India is home to a large number of fintechs offering financial services to businesses and individuals alike. While these startups are growing rapidly, particularly in the instant payment sector, none of them is yet profitable.
200 billion in sales by 2030
According to a study by consulting firm BCG published in August 2022, India has 7,460 fintechs, making it the 3rd largest fintech ecosystem worldwide. Since 2019, the number of Indian fintechs has grown by 20% a year, and there are now 23 unicorns among them, up from 8 in 2020.
According to estimates by GP Bullhound, a specialist in fundraising consultancy, Indian fintechs are set to achieve $200 billion in sales by 2030. Since January 2017, they have captured 14% of the funds raised by all fintechs, all countries combined, or $29 billion.
At 87%, their adoption rate is the highest in the world, well above the global average of 64%. The services offered by Indian fintechs are varied, ranging from payments and loans to personal finance management and investment platforms.
The success of fintechs specializing in instant payments
Indian fintechs are particularly dynamic in the field of instant mobile payments. Back in 2016, the launch of the UPI (for Unified Payment Interface) instant payments platform changed the game. This project, an initiative of the Central Bank of India, the National Payments Corporation of India (NPCI) and the Indian Banks Association (IBA), was designed to reduce the use of cash in favor of electronic payments.
Gradually, third-party applications were developed to link the 300 participating banks, and today they handle almost all the transactions carried out on this platform, accounting for 93% of their total value, compared with just 7% for the banks.
In India, as elsewhere, the Covid-19 pandemic has contributed to the decline in cash, helping to drive the success of UPI, which has recorded a 75% increase in transactions between 2020 and 2021. By 2026, digital payments are expected to account for 1 in 2 transactions in the country. 135 billion in transactions were recorded on the UPI platform in June, 9 times more than credit card transactions.
In all, Indian fintechs specializing in instant mobile payments, such as PhonePe and Paytm, alone account for half of the country's fintech valuation. PhonePe is the Indian fintech with the highest valuation, with $11 billion and 165 million monthly users claimed, representing a customer increase of 32% on last year. Neobanks are also on the rise, such as NiyoX, whose customer base has increased by 60% in one year, from 2.5 to 4 million.
The Indian government, which is stepping up its efforts to promote financial inclusion for millions of unbanked Indians, is counting on the network of fintechs to achieve its goals. However, the fintechs face a number of challenges: they have to cope with a decline in funding, and prove that they can achieve profitability - which none of them can at present - in order to reassure investors.