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Fintech: An Evergreen Sector Getting More Greener (2/2)
Fintech: An Evergreen Sector Getting More Greener (2/2)

July 7, 2021

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Fintech: An Evergreen Sector Getting More Greener (2/2)

In my earlier blog on Fintech (Link), I talked a lot about how Fintech continues to be the king of the start-up ecosystem. Fintech leads the race in funding, innovation, user base, etc., and frankly, with the recent advent of the unicorn era in India, the success of any sector can now be measured in unicorn terminology also. And Fintech is a winner here too:

Fintech 2-1

Total Fintech unicorns in India: 11

Time taken to turn unicorn: 3-15 years

Fintech unicorns planning IPOs: 4 (Paytm, Pine Labs, Policy Bazaar, Five Star Finance)

Profitable Fintech unicorns: Billdesk, PolicyBazaar, Zerodha, Five Star Finance)

Combined Valuation of Fintech unicorns: ~36 bn

Now, Fintech has proved its worth in every aspect but like any other sector its growth is still regressed by long existing challenges. It very difficult to completely remove these challenges but ecosystem stakeholders are trying hard to manage them and keep them under control. Some of the key challenges faced by this sectors are:

 

Fintech 2-2

  • Security Risk: Risk associated with Fintech globally. Data breaches, Malware risk, etc. issues are creating concerns
    • Mobikwik database of 10 crore users leaked on the dark web in April 2020
  • Internet Issues: Though we have come a long way but slow or unavailable internet connectivity impacting the growth of this sector
    • India broadband penetration still stands at 47% wherein our European counterparts have reached over a 100%.
    • India witnessed the highest number of Internet shutdowns in the year 2020, a total of 155 internet shutdowns were imposed globally out of which India had 109 shutdowns.
  • Fintech Specific Regulation: No set regulations and guidelines in place for Fintech  
  • Seamless Bank Fintech Collaboration: Banks and Fintech face efficient, acceptance challenges while working with each other
    • The issue exists like culture, innovation acceptance, ideology

But these challenges cannot stop the growth of this mammoth sector and we can expect more fireworks in this sector in the next few years. So, what to expect in the next 2-3 years in Fintech:

Fintech 2-3

  • Strong Investment: Over 2X growth in investment expected in lending, InsurTech and WealthTech / Broking
  • Valuation Rise: 3X rise in valuation expected in overall Fintech ecosystem from current $ 50-60 bn to reach $ 150-160 bn
  • Internationalization: Indian solutions will see more presence abroad, currently 40% have a presence abroad
  • Collaborative Model of Participation: FinTech and Banks both need to get better at working together with each other to successfully drive innovation.
  • Larger Reach & Better Solutions: Existing solutions with become accessible to more people at the same time more innovative technologies will evolve

So it looks like there is no reason why the growth of this sector will stop or even stagnate. Trust and potential continue to help this sector in maintaining its legacy.


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