Arising with the Financial Technology Ecosystem


Over the last year and a half, the financial technology ecosystem has emerged as one of the hottest sectors in India’s internet play. With funding pouring in, even global players like Google and Whatsapp are looking to get a piece of this pie. According to NASSCOM, the Indian fintech market is expected to grow at a CAGR of 22 percent for the next five years. Another KPMG report states that the transaction value for the Indian fintech sector was estimated to be approximately $33 billion in 2016 and is expected to reach $73 billion by 2020. My key observations are as below

  • Fintech in India is still young 

Data shows that almost 64 percent of fintech organizations in India have been in business for close to three years now, with median employee strength of 14 people. Furthermore, 61 percent of the founders are under the age of 40 (25 percent less than 30 years of age, and 35 percent between the age of 31-40). Being at a nascent stage, only 7 percent of respondents have seen their companies turn profitable. 

  • India has the second highest global fintech adoption rate with collaboration

As per a report in EY, the fintech adoption index in India is the second highest and 59 percent higher than the global average. It shows that incumbents and fintechs have moved from competition to co-opetition and collaboration. Seventy-nine percent of respondents view incumbents as partners while 13 percent are indifferent and only 8 percent of them view them as competitors.

  • Lending is a massive opportunity

There’s report which states that Rs 26.5 trillion of the SME debt demand unmet by formal channels presents a huge opportunity for fintech firms. Further, it highlights that MSMEs often do not have access to formal lending channels, and rely on the informal sector, at interest rates as high as 30 percent. Moreover, smaller businesses also have limited financial history and might not have detailed documentation available at hand, which becomes a major hurdle in the loan disbursement process.

  • The talent pool is not ready for the future 

As many as 87 percent founders identified that employees focused on technology development or coding are the core of their workforce. On average, 33 percent of total employee strength (in Indian fintech) comprises of coders; this number is as high as 67 percent for idea and pre-revenue stage startups. However, the current talent pool for Indian fintech is low on future tech skills or knowledge. About 71 percent of respondents state lack of deep tech expertise as a key impediment to their growth. All fintechs using Block chain technology highlighted that the availability of coders in the technology is especially low, with many respondents hiring their coders from Russia, Poland, or Silicon Valley.

  • Proof of concept and early stage funding is still limited

Fintech funding in India rose from $300 million in 2016 to $2.7 billion in 2017. This shows that fintechs have shown a 34 percent year-on-year jump. However, Proof of Concept (PoC) and early-stage funds are limited. As many as 71 percent of pre-revenue and 81 percent at idea stage fintechs noted “severe difficulty” in raising funds.  

  • Managing burn rate is emerging as a key issue for Indian fintech 

According to a data 74 percent of the startups have a burn rate between $10,000 and $50,000 per annum, with only 7 percent of them being profitable.

  • Accelerators and incubators might actually be supporting in commercialization

Fintech hubs, accelerators, and incubators might be playing an important role due to their ability to provide mentorship and access to investors, corporates, and funding.
About the Author
Rajesh Nair
A career banker with 12 years of experience in Financial Planning. Founder of EarnWealth Solutions Pvt Ltd, a wealth management company in mid 2014. Successfully set up the Treasures Priority Banking & Wealth Management franchise for DBS Bank Pune. Joined the private life insurance space in 2001 on opening of the sector as an agent with Bajaj Allianz Life Insurance. Joined ICICI Prudential Life Insurance in June 2006 as Sales Manager & established Beed branch. Moved to Aurangabad and took over a struggling branch and created many records. Joined Tata AIG Life as a branch head in May 2009. Successfully established PCMC branch & built one of the most admired sales teams in TALIC. Got promoted as an Area Manager in June 2010.

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