Your mind races with the odds for what really happens if you can’t pay your bill. Will you be made to work as a dishwasher? Well, had it been the 1990s, it would have been a worrisome situation. But thank God it’s 2022! You could pay via UPI and the restaurant’s account will get credited within minutes. All thanks to the Indian FinTech industry. Fintech has changed our world and a lot is coming. Let’s know about it in detail.
What Exactly is FinTech?
FinTech is an emerging digital technology that aims to improve and automate the delivery and usage of financial services. The word FinTech is basically a combination of ‘financial technology’. Thanks to Fintech, you can send money to a friend via UPI, you can take a cab ride without cash or buy groceries without carrying a purse.
Over the past decade, these transactions have become a part of our day-to-day existence. And these innovations are only the beginning. Fintech is disrupting nearly every area. What’s unique about them you ask? Well, Fintechs operate differently, unlike conventional ways. They recognise a customer need, build an entire experience around a product, and a journey that delivers service. It is the ‘experience’ and ‘service’ that is a hook to a customer’s wallet.
Rise and Rise of Fintech in India
Actually, FinTech can be traced back to the earliest credit cards. However, today they boast a host of offerings. It is rapidly changing the face of the banking industry, as several banks are now moving to digitization as well as paperless processes. Today, FinTech spans various sectors including education, retail banking, investment management, and much more. FinTech has also come to include the use of cryptocurrencies like Bitcoin in today’s times.
Some of the fintech companies that are major players are RazorPay, Policybazar, MobiKwik, CoinDCX, Cleartax, Cred, Upstox, etc.
Fintech StartUps & Unicorns
India is the world’s second-biggest fintech hub with more than 2,565 startups operating currently, there were only 737 in 2014. India’s largest share from fintechs is through payments and is followed by lending, wealth tech, personal finance, insurtech, regtech and others.
The story of fintech unicorns in India started way back in 2015 when Vijay Shekhar Sharma’s Paytm became India’s first fintech unicorn. Three years later India’s fintech startup ecosystem produced the next few unicorns, with PolicyBazaar, PhonePe and Billdesk entering in 2018. The next few years saw the floodgates open, with 2021 alone seeing 11 fintech unicorns. The latest unicorn came in May 2022, with the neobanking startup Open becoming India’s 100th unicorn. The total tally of fintech unicorns in India to now is 21.
Indian versus Global Fintechs
If we go by the data published by FintechLabs as of July 2022, here’s the list of top 10 Fintech Unicorns list by value. See where Indian Fintechs stand compared to the world biggies. Source: Fintechlabs.com
| Rank | Company | Value($Bn) | Value Date | Founded | Country |
|---|---|---|---|---|---|
1 | Ant Technology | 150 | 2018 round | 2014 | China |
2 | PayPal | 103 | 01-Aug-22 | 1999 | USA |
3 | Stripe | 75 | WSJ 15 July 2022 | 2010 | USA |
4 | Adyen | 57 | 01-Aug-22 | 2006 | Netherlands |
5 | Shopify | 46 | 01-Aug-22 | 2004 | Canada |
6 | Block (Square) | 45 | 01-Aug-22 | 2009 | USA |
7 | Checkout.com | 40 | Jan 2022 round | 2012 | UK |
8 | Revolut | 33 | July 2021 round | 2015 | UK |
9 | FTX Exchange | 32 | Jan 2022 round | 2012 | USA |
10 | Afterpay | 29 | Aug 2021 exit (Square) | 2014 | Australia |
51 | Razorpay | 7.5 | April 2021 round | 2014 | India |
62 | CRED | 6.2 | June 2022 round | 2018 | India |
69 | PhonePe | 5.5 | Dec 2020 spinout | 2015 | India |
What’s interesting to note is that - according to the ministry of Commerce & Industry, 1 out of every 10 unicorn, globally, have been born in India. And according to a data by GOI, India has the highest number of fintech adopters in the world at 87% compared to the global adoption of 64% owing to the Covid-19. Here on, it will be interesting to see the journey of India based Fintech firms.
Regulations and Oversight
Recently, RBI released the first set of rules on digital lending based on the working group (WG) recommendations. The focus of these is on protection of consumer interests, transparency of loan pricing/fees, ensuring customer consent for capture/storage of data, restricting access to mobile phone resources among others.
These guidelines have limited impact for lenders at this point. They will evolve over time, but we see them being a bit restrictive for existing players as there is greater focus on transparency, privacy and oversight for entities that are regulated by the RBI. As market players adapt to the new regulations, it would be fair to see stronger oversight build over time as we have seen with banks or NBFCs.
The Next Big Thing in the Future of Finance?
In today’s times, adoption of new technology, leveraging of partnerships with other FinTech stakeholders has become vital for growth for all businesses. Fintech is one of the most promising sectors in India. It has catalysed the financial sector to take new strides and provide better services. That said, there’s a lot to be explored. With appropriate regulatory support, fintech industry is yet to offer surprise and excitement. We believe Fintechs funded with strong promoters or dynamic managements could do exceptionally well in the long run.
References: Startup talky
Kotak Institutional Equities (KIE)
