The fintech sector in India has been growing at an astronomical pace, thus enabling it to grab a sizeable chunk in the global fintech sector, states ‘State of the Fintech Union 2022’ report by the Boston Consulting Group.
The latest data suggests that India's CAGR in the fintech sector grew by 20 percent, which was higher than that of US, UK and China which witnessed a growth of 16 percent, 15 percent and 10 percent, respectively.
“Clocking over $800 billion annual payments transaction value, Fintechs have made a strong contribution to Indian economy, and play a powerful role in the provision of full-fledged financial services to all Indians. We see this collective segment to be mission critical for the $5 trillion Indian economy,” stated the report.
By growing at a compound annual growth rate of 20 percent, India’s share in global fintech funding is 14 percent.
(Source: BCG State of India Fintech Union 2022)
Upon looking at some of the data points, one can get a drift of the pace of growth in fintech sector in India. The volume of digital payments grew from 125 million in 2021 to 165 million in 2022, registering a growth of 32 percent.
The volume of digital investment in the country grew from 4.5 million in 2021 to 9 million in 2022, reporting a growth of 100 percent.
The neo banking volume, at the same time, rose from 2.5 million to 4 million, reporting a 60 percent growth in just one year, the report stated.
With a number of deals standing at 2,084, India trails only USA and is ahead of UK and China with a total number of 1,951 and 794 deals, respectively between Jan 2017 and July 2022.
Also, India produced as many as 23 unicorns in this sector against 172 in the US, 30 in the UK and 36 in China.
The report further credits the pandemic for astronomical growth in this sector. It states that the funding was low till 2015 after which the sector received rapid funding boost. “Covid further boosted payments space, leading to 210 percent spike in funding between 2020 2021,” it said.
The growth is so phenomenal that these firms are phasing out traditional players off their perch. For instance, fintech firms now occupy 36 percent share in new-to-credit customers against 22 percent by banks. Their market share in UPI transactions is 93 percent against 7 percent by banks, and the market share in active broking clients is 80 percent against 20 percent share by traditional broking firms.
Moving forward, fintech firms will need to re-evaluate their financials and enable cost controls as needed to be able to continue innovative investments and scale.