The Indian fintech firms saw a record funding of $10 billion across over 580 deals in 2021, compared to $3.5 billion in 2020, according to a report by the research firm Bain & Company. However, compared to the first six months of 2021, the fintech funding in H1 of 2022 declined to $4.2 billion.
In FY 2020-21, non-cash payments surged, with over 75% year-on-year (YoY) growth in UPI transactions. This happened due to a shift in consumer behaviour and accelerated digital adoption amid Covid. The loans disbursed by digital lending apps accounted for over 60% of that of non-bank financial companies (NBFCs). Of this, the credit disbursed through buy-now-pay-later (BNPL) apps accounted for $25 billion to $30 billion for 15 million customers in 2021, led by increased adoption of BNPL payments by Millenials and GenZ.
“Small-ticket CD loans have recovered to pre-pandemic levels, with an 11% CAGR over the past three years. Over 70% of disbursements have been to the <40 years age group with 36% to the 30-40 years age group and 37% to the <30 years age group, highlighting significant demand for consumption financing by Millenials and members of GenZ,” the report says.
“The above factors highlight a clear trend in favour of bite-sized consumption financing solutions, especially driven by millennials and Gen Z. Growth in semi-urban regions and the NTC segment also shows that lenders are beginning to successfully increase their reach through digital channels and leverage alternate data for underwriting,” it adds.
Moreover, 2021 and 2022 saw fintech funding worth over $19 billion, with the addition of 18 fintech unicorns. During these two years, the country added 15 fintech unicorns beyond the payment segment. This is because of the emergence of wealthtech, and insurtech.
“Wealthtech players such as Zerodha and Groww banked on their unique low-brokerage proposition to attract new investors while increasing activation through community engagement forums and educational resources,” the report says.
The domestic fintech industry is expected to add an enterprise value worth $350 billion by 2026. “Fintechs are expected to play a vital role in increasing financial inclusion and digital adoption. India has seen a significant rise in fintech investment, with about $35 billion invested across segments thus far, more than doubling India’s share of global fintech funding since 2016,” the report says.
“While both incumbents and insurgents will benefit from this growth, customer engagement and retention will remain a critical strategic priority, creating the potential for collaboration and consolidation between the two,” it adds.