Renub Research

India FinTech Insights

www.renub.com
India Fintech Insights www.renub.com 1
 India Fintech Insights
This research report covers following Markets, Regions and Segments :

1. Introduction

2. Executive Summary

3. Growth Drivers

• Unmet financial needs

• Changing consumer demographics, evolving needs and rising digital expectations
• Government policies, regulations and infrastructure
o Goods and Services Tax (GST) regime
o Jan Dhan Yojana

• Building the digital infrastructure

o Unified Payments Interface (UPI)
o Digital India Programme
o Availability of the Internet

• Promoting innovation and competition in the industry

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 India Fintech Insights
• Startup India

o License for payment banks

o Recognition of peer-to-peer (P2P) lenders as non-banking financial companies
(NBFCs)
o Regulatory sandbox by the RBI for FinTechs

• Rising collaboration between incumbents and FinTechs

4. Challenges

• Market regulators

o Balancing data privacy needs with the industry’s requirement for open data
o Keeping pace with the emerging risks inherent in advanced technologies
o Promoting stability in the FS sector in an interconnected world

• FS Incumbents

o Reskilling people for a digital tomorrow

o Tackling regulatory scrutiny on advanced technologies
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 India Fintech Insights
• FinTech Players

o Addressing cyber security concerns to win consumers’ trust

o Lack of early-stage funding
o Managing regulatory uncertainty

5. Opportunity

• Bundling FinTech with consumption needs of the mass segment

• Realizing the opportunity: The consumer-need cornerstone framework

6. India Fintech Insights

• Year-on-Year Number of FinTech Companies Founded (in Number) 2013 – 2018

• India FinTech Transaction Value Projections (in US$ Billion), 2019 – 2023
• Global FinTech Transaction Value Projections (in US$ Trillion), 2019 – 2023

7. Global and Indian FinTech

• Global VC-backed FinTech Funding and Deal Count (in US$ Billion), 2014 – 2018
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 India Fintech Insights
8. Asia’s Rising Share in Global FinTech Funding

• Global VC-Backed FinTech Funding by Continent (US$ Billion), 2014 – 2018

• Global VC-Backed FinTech Deal Count by Continent, 2014–2018

9. Robust funding landscape in India

• India VC-Backed FinTech Funding and Deal Count (in US$ Million), 2014 – Q1 ’19
• VC-Backed FinTech Deal Count in India and China (in US$ Million), Q1 2019
• VC-Backed FinTech Deal Count in India and China (US$ Million), Q1 2019

10. Building the Digital Infrastructure

• Number of Mobile and Internet Users in India

• UPI Transactions Cross INR 1 Trillion in Value in Dec 2018

11. Segment Overview

• India VC/PE funding by FinTech Segments (US$ Million), 2018

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12. Digital Payments

• Volume of Digital Payment Transactions (In Million)

• Value of Digital Payment Transactions (In USD Trillion)

13. Payments Ecosystem

• Payments value chain and business models

14. Key Emerging Trends

• Need for interoperability
oDevelopment of next-generation customer solutions by banks and payment
service providers (PSPs) through open banking
oIncreasing use of alternative payment channels
oProcess innovation across the value chain
oTokenization: The future of secured payments

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 India Fintech Insights

• Transaction Flow Using Tokenization across Various Stakeholders in the Payments

Value Chain, 2019-2023.
• % Share of Worldwide Digital Payments Transaction Value by Country, 2019-2023

15. Alternative Lending

• Direct lending models

o POS lending
o Supply chain financing

• MSME financing to rise with increasing business formalization

o Global VC-Backed Alternative Lending Funding (US$ Billion), 2013 to 2018*
o Total Alternative lending Transaction Value in India (US$ Million), 2019 – 2023
o Country Alternative Lending Transaction Value as a % of Worldwide Alternative
Lending Transaction Value in 2019
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 India Fintech Insights
16. InsurTech

• Key Business Models

o Digital insurance advisors
o PoS insurance providers

• Key Emerging Trends

o Product customization
o Price segmentation
o Business model innovation

17. WealthTech

A) Democratising investment advisory

B) Hybrid models with a human touch
C) Sentiment analysis
D) Payment players moving into the systematic investment plan (SIP) space

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18. WealthTech Transaction Value (India vs. Global)

• Indian Robo-Advisory Space

o India - AUM in I Robo-Advisory Space in (USD Million), 2019-2023
o India - Robo-Advisory Transaction Value Accounts for 0.004% of Worldwide
Value in 2019

19. Lending
• Market Opportunity Cash loans (USD Billion), 2021-2025
• Market Opportunity EMI loans (Mobile Phones & Accessories) In USD Billion, 2021-
2025
• Market Opportunity EMI Loans (FMCG) in US$ Billion, 2021-2025
o Redefining Customer Experience Using Modern Technology
o Finding new ways of Customer Acquisition
o Optimizing Customer on Boarding
o Driving hyper-personalisation using chat bots
o Managing risk with AI/ML
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 India Fintech Insights
• ML, automated data analyst and robotics emerge as the top three AI-powered
solutions in BFSI

20. AI-Based

• Moving from robotic process automation (RPA) to intelligent automation (IA)

21. Technologies Shaking Up the FS Infrastructure

• Block chain moving into the mainstream

• FS Industry Leading in Block chain Adoption

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 About Us

Renub Research is a leading Market Research and Information Analysis Company with
centers at Noida India and Roswell USA. We have long-term experience especially in
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info@renub.com

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1. Introduction

Over the last five years, the Indian FinTech market has scaled new heights, both in
terms of funding received and the increasing consumer adoption of FinTech
solutions. In 2018, India ranked second globally on FinTech adoption, with its
percentage of FinTech users at 57.9%. Although India’s adoption rate lags behind
China’s 83.5%, it has surpassed that of developed countries, which stands at
34.2%.1 Several favorable factors have aligned to effect this.

First, consumer experiences have been transformed by non-Financial Services (FS)

tech firms, leading to rising digital expectations from FS providers. Second, the
Indian Government and regulators have engendered an enabling environment for
FinTechs by launching several initiatives aimed at augmenting the country’s digital
infrastructure and boosting the application programming interface (API) economy.

Third, advanced technologies such as artificial intelligence (AI) and cloud computing
have empowered organizations to ride the data explosion wave, fuelled by rising
mobile and Internet penetration, to derive business insights.
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1. Introduction

The interplay of these factors, coupled with the low penetration of FS in India, has
enabled innovators to reconfigure FS value chains by offering best-in-breed point
solutions, primarily aimed at enriching customers’ experience and driving
operational efficiency.

In the Indian FinTech space, digital payments and alternative lending segments
have led from the front in turbo charging the industry’s growth, followed by the
emerging areas of InsurTech and WealthTech. The digital payments space, in
particular, is witnessing remarkable innovations such as the emergence of
alternative payment channels, setting up of payments hubs and tokenization for
securing payments.

Along similar lines, alternative lenders are leveraging advanced technologies and
employing innovative business models to reshape the lending value chain from
customer acquisition and credit scoring to loan servicing and recovery.

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2. Executive Summary

 India FinTech transaction value is expected to grow to US$ 137.8 Billion by

2023.
 Global FinTech transaction value was 5.49 USD Trillion in 2019.

 Number of FinTech companies Founded from 2013 to till Oct 2018* are 1994.

 The average percentage of FinTech users in India is 57.9%, behind China’s

83.5%, and much higher than developed countries’ 34.2%.

 In 2018, The UPI platform was used by 92 banks and witnessed 620 million
transactions worth INR 1 trillion.

 Payments and alternative lending segments attracted the maximum funding in

India in 2018.

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2. Executive Summary

 Volume of India digital payment transactions was US$ 24.13 Million in 2018.

 Value of Global digital payment transactions US$ 3.5 Trillion.

 Total AUM in Indian Robo-Advisory forecasted to hit US$ 145 million by 2023.

 Market opportunity EMI loans (Mobile phones & accessories) is forecasted to

US$ 8.5 Billion.

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3. Growth Drivers

In India, along with sustained funding, both supply-side factors such as Government
and regulatory support, and technological advancements and demand-side factors
such as large unmet needs and rising customer digital expectations have been
converging to drive the FinTech market. These factors are discussed below.

1.Unmet financial needs : A large portion of the Indian population has been
excluded from the formal financial system, owing to multiple reasons such as lack of
awareness about the benefits of FS products and the inability of traditional FS
players to serve this segment in a cost-effective manner. However, since the launch
of schemes like Jan Dhan Yojana and Direct Benefit Transfer, there has been a
marked rise in awareness levels of FS products.

The traditionally unbanked and underbanked population, that was earlier averse to
accessing formal FS products, is now embracing them. However, the incumbents
have been unable to meet their requirements.

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3. Growth Drivers

This has paved the way for FinTechs to serve this segment across the country with
their low-cost and digitised products.

2. Changing consumer demographics, evolving needs and rising digital

expectations: FinTech solutions are being created to cater to the evolving needs of
the young Indian consumer with a median age of 28.2 years. These consumers are
tech-savvy, spend considerable time (approximately 130 minutes per day for
premium segment users) on their smartphones and are open to accessing financial
products on digital platforms.

In addition, FS players have to match consumers’ rising appetites for digitisation,

with the bar for customer experience set high by the non-FS technology players. All
these factors have led to FS players offering digital services, forcing incumbents to
rethink their business models and collaborate with start-ups, or offer services
through their own digital platforms.

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3. Growth Drivers

3. Government policies, regulations and infrastructure : The Indian Government

and regulators have played a prominent role in accelerating the growth of FinTech
solutions across the country by launching several initiatives to this end. Some of
these key initiatives can be categorized below:

Goods and Services Tax (GST) regime : The introduction of the GST regime has
been a key step in formalising the unorganised sector of the Indian economy, with
many FinTechs leveraging the digital footprint generated from the Goods and
Services Tax Network (GSTN). The network has 1.21 crore registered taxpayers13
to credit score and lend to micro, small and medium enterprises (MSMEs) .

Jan Dhan Yojana : A flagship initiative of the Government, this scheme aims to
drive financial inclusion across the country. This has resulted in a significant uptick
in the number of people with bank accounts in India (approximately 320 million
accounts were opened under the scheme), laying the foundation for the delivery of
banking.
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3. Growth Drivers

services to the unbanked. The scheme has also brought in a behavioural change
among unbanked consumers. This, in turn, has led to an increase in the demand
for FS products, thereby creating viable opportunities for FinTechs.

Building the digital infrastructure :

1. Unified Payments Interface (UPI) : The launch of UPI by the National

Payments Corporation of India (NPCI) has resulted in the roll-out of
interoperable payment services amongst FinTechs and incumbent institutions,
leading to the widespread adoption of digital payments across merchants and
customers.

The platform was used by 92 banks and witnessed 620 million transactions worth
INR 1 trillion in December 2018, making it one of the largest payment platforms
across the world.15 In addition, the launch of UPI 2.0 with an overdraft facility in
2019 has the potential to enable credit access to many thin-file customers.
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3. Growth Drivers

2. Digital India programme : The Government’s push to improve digital literacy

across the country through a bouquet of initiatives spanning infrastructure, literacy
and ease of accessing digital services has had a significant impact in improving the
overall digital maturity of the Indian populace. These initiatives have led to
increased awareness about FinTech solutions, thus boosting their usage .

3. Availability of the internet : Over the last decade, there has been a significant
rise in access to and speed of the internet (approximately 520 million mobile
internet users) across the country. This is a prerequisite from an infrastructural
standpoint to access FinTech services. In addition, the cost of internet usage has
dropped significantly in the past five years, resulting in an increase in the number of
internet users. This, in turn, contributes to FinTech adoption.

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3. Growth Drivers

Promoting innovation and competition in the industry:

Startup India: The flagship scheme of the Government to promote the efforts of
startups in the country by providing regulatory and financial support which has led
to a growth in the number of FinTech startups in the country.

Licence for payment banks : The RBI has issued licenses to FinTech companies
to offer e-banking services like remittances, deposits and savings, paving the way
for new-age branchless banking services offered by FinTechs.

Recognition of peer-to-peer (P2P) lenders as non-banking financial companies

(NBFCs) : The RBI provided legitimacy to the P2P lending segment by categorizing
them as NBFCs, boosting the sector’s growth.

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3. Growth Drivers

Regulatory sandbox by the RBI for FinTechs : The RBI has planned to set up a
regulatory sandbox for FinTech start-ups, and the norms for the same are expected
to be announced by June 2019. The central bank aims to achieve a middle ground
between innovation and regulation to help the FinTech industry achieve its
potential.

The sandbox is expected to provide temporarily relaxed regulatory norms for the
conceptualization of new solutions or products on a small scale before a potential
scale up. This is a first-of-its-kind initiative by the regulator in India and is expected
to provide a boost to organizations and start-ups that wish to enter the industry.

In recent years, some state governments have also joined the central Government
in driving the FinTech agenda, with the Maharashtra and Andhra Pradesh
Governments setting up a Mumbai FinTech Hub and FinTech Valley in Vizag,
respectively, for strengthening the FinTech ecosystem in their states.

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3. Growth Drivers

Rising collaboration between incumbents and FinTechs : In the context of the

compete-vs-collaborate debate, the increasing trust in the FS ecosystem has
brought incumbents and FinTech players together to explore more opportunities for
collaboration.

These partnerships have led to innovative customer propositions and new revenue
streams - industry incumbents adopt technology and innovation in a more seamless
and rapid cycle, while FinTech players symbiotically increase their presence
through the distribution infrastructure of incumbents.

In general, the methods of collaboration can be summarized as below :

Supplementary offerings : Using new or existing subsidiaries or sub-brands to

offer new services

Partnerships : Developing joint solutions with FinTechs.

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3. Growth Drivers

Acquisitions: Enhancing their services by acquiring FinTechs

Incubators: Launching incubators to promote startups relevant to their market

Invest: Setting up venture funds to invest in FinTechs

However, the road to collaboration is not free from obstacles. Differences in the
work culture, business models and security continue to pose key challenges. While
incumbents struggle with the pace of innovation and the rigidity of their legacy
systems, startups face legal, bureaucratic and cultural issues while working with
institutions. Despite these challenges, collaboration has become a highly promising
avenue for growth and is expected to remain so in the future, leading to increased
adoption of FinTech solutions among consumers.

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4. Challenges

Although FinTech solutions have been gaining increasing traction in the market,
there are a few challenges hampering the industry’s growth. Some of these are
highlighted below:

1. Market regulators
Balancing data privacy needs with the industry’s requirement for open data:
Market regulators are struggling to balance the consumer needs of data security
and data privacy with the industry’s need for open data for insight generation. While
ensuring data privacy is critical to safeguarding consumers’ trust in the FS space, a
hard-line approach on data sharing has the potential to hamper the free flow of data
crucial for creating innovative solutions.
Keeping pace with the emerging risks inherent in advanced technologies :
Market regulators would need to keep up with the technological breakthroughs to
fully appreciate their evolving risks on the wider ecosystem. For instance,
cryptocurrencies could be used for money laundering,

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4. Challenges

and AI-driven algorithm trading could lead to systemic risks by increasing market
volatility. Also, AI-led models for credit assessment and underwriting could lead to a
‘segment of one’ and end up pricing certain customer segments out of the market
for good.

Promoting stability in the FS sector in an interconnected world : Though

FinTech players have helped create a diverse FS ecosystem, it has also led to
increased interconnectivity and brought forth new systemic risks by launching
disruptive business models. For instance, local regulators are grappling to
supervise global technology firms who operate across multiple jurisdictions, leading
to regulatory arbitrage.

2. FS incumbents
Reskilling people for a digital tomorrow : One of the key challenges facing the
industry is how will they adopt workforce re-skilling strategies to cope with the rapid
pace of technology-led revolution.
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4. Challenges

Tackling regulatory scrutiny on advanced technologies : The FS industry, with

its stringent regulations round consumer security, necessitates that advanced
models should be employed in sensitive areas such as lending pass the test of
explain ability so as to safeguard consumer interests. Such regulations have
curtailed traditional players’ ability to experiment with advanced analytical models in
areas directly impacting customers.

3. FinTech Players
Addressing cyber security concerns to win consumers’ trust : With the rapid
pace of technological advancements, cybercrime has also become more
sophisticated. The onus is on FinTech players (and their partners) to ensure that
sufficient digital controls are in place to secure customers’ trust.

Lack of early-stage funding : Despite the Indian FinTech space attracting

sustained VC investments over the last few years, many smaller startups lack
access to early-stage capital, inhibiting their potential to scale up.
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4. Challenges

Managing regulatory uncertainty : Although Indian FinTechs have operated in an

enabling regulatory environment, they have not been immune to regulatory
uncertainties. With the recent Aadhaar e-KYC ban as a case in point, many
FinTechs who had built business models around Aadhaar-enabled services for
customer on boarding had to move back to physical mandates, disrupting their
operations.

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5. Opportunity

1.Bundling FinTech with consumption needs of the mass segment : Although

India’s FinTech sector has made substantial inroads into the FS space, most of their
solutions have primarily catered to the affluent, urban segment.

However, this is set to change with the rise of the mass segment in India. A large
majority of this segment are first-time internet users and greatly differ from the
current FinTech consumers, both in their demographical makeup and consumption
needs.

In the coming years, the increasing consumption needs of this segment on the back
of their rising income levels are set to open up distinct FinTech opportunities in
diverse areas ranging from food, clothing, and health to housing transport.38 We
look at key FinTech opportunities in the lending space that are expected to emerge
with the rising consumption needs of India’s mass segment.

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5. Opportunity

2. Realising the opportunity: The consumer-need cornerstone framework

By following a three-pronged strategy of the consumer need cornerstone framework,
FS players would be well positioned to capitalize on the FinTech opportunities
provided by the burgeoning consumption needs of different income segments.

Phase 1 : Cornerstone creation : At the start, an FS player targets a customer

segment to identify its specific core user’s need as the cornerstone, which may not
necessarily be financial. The player then proceeds to offer a product centered on
this through an exceptional user experience to develop and grow the user base.

This phase entails close monitoring of key KPIs such as customer growth rate,
customer retention rate and merchant/partner growth rate to gauge the success of
the offering’s market adoption. In this phase, the key focus is on catering to the core
consumer need cornerstone, such as food and clothing, and not necessarily on
delivering FS solutions.

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5. Opportunity

Phase 2: Introduction of FS offerings : In the second phase, the FS player

proceeds to introduce the FS offering that directly addresses the consumer need
cornerstone identified in phase 1.

Here, the FS player would leverage technology and partnerships to efficiently deliver
the FS offering, and drive customer usage and revenues. Key KPIs that need to be
monitored in this phase would be activation rates, number of transactions and
average ticket size, as the focus now is on building a large user base for
monetisation in the next phase.

Phase 3 : Once the FS player establishes market traction for the initial offering and
grows a sizeable user base, it swiftly expands into other profitable product streams
that share logical adjacencies to its current offerings. The key goal here is to
achieve profitable growth via expansion, and this requires close monitoring of KPIs
such as up sell/conversion rates, product per customer, average revenue per
customer and strategies to optimize these KPIs.
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6. India Fintech Insights

The Indian FinTech market has been on an upward growth trajectory over the last
five years. This is evidenced by an increase in both the number of FinTech
companies founded and the investment they have attracted. From January 2013 to
October 2018, approximately 2,000 FinTech companies have been founded, turning
India into a hotbed of entrepreneurial activity.

This has also translated into increased consumer adoption of FinTech solutions. In
2018, India ranked second globally in the FinTech adoption rate.

The average percentage of FinTech users in the country is 57.9%, behind China’s
83.5%, and much higher than developed countries 34.2%.4 With a strong
technological ecosystem as its backbone and a huge market base with a low
penetration of financial services (FS), the Indian FinTech market holds immense
potential.

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6. India Fintech Insights

The overall transaction value in the Indian FinTech market is estimated to jump from
approximately USD 66.1 billion in 2019 to USD 137.8 billion in 2023, growing at a
CAGR of 20.18% (The global FinTech market is also poised to achieve high growth
levels in the coming years. The overall transaction value in the global FinTech
market is predicted to grow from around USD 5.49 trillion in 2019 to USD 9.82
trillion in 2023, a CAGR of 15.64%.

For the Indian insurance industry, the ultralow levels of insurance penetration
(2.76% in life insurance and 0.93% in non-life insurance), coupled with the
technology-led innovations that are underway across the product, pricing and
distribution spectrums, make it ripe for digital disruption.

Similar trends are shaping up in the wealth management space, as digital advisory
models aim to democratize investment management for the mass segment. Despite
the tremendous progress made by Indian FinTechs, their true democratic potential is
yet to be fully exploited, as current solutions primarily cater to the affluent, urban
segments and not the masses.
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6. India Fintech Insights

However, we believe this is set to change, as the next wave of FinTech growth is
likely to be led by the bundling of FinTech solutions with the rising consumption
needs of this segment on the back of their increasing income levels.

For FS players, targeting a core consumer need (not necessarily financial) and
expanding along a continuum of adjacent offerings to provide FS solutions at the
point of consumption would position them to monetize this large user base, and
drive financial inclusion.

Another overarching theme manifesting itself in the FS space is the increasing

number of partnerships between various players across industries. The diverse
Indian digital payments landscape today, including telecom companies, banks,
wallet companies and retailers (e-commerce), drives home this point. Similarly,

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6. India Fintech Insights

FS lenders are increasingly partnering with alternative data providers such as

FinTechs, data utilities, and tech players to cater to the evolving needs of today’s
marketplace.

Clearly, the industry has come to realize that the true power of FinTech lies in
collaboration. However, within this overall trend, another significant theme playing
out is the increasing role of non-FS players who leverage their captive
customerbase and superior technology stack to own the customer experience,
upending the product distribution space.

This has huge implications for incumbents, as profit streams begin to shift from
product manufacturing to other value chain activities that directly control the
customer experience.

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6. India Fintech Insights

Going forward, incumbents would need to make strategic bets on where to play in
the FS value chain, as platformization becomes the new normal in the FS industry.
The next five years hold immense potential for both FinTechs and incumbents to
revolutionize the FS landscape and uplift India’s economy by driving the
consumption story.

However, success in this digital economy would be dictated by an organization's

capacity to innovate, along with its ability to manage partnerships and orchestrate
ecosystems across both FS and non-FS players to provide financial solutions at the
point of consumption.

Ultimately, this would boil down to how effectively organizations can build digital
leadership and business agility to drive the organizational change and the cultural
mindset shift required for embracing innovation and new ways of working.

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6. India Fintech Insights

Through this report, we have articulated some key trends in the Indian FinTech
landscape by setting them against the technological advancements disrupting the
FS space, and have provided recommendations for furthering India’s FinTech
growth.

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6. India Fintech Insights

Year-on-Year Number of FinTech Companies Founded (in Number) 2013 - 2018*

700

600 574
Number of Fintech Companies

524
500

400
337
293
300

200
200

100 66

0
2013 2014 2015 2016 2017 2018*

Source: Tracxn, 2018

Note: 2018 data is till October 2018

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6. India Fintech Insights

India FinTech Transaction Value Projections (in US$ Billion), 2019 - 2023

160

137.8
140

120

100
Billion US$

80
66.1

60

40

20

0
2019 2023

Source: Statista, 2019

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6. India Fintech Insights

Global FinTech Transaction Value Projections (in US$ Trillion), 2019 - 2023

12

9.82
10

8
USD Trillion

6 5.49

0
2019 2023

Source: Statista, 2019

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7. Global and Indian FinTech

2018 emerged as a phenomenal year for the FinTech sector, as global funding
broke new ground on the back of supportive regulatory policies, technological
advancements and an increase in consumers’ adoption of FinTech solutions.

As per a CB Insights report global venture capital (VC)-backed funding in FinTech

companies rose to approximately USD 39.57 billion across 1,707 deals, both of
which represent a new annual high. This was partially driven by 52 mega-rounds
(USD 100 million+) totaling USD 24.88 billion, indicating investors’ increasing
appetite for larger deals and the preference for investing in late-stage companies as
the funding market matures.

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7. Global and Indian FinTech

Global VC-backed FinTech Funding and Deal Count (in US$ Billion), 2014 - 2018

45.00 1707 1800

40.00 1480 1600

39.57
35.00 1254 1400
1153
30.00 1200
US$ Billion

Number of Deals
25.00 885 1000

20.00 800
19.29
15.00 18.00 600
16.30
10.00 400

5.00 8.34 200

0.00 0
2014 2015 2016 2017 2018

USD Bn Deal Count

Source: CB Insights, 2019

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8. Asia’s Rising Share in Global FinTech Funding

This exceptional growth in global funding was primarily driven by the North American
and Asian markets, as deal activity increased across all continents, barring Europe.
The US retained top positon, with 659 deals totalling approximately USD 11.89
billion, an annual high both in terms of the number and size of deals.

However, Asia, driven by China and India, remains well-positioned to unseat North
America as the primary market for global funding. This is corroborated by its
ascendancy in recent years, despite the US imposing regulatory barriers on
investment in China in 2018. Asia attracted the largest chunk of VC-backed FinTech
funding - USD 22.64 billion across 516 deals – during the year.

This figure includes the most significant funding deal of approximately USD 14
billion in a Chinese FinTech. Aggressive growth strategies adopted by Chinese
technological giants and their expansion into new markets like Southeast Asia and
India played a key role in driving global funding to Asia.

India Fintech Insights www.renub.com 43

8. Asia’s Rising Share in Global FinTech Funding

Another significant development in 2018 was the global nature of FinTech’s growth,
with 39% of deals being closed outside the core markets of the US, UK and China,
signaling the increasing potential of emerging markets such as India.

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8. Asia’s Rising Share in Global FinTech Funding

Global VC-Backed FinTech Funding by Continent (US$ Billion), 2014 - 2018

25

22.64
20

15
US$ Billion

12.41

10 9.12 8.67

5.92 6.26
6.84
5 6.2
5.02

1.11 1.19 2 1.37 2.84 3.52

0
2014 2015 2016 2017 2018

North America Asia Europe

Source: CB Insights, 2019

India Fintech Insights www.renub.com 45

8. Asia’s Rising Share in Global FinTech Funding

Global VC-Backed FinTech Deal Count by Continent, 2014–2018

800
717
700
629 643
622
600 553
Numbers of Deal Count

500
516

400
373
300 318
256
200

156
100

144 234 262 371 267

0
2014 2015 2016 2017 2018

North America Asia Europe

Source: CB Insights, 2019 not included in the graph

Note: Other continents

India Fintech Insights www.renub.com 46

9. Robust funding landscape in India

In line with the global trends, sustained VC-backed investments in the Indian
FinTech space over the last few years have played a pivotal role in propelling India’s
FinTech sector. In 2018, India received approximately USD 1.79 Billion in VC-
backed funding across 97 deals.

Though this was an annual high in terms of deal count, it reflected a decline from
the record funding of USD 2.4 billion across 48 deals in 2017. In addition, India
overtook China as Asia’s top FinTech funding target market with investments of
around USD 286 Million across 29 deals, as compared to China’s USD 192.1 Million
across 29 deals in Q1 2019.

The massive slump witnessed by China in this quarter could partly be attributed to
its Government’s concerted efforts to rein in the risks associated with the
mushrooming of its peer-to-peer (P2P) lenders.

India Fintech Insights www.renub.com 47

9. Robust funding landscape in India

Though the Indian FinTech market has witnessed high levels of investment activity
in recent years, a quick comparison with core FinTech markets like the US and
China reveals that India still has substantial headroom for further growth. Some of
the factors supporting the Indian FinTech market are examined in the next section.

India Fintech Insights www.renub.com 48

9. Robust funding landscape in India

India VC-Backed FinTech Funding and Deal Count (in US$ Million), 2014 – Q1 ’19

120 3000

97
100 2400 2500

80 2000
1791
US$ Million

1580
60 1500
50
48
40 47 1000
29
30
20 388 500
286
163

0 0
2014 2015 2016 2017 2018 Q1 2019

Funding (USD Mn) Deal count

Source: CB Insights, 2019; Tracxn. 2018

India Fintech Insights www.renub.com 49

9. Robust funding landscape in India

VC-Backed FinTech Deal Count in India and China (in US$ Million), Q1 2019

2000
1829.7
1800

1600 1544.5
1451
1400

1200
US$ Million

1091.8

1000

800

600
428.2 454.3
397.6
400 285.6
225.1 192.1
200

0
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

India China

Source: CB Insights, 2019

India Fintech Insights www.renub.com 50

9. Robust funding landscape in India

VC-Backed FinTech Deal Count in India and China (US$ Million), Q1 2019

80 76
71
70

60

50 49
50
US$ Million

40

29 28 29 29
30
22
20 18

10

0
Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019

India China

Source: CB Insights, 2019

India Fintech Insights www.renub.com 51

10. Building the Digital Infrastructure

Unified Payments Interface (UPI):

The launch of UPI by the National Payments Corporation of India (NPCI) has
resulted in the roll-out of interoperable payment services amongst FinTechs and
incumbent institutions, leading to the widespread adoption of digital payments
across merchants and customers.

The platform was used by 92 banks and witnessed 620 million transactions worth
INR 1 trillion in December 2018 (Figure 10), making it one of the largest payment
platforms across the world.15 In addition, the launch of UPI 2.0 with an overdraft
facility in 2019 has the potential to enable credit access to many thin-file customers.

Digital India programme

The Government’s push to improve digital literacy across the country through a
bouquet of initiatives spanning infrastructure, literacy and ease of accessing digital
services has had a significant impact in improving the overall digital maturity of the
Indian populace.
India Fintech Insights www.renub.com 52
10. Building the Digital Infrastructure

These initiatives have led to increased awareness about FinTech solutions, thus
boosting their usage.

Availability of the internet

Over the last decade, there has been a significant rise in access to and speed of the
internet (approximately 520 million mobile internet users16) across the country. This
is a prerequisite from an infrastructural standpoint to access FinTech services. In
addition, the cost of internet usage has dropped significantly in the past five years,
resulting in an increase in the number of internet users. This, in turn, contributes to
FinTech adoption.

India Fintech Insights www.renub.com 53

10. Building the Digital Infrastructure

Number of Mobile and Internet Users in India

Mobile
Subscribers
1.18 Billion

Internet Users
540 Million

Mobile Internet
Users
520 Million

Source: PwC analysis

India Fintech Insights www.renub.com 54

10. Building the Digital Infrastructure

UPI Transactions Cross INR 1 Trillion in Value in Dec 2018

UPI Transactions Nov-16 Dec-18

No. of Banks on UPI 21 92

No. of Transactions On UPI 0.3 Million 620 Million

Value of Transactions On UPI 0.9 Billion INR 1 Trillion INR

Source: PwC analysis

India Fintech Insights www.renub.com 55

11. Segment Overview

The Indian FinTech market has seen the emergence of a few dominant segments
that are disrupting the FS value chain by offering technology-led innovations to
improve customer experience and engagement, and to drive operational efficiency.
Within this space, digital payments and alternative lending have emerged as the
most mature segments, driven by sustained funding, Government support and huge
untapped market opportunities.

In 2018, the Indian FinTech market received total VC/private equity (PE)
investments of approximately USD 1.83 billion across 165 deals. Payments
accounted for the largest share with USD 709 million across 21 deals, followed by
alternative lending with USD 530 million across 67 deals, mirroring global trends.
InsurTech and WealthTech emerged as the next best funded FinTech segments in
2018.

India Fintech Insights www.renub.com 56

11. Segment Overview

India VC/PE funding by FinTech Segments (US$ Million), 2018

800
709
700

600
530
500

400 378

300

200
122
100 67
21 17 23 37
11
0
Payments Alternative Insur Tech Wealth B2B FinTech
Lending

Funding USD Mn Deal Count

Source: MEDICI Research, 2019

India Fintech Insights www.renub.com 57

12. Digital Payments

Indian digital payments witnessed exponential growth in the last 5 years

Payments have been at the forefront of India’s digital revolution, with digital payment
transaction volumes (worth USD 3.5 trillion) touching approximately 24.13 billion in
2018.

The demonetization drive launched in November 2016 and lucrative returns on

mobile wallets and UPI transactions (which led to their widespread adoption) have
been key to driving exponential growth in digital transactions.

In addition, the rise of digital commerce, innovation in payments technology using AI,
block chain, the Internet of Things (IoT) and real-time payments; and the introduction
of mobile point of sale (POS) devices have led to a reduction in the cost of
acceptance infrastructure and also contributed to growth.

India Fintech Insights www.renub.com 58

12. Digital Payments

Volume of Digital Payment Transactions (In Million)

30

25 24.13

20 19.2
US$ Million

15 14.32

10.6
10 8.56
6.99

0
2013 2014 2015 2016 2017 2018

Source: RBI Clearing, Cards, PPI, Mobile Banking

Note: Inclusive of retail electronic

India Fintech Insights www.renub.com 59

12. Digital Payments

Value of Digital Payment Transactions (In USD Trillion)

3.5
3.5

2.5
2.5
US$ Trillion

2
1.8

1.5
1.3

1
1
0.7

0.5

0
2013 2014 2015 2016 2017 2018

Source: RBI Clearing, Cards, PPI, Mobile Banking

Note: Inclusive of retail electronic

India Fintech Insights www.renub.com 60

13. Payments Ecosystem

Payments value chain and business models :

While there are multiple electronic payment modes in India now, the major forms of
digital payments are cards, retail electronic clearing (NEFT, IMPS and more), UPI,
mobile banking and prepaid payment instruments (PPIs). Of these, PPIs and UPI
have gained major traction in the last few years, with cards remaining a stable fixture
in the landscape.

UPI, mobile wallets and prepaid cards have also opened up the payments
landscape to additional use cases like e-toll and transit payments, micro-lending,
cross-border remittances, and smart city payments.

These leverage the base technology of mobile payment instruments to provide

access to digital payments anytime, anywhere. Across the entire payments value
chain, participants can be broadly classified into six verticals with subdivisions.

India Fintech Insights www.renub.com 61

 13. Payments Ecosystem

Payments Ecosystem

Payments

Digital Outsourcing Support Core

and Managed Issuance
Payments Services Applications Device
Services
Manufacturer

Mobile Wallets ATM And POS Card Issuers Loyalty Card ATM
Outsourcing Management Manufacturers

Internet ATM Switching

Payment Prepaid Analytics and Driving POS
ATM Managed
Gateway Services Instrument Manufacturer
Providers

Bill Cash CRM Reconciliation Card

Management Manufacturers
Aggregators

India Fintech Insights www.renub.com 62

14. Key Emerging Trends

While there are several factors at play that will shape the future growth
trajectory of the Indian digital payment space, look at six key trends that are
critical to driving this growth.

Need for interoperability: Recently, the RBI’s Master direction on PPIs in India
highlighted the need for exploring PPI interoperability. In a country where there are
almost 50 PPI players, this will facilitate exponential growth in digital payments as
well increase their acceptance. Currently, even if customers want to use digital
wallets to make payments, they are unable to do so if the merchant is a subscriber of
a different mobile wallet.

Interoperability is expected to remove such hindrances and enable users to make

payments at any and all digitally enabled merchant outlets without the need to
possess the same wallet platform What makes interoperability possible today is the
UPI, which allows users possessing accounts in different banks to transact with each

India Fintech Insights www.renub.com 63

14. Key Emerging Trends

other in real time. With wallet interoperability, this platform can be leverage to
facilitate easier mobile wallet transactions, thus paving the way for a more connected
peer-tomerchant (P2M) network.

Development of next-generation customer solutions by banks and payment

service providers (PSPs) through open banking : Open banking is a trend that
has recently caught on with FS providers worldwide. It entails providing regulated
access to internal bank customer data and processes to other parties (mostly
FinTech firms) through digital channels like APIs.

Globally, banks are launching applications that allow users to access their accounts
with the country’s biggest banks in one place, view their spending history and gain
insights into their finances through in-app messaging.

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14. Key Emerging Trends

This has been done by connecting to the open APIs of these banks. In India, banks
are introducing API-based business to-business (B2B) services where corporate
ERPs can gain access to the bank’s transaction processing services through API
calls.

Increasing use of alternative payment channels: While there have been

improvements in the ongoing issuing and acquiring of channels (e.g. virtual cards,
instant issuance, all-inone POS, combo cards), newer alternate channels have
emerged in recent years that can be leveraged by financial institutions worldwide
(e.g. NFC, QR codes, RFID IoT payments, wearable's).

Indian banks are partnering with mobile payment firms to enable ‘tap-and-go’ credit
card payments at merchant PoS terminals using smart phones.

India Fintech Insights www.renub.com 65

14. Key Emerging Trends

Process innovation across the value chain : Technology-led process optimization

is enabling cost efficiencies across the payments value chain, with innovations in
both front-end customer facing and back-end operational processes. One of the
major trends in this context has been the setting up of payments hubs – a centralized
system that actively supports payment transactions across channels and businesses,
creating a fully unified banking platform.

Similarly, Asian banks are also undertaking initiatives to unify their global payments
and clearing systems, integrating various systems and processes. Indian banks are
also setting up enterprise payment hubs to manage payments, support financial
messaging, automate payables and receivables, and optimize liquidity.

Tokenization: The future of secured payments : In an age where digital

transactions are booming, the security of customers’ payment data has become
extremely crucial. In light of this, card tokenization is slowly gaining popularity in

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14. Key Emerging Trends

In India, digital payments’ transaction value is estimated to grow at a CAGR of 20.2%

from approximately USD 64.8 billion in 2019 to USD 135.2 billion in 2023. Its share
of worldwide transaction value of digital payments is set to increase from 1.56 % to
2.02% during the same period.

In the case of the market leader, China, the transaction value of digital payments is
estimated to grow at a CAGR of 18.5% from approximately USD 1.56 trillion in 2019
to USD 3.08 trillion in 2023. Additionally, its share of the worldwide transaction value
of digital payments is set to increase from 37.72% to 46.11% during the same period.
.

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14. Key Emerging Trends

Transaction Flow Using Tokenization Across Various Stakeholders in the Payments Value
Chain

3,500.0
3,083.3
3,000.0
2,602.0
2,500.0
2,195.8
US$ Billion

2,000.0 1,853.0
1,563.7
1,500.0 1,338.2
1,232.2
1,134.6
1,044.8
962.0
1,000.0

500.0
64.8 77.9 93.6 112.5 135.2
0.0
2019 2020 2021 2022 2023

India US China

Source: Statista, 2019

India Fintech Insights www.renub.com 68

14. Key Emerging Trends

% Share of Worldwide Digital Payments Transaction Value by Country, 2019-2023

50
46.11
45 43.85
41.71
39.67
40 37.72

35

30

25 23.21 22.37 21.55 20.77 20.01

20

15

10

5 1.9 2.02
1.56 1.67 1.78
0
2019 2020 2021 2022 2023

India US China

Source: Statista, 2019

India Fintech Insights www.renub.com 69

15. Alternative Lending

Technology-driven alternative lenders are upending the traditional lending value

chain by engaging in both product and process innovation to improve customer
experience and drive operational efficiency.

These new-age lenders employ advanced technologies like artificial intelligence (AI)
and machine learning (ML) to optimise their customer acquisition process for
reducing costs, incorporate alternative data for credit underwriting and adopt
sophisticated risk management solutions for vastly improving downstream lending
activities, including collections management and loan resolution. Alternative lenders
have been growing rapidly, with a steady infusion of investment, both globally and in
India, serving as testimony to the huge market potential this sector holds.

In 2018, alternative lending witnessed the highest deal activity in the Indian FinTech
market, with 617 deals totalling approximately USD 530 million. Additionally,
cumulative investments into the Indian alternative lending space have already
crossed USD 1 billion as of September 2018.
India Fintech Insights www.renub.com 70
15. Alternative Lending

Across the globe, there are more than 3,400 alternative lenders, with multiple
business models catering to the huge underserved segment, and 11 alternative
lenders as unicorns. Also, the overall global funding in this space has already
crossed approximately USD 21.7 billion till September 2018, boosting the sector’s
growth.

Direct lending models : Direct lending includes entities that lend their own capital.
In India, these are either registered as NBFCs or have tie-ups with these entities. In
India, multiple direct lending models are emerging, with lending based on borrowers’
working capital, and unsecured and short-tenure loans. Some of these models are:

POS lending: These players finance e-commerce shoppers’ purchases through tie-
ups with FS lenders. Apart from utilizing conventional data like bank account
statements for underwriting, these players also utilize AI models to assess consumer
behaviour based on their transaction history, product purchase behavior and other
data points, to create a sharper customer risk profile.
India Fintech Insights www.renub.com 71
15. Alternative Lending

Supply chain financing: With the continued growth of e-commerce and online
marketplaces, lenders have targeted not just retail consumers but also merchants
selling their products and services on these platforms. Direct lending NBFCs tie up
with wholesale players and marketplaces to target large networks of merchants who
source their products there. These platforms contain huge volumes of data on the
sales cycles of these merchants, which are then consumed by advanced analytical
models for credit underwriting.

Driving financial inclusion using alternative credit scoring :

MSME financing to rise with increasing business formalization: MSMEs are

crucial to the growth of different global economies. In 2018, MSMEs in India
contributed 37% of the country’s GDP and 43% of exports, and employed 40% of the
workforce.25 In spite of exclusive legislations and policies, MSMEs failed to reach
their full potential owing to lack of access to formal credit.

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15. Alternative Lending

For lenders, the fragmented and opaque nature of available MSME information
poses a serious challenge for underwriting. Other factors, including a lack of
collateral and formal credit ratings, coupled with high transaction costs, act as a
further disincentive to lend to MSMEs.

However, this situation is set to change with huge improvements in digital

infrastructure and the roll-out of structural reforms such as the GST rollout. As a
result, MSME businesses will be formalised through the increased availability of
digital MSME information that can be utilised for credit assessment.

A new of crop of Fitch lenders have already entered this space, and they use both
traditional data and alternative MSME data to offer credit solutions to MSMEs. Some
of the MSME alternative data is used by these lenders include e-commerce data
(e.g. MSME borrowers’ interactions with their market), psychometric credit
information, digital footprints (e.g. digital supply-chain data), mobile phone usage
data, social network data and location data.
India Fintech Insights www.renub.com 73
 15. Alternative Lending

Global VC-Backed Alternative Lending Funding (US$ Billion), 2013 to 2018*

350 6
324 327
300 304
5
4.9
250

NO. of Deal Count

4
219
US$ Million

200 201
3.5
3
150 2.8
128
2
100 2 2.1

50 1
0.7
0 0
2013 2014 2015 2016 2017 2018*

Funding USD Mn Deal Count

Source: Tracxn, 2018

India Fintech Insights www.renub.com 74

15. Alternative Lending

Total Alternative lending Transaction Value in India (US$ Million), 2019 - 2023

135
132.4

130

125
US$ Million

120
118.4

115

110
2019 2023

Source: Statista, 2019 (Consumer) Data

Note: Only Includes Crowdlending (Business) and Marketplace Lending (Consumer) Data

India Fintech Insights www.renub.com 75

 15. Alternative Lending

Country Alternative Lending Transaction Value as a % of Worldwide Alternative Lending

Transaction Value in 2019

100
91
90

80

70

60
Percentage

50

40

30

20

10
3.49 1.74 0.005
0
Uinted States United Kingdom India China

Source: Statista, 2019

Note: Only Includes Crowdlending (Business) and Marketplace Lending (Consumer) Data

India Fintech Insights www.renub.com 76

16. InsurTech

The Indian InsurTech space witnessed rapid growth in 2018 after receiving a total
funding of approximately USD 378 million across 17 deals to emerge as the third
best funded FinTech segment. As of February 2019, there were 142 InsurTech
startups operating in India.29 Amongst these, the top 10 InsurTech start-ups by their
amount of funding have received an aggregate of USD 660 million in the past
decade.

Key business models : InsurTech refers to the practice of using technology-based

innovations to drive disruptions across the insurance value chain and achieve cost
efficiencies and product democratisation.

This space is currently dominated by nascent startups which operate across various
facets of the insurance life cycle—that is, lead management, underwriting, sales and
distribution, claims and renewal.

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16. InsurTech

Digital insurance advisors : Digital advisors are web/application-based service

providers who aggregate and sell product offerings of both traditional and new-age
digital insurers on their platforms via a commission based revenue model. The key
value propositions offered to the customers are convenience to access and compare
products from multiple insurers on the same platform, and an end-to-end, seamless
digital experience across the insurance lifecycle.

PoS insurnce providers : PoS insurers address customers’ need for insurance
when they shop for other products and services. These players partner with digital
service providers who cater to customers’ needs like buying a car, electronic
appliance, furniture, house, vacation, etc., and offer personalised insurance products
to these customers. By partnering with online service provides and e-commerce
aggregators, the PoS insurers gain access to a significant market base. This is
further leveraged by insurance companies to cross sell traditional insurance products
like life, health, auto, etc.

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16. InsurTech

Key emerging trends

Even though the Indian InsurTech market is at an early stage, the following three
trends are emerging:

Product customisation : The rise of real-time analytics and increased availability of

data using IoT devices have altered the nature of insurance products, giving rise to
sachet insurance policies. This has also transformed methods used for underwriting
for these new-age policies by using alternative data.

Price segmentation : Insurers are creating customized profiles on a customer-to-

customer basis. This helps them understand their unique risk profiles and offer
personalized pricing in policies.

Business model innovation : Companies have adopted new models like P2P
insurance, and offer platforms to pool insurance premiums wherein peers can
purchase group insurance policies. This enables them to team up and contribute to
each other’s losses if required.
India Fintech Insights www.renub.com 79
17. WealthTech

WealthTech players employ advanced analytics to offer digital solutions to transform

traditional wealth management and investment management services. Traditionally,
the technical expertise of financial advisors has been the key differentiating factor for
wealth managers.

However, with improved usage of big data and emergence of sophisticated AI and
ML models in evaluating investment opportunities, optimizing portfolios, and
mitigating associated risks, both quantitative as well as fundamental asset managers
are increasingly relying on technology for investment decision-making.

The increasing influence of technology in this space is apparent by both the steady
funding into this space and the growing number of WealthTech startups. In 2018,
WealthTech was the fourth-best funded FinTech segment in India, with investments
of approximately USD 122 million across 23 deals. Even globally, there has been an
upward trend in the amount of capital raised by WealthTech startups in recent years.

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17. WealthTech

In the first quarter of 2019 alone, global WealthTech startups raised approximately
USD 845.1 million, an increase of almost 80% over the Q4 2018.

Democratising investment advisory : Traditionally, specialised investment advisory

services were the preserve of only high net worth individuals. However, the
emergence of tech-enabled wealth managers has made it possible to deliver highly-
specialised investment advisory services targeting the mass segments.

Hybrid models with a human touch : As the demand for robo-advisory and
technology-driven wealth and portfolio management tools grows, financial institutions
are investing significant money and effort to integrate these offerings with their
existing workforce. The hybrid model is meant to provide a level of comfort not seen
before that uses only digital services while still catering to rising consumer interest in
WealthTech.

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17. WealthTech

Sentiment analysis : AI - powered robo-advisors can analyse web data, including

social media data, to analyse the real-time sentiments of people, thus providing
insights into optimal asset allocation strategies. For instance, with a combination of
big data analytics and AI, live data from various social media outlets is being
collected. It is analysed to help traders anticipate movement in a company’s stock
price.

Payment players moving into the systematic investment plan (SIP) space :
Digital wallet companies in India are now moving into the wealth management space
with small-value SIPs (systematic investment plan), starting as low as INR 100. The
USP of these offerings is the easy integration with customers’ payment wallets and
the near zero fees or commission. Life-stage/event/ goal-based investment advisory
Some of the WealthTechs today are gasifying the process of investment product

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17. WealthTech

selection by providing the customer with a pre-defined life-stage or event-based

investment option which can be used to achieve the desired financial goals. This
helps in simplifying the complexities traditionally associated with choosing the
components of a portfolio of financial products, and helps customers focus only on
the objective of their investments.

In the first quarter of 2019 alone, global WealthTech startups raised approximately
USD 845.1 million, an increase of almost 80% over the Q4 2018 figure.

WealthTech transaction value (India vs. global) : Total assets under management
(AUM) in the Indian robo – advisors segment is estimated to grow at a CAGR of
36.2% from USD 42 million in 2019 to USD 145 million in 2023. But, these numbers
are dwarfed by the market leader, the US, which accounts for 76% of the worldwide
total assets under management in the robo-advisors segment in 2019.

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17. WealthTech

As the number of high-net-worth individuals (HNWIs) in India grows, so does their

need for advisory in wealth management. Between 2011 and 2017, the number of
HNWIs has been steadily growing at a CAGR of 18.67%.This growth is expected to
continue over the next few years, with the total HNWI wealth likely to reach around
USD 3 trillion by 2025, creating a huge opportunity for the WealthTech players.

Moreover, the requirement for wealth management today is not limited to HNWIs, but
also includes the mass segments.

This is supported by the target set by the Association of Mutual Funds in India (AMFI)
to grow the industry’s assets under management (AUM) by approximately five times
to INR 95 lakh Crore (USD 1.47 trillion) and the number of investor accounts by more
than thrice to 130 million by 2025.This would call for WealthTech players to step up
to sustain this surge in retail investors looking to invest money in equity and mutual
funds.

India Fintech Insights www.renub.com 84

18. WealthTech Transaction Value (India vs. Global)

Total AUM in Indian Robo-Advisory Space in (USD Million), 2019-2023

160
145
140

120

100
US$ Million

80

60
42
40

20

0
2019 2023

Source: Statista, 2019

India Fintech Insights www.renub.com 85

18. WealthTech Transaction Value (India vs. Global)

Indian Robo-Advisory Transaction Value Accounts for 0.004% of Worldwide Value in 2019

80 76

70

60

50
Percentage

40

30

20 18

10
1.51 0.004
0
Uinted States United Kingdom India China

Source: Statista, 2019

India Fintech Insights www.renub.com 86

19. Lending

The abovementioned target segment’s financing needs are mainly to meet their
personal expenses (small-ticket size cash loans) and purchase consumption items
(EMI loans for purchase of mobile handsets & accessories and FMCG). As per PwC,
the total addressable market size for cash loans and the EMI commerce loans
segment in 2023 is estimated to be USD 28.9 billion and USD 29.4 billion
respectively.

India Fintech Insights www.renub.com 87

19. Lending

Market Opportunity Cash loans (USD Billion), 2021-2025

40

34.8
35

30 28.9

25 24.1
US$ Billion

20

15

10

0
2021 2023 2025

Source: Secondary Research, PwC Analysis

India Fintech Insights www.renub.com 88

 19. Lending

Market Opportunity EMI loans (Mobile Phones & Accessories) In USD Billion, 2021-2025

9 8.5

7
6.2
6
US$ Billion

5 4.6

0
2021 2023 2025

Source: Secondary Research, PwC Analysis

India Fintech Insights www.renub.com 89

19. Lending

Market Opportunity EMI Loans (FMCG) in US$ Billion, 2021-2025

50

45 44

40

35

30
US$ Billion

25 23.2

20

15 12.3

10

0
2021 2023 2025

Source: Secondary Research, PwC Analysis

India Fintech Insights www.renub.com 90

19. Lending

With digital leaders of non-FS industries setting benchmarks for customers’

experience, FS organizations have had to step up their game by adopting ‘digital first’
strategies with a customer centric perspective.

For organizations, each customer interaction is an opportunity to generate insights

that would help in not just delivering a seamless customer experience to win
customers’ trust and loyalty, but also in optimizing product design and innovation to
win new customers, thus creating a virtuous circle.

With shrinking margins and increasing commoditization of FS products, owning

customer experience is key to organizations for creating competitive differentiation,
and avoiding ‘a race to the bottom’ of price competition.

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19. Lending

Finding new ways of customer acquisition : Customer acquisition in the FS space

has emerged as one of the most promising areas of innovation. Organizations are
investing in social media and web analytics for lead conversion by consuming
unstructured social media and web data, and employing AI techniques to predict
customers’ intent to buy.

In addition, organizations are also mining their core transaction and IoT data to
analyze customer spend and payment patterns for recommending ‘next best offers’.
This has not only helped in lowering high customer acquisition costs in FS, but also
led to increased revenue opportunities through cross-selling and upselling.

Optimizing customer on boarding : The account opening and ‘Know Your

Customer’ (KYC) processes are fraught with friction with customers owing to a
cumbersome manual process that leads to a high turnaround time. With the
advancements in technology, organizations have started streamlining the customer

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19. Lending

onboarding process by digitising it fully and, in some cases, automatically prefilling

customer fields by linking with external sources of data. AI-based methods, coupled
with advanced video technologies, are also being explored to visually identify and
validate customer identities.

Driving hyper-personalisation using chat bots : In today’s age of hyper-

personalisation, FS chatbots have become ubiquitous, evolving from a simple digital
tool to a virtual private assistant. Apart from offering consumers the flexibility of a
selfservice option, AI-powered chatbots provide contextual insights to consumers
through their preferred channels (including the comfort of their homes), thus boosting
the sales conversion of FS products. Moreover, by constantly incorporating feedback
from past customer interactions into their ML algorithms, they help in building sharper
insights to deepen customer relationships.

For instance, an AIpowered chatbot employed in a customer care scenario could

predict the probable cause of a customer’s call by analysing its past transactions,
and offer pre-emptive solutions, leading to customer delight.
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19. Lending

As digitisation gathers pace, chatbots are positioned to play a critical role. This is
because s consumers, especially in the FS space, are expressing increasing comfort
with the use of virtual assistants for sharing information and recommendations. As
per PwC’s Bot.me survey in 2017, 41% of respondents said they are likely to turn to
AI assistants versus humans for financial advice in the next 5 years.

Managing risk with AI/ML : As per PwC’s ‘Artificial Intelligence in India - hype or
reality’ report, decision makers in the banking, financial services and insurance
industry (BFSI) cited machine learning, automated data analysis and robotics as the
top three AI-powered solutions with the largest impact on their business. This is in
accordance with the industry’s focus on risk management, customer service and
process automation.

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19. Lending

ML, automated data analyst and robotics emerge as the top three AI-powered solutions in
BFSI

Machine learning 44%

Automated data analys 44%

Robotics 44%

Virtual private assistants 33%

Automated research and information aggregation 33%

Automated sales analys 33%

Automated communications 22%

Predictive analytics 22%

Automated operations and efficiency analyst 11%

Decision support systems 11%

Source: PwC, Artificial intelligence in India , 2018

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20. AI-Based

AI- based start-up optimising the loan collection process for FS lenders An innovative
startup has automated the loan collection process by using AI to modulate the
communication of lenders with their borrowers.

By using an AI-powered decision engine, it has automated the loan collection

process, making it easy, hassle-free and cost-effective for lenders. This system
closely monitors customers’ profiles and analyses their past transaction behavior to
send customized email and SMS communication on payments due to borrowers at
specific time intervals to boost chances of repayment. Personalized modulated
content-based communication holds the potential to improve the performance of
lenders’ asset books and reduce borrowers’ defaults.

Moving from robotic process automation (RPA) to intelligent automation (IA) :

FS organisations have successfully implemented many automation initiatives,
especially in functions such as finance and operations, but have been unable to

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20. AI-Based

realize a true end-to-end automation vision. In PwC’s ‘Financial services intelligent

automation survey, less than 20% of the respondents said they have achieved an
enterprise-wide scale in automation.

RPA technologies, while has no doubt helped in delivering value, is severely

restricted in its capabilities by design. Consequently, organizations have started
moving beyond ‘vanilla’ RPA options and entering into the promising space of IPA
over the past year. Unlike RPA, IA is not a single tool, but a collection of automation
tools that could be orchestrated together for tackling more complex problems.

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21. Technologies Shaking Up the FS Infrastructure

Blockchain moving into the mainstream : Blockchain is gaining increasing traction

across multiple industries, as supported by PwC’s Global Blockchain Survey 2018,
with 84% of respondents saying they are actively involved with blockchain
technology. In the same survey, respondents cited FS as the most advanced industry
in developing blockchain systems.

Apart from offering a vast array of potential use cases, blockchain’s ability to
drastically reduce infrastructural costs makes it very attractive to the FS industry. As
blockchain’s distributed ledger technology (DLT) enables simultaneous confirmation
of all parties on the network, it vastly reduces costs by eliminating an entire layer of
intermediaries who extract fees from each transaction they execute.

This is significant, as the FS industry is characterised by the presence of a large

number of intermediaries involved in moving money, adjudicating contracts, among
other activities.

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21. Technologies Shaking Up the FS Infrastructure

For instance, today, the cross-border payments process is highly inefficient, as

transactions have to pass through a maze of intermediaries for authentication before
reaching the end customer, leading to huge delays and high costs. In addition,
money laundering risks are also amplified due to difficulties in tracing the true source
of transactions.

Blockchain payment systems have the potential to eliminate this layer of

intermediaries to deliver real-time payment to end customers more securely.
Similarly, blockchain systems can transform clearing and settlement systems by
putting securities on a common, decentralised ledger, thereby eliminating the need
for middlemen and delivering real-time clearing and settlement of securities.

Another high potential use case is the blockchain-enabled KYC utility. This would
allow organisations to store customer KYC data from multiple sources in a single
decentralised, secure database, and share access to third parties after obtaining due

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21. Technologies Shaking Up the FS Infrastructure

consent, leading to reduced duplication and lowered costs for the industry, robust
AML/CFT checks and improved customer experience. Similar use cases abound in
areas such as trade finance, loan syndication, claims management and P2P2
insurance, which are already witnessing good traction in India.48 Apart from these,
use cases involving smart contracts that automate complex contractual agreements
in FS areas such as derivatives, mortgages and insurance are also expected to
witness increased uptake in the future.

Notwithstanding the recent growth in blockchain initiatives, concerted efforts are still
required to transition more blockchain projects to the live phase, which currently
stand at only 15%.

In PwC’s Global Blockchain Survey 2018, respondents cited regulatory uncertainty

as the biggest barrier to blockchain adoption, followed by lack of trust among users,
interoperability and scalability issues.

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21. Technologies Shaking Up the FS Infrastructure

FS Industry Leading in Block chain Adoption

Financial services 46%

Industrial products and manufacturing 12%

Energy and utilities 12%

Healthcare 11%

Government 8%

Retail and consumer 4%

Entertainment and media 1%

Source: PwC Global Block chain Survey, 2018

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