Fintech is now an innovator and enabler, says KPMG India’s Neha Punater
Neha Punater, partner at KPMG India, says ‘increased mobile and Internet penetration’ on the payments side is one of the fintech growth drivers in India
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Mumbai: There is something new in the fintech space every day. Traditionally, it was thought to be a disruptor but now it is an innovator and enabler,” Neha Punater, partner and head (digital strategy, innovation and fintech) at KPMG India, said in her keynote speech at the Mint Fintech Summit in Mumbai.
“It (the disruption) has become so with the help of traditional institutions and we must understand that this can only happen on the basis of trust,” she said.
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“This industry is definitely a force to reckon with,” Punater added, pointing out that the global annual growth of the fintech sector at 55% is not led by volume expansion but by investment, which shows investor confidence in the space. “Compared to about 12,000 global start-ups, there are about 900 Indian fintech firms—and over 120 of them were started in 2016 alone. An investment of $2.25 billion has been infused into Indian fintechs from 2010 to 2016,” she added.
The Indian fintech market, according to her, typically mirrors global trends. “Payments-related companies have the highest market share at 25% in India and in the world. Payments, lending and wealth management are growing, while P2P (peer-to-peer) lending, blockchains and payment banks are still nascent. Many payments-related activities are still in the business-to-consumer space but we haven’t seen much happening on the business-to-business side,” she added.
Terming payments “the crown jewel of Indian fintech”, Punater said demonetization of high-value banknotes in November had definitely provided a boost to the sector by increasing awareness and adoption of fintech. According to her, there was a 252% increase in volume of transactions through prepaid payment instruments—up from 97 million transactions in September 2016 to 342 million in March.
On the lending sector, she said, “When you look at fintech lending, it is driven by the need to fund small businesses and private consumption at all levels. Fintech lenders are evolving in two ways: one, fintech companies are acting as a marketplace between lenders and consumers—essentially, an Amazon.com for financial products. Two, they are emerging as alternative lenders.” Moreover, they have begun to carry the risk of the loans “on their own books”.
According to Punater, wealth tech is the third-largest sector in the fintech space and is still relatively small. “If we look at the mutual funds penetration in India by any metric and compare it to the global value, it’s very low. Indians traditionally prefer other asset classes such as gold or real estate to invest in,” she said.
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Talking about fintech growth drivers in India, Punater cited “increased mobile and Internet penetration” on the payments side, in addition to higher international remittances. “In the lending sector, a major demand driver is the swift processing cycle; many micro, small and medium enterprise customers struggle with the long cycles they encounter with banks, and in a lot of cases, it is too late when they receive the loans,” she said.
Fintech lenders, she added, are also getting help from the increasing availability of personalized customer data, other than the conventional income statements.