Bengaluru: Indian financial technology start-ups have a long way to go before catching the fancy of venture capital firms, which have become cautious with their bets after a deluge of funding last year.

Bala Srinivasa, partner at Kalaari Capital, said unlike the US and other established markets, India is still evolving. “When you are looking at a place like India, frankly, there is nothing to disrupt. There is not a whole lot to disrupt but a whole lot to create. Fintech disruption is about creating new products and creating new markets than about disrupting something which is fully penetrated."

According to a June report by KPMG and industry lobby body NASSCOM (National Association of Software and Services Companies), transaction value for the Indian fintech sector is estimated to be approximately $33 billion in 2016 and is forecasted to reach $73 billion in 2020, growing at a five-year compounded annual rate of 22%.

Fintech investment in India rose from $247 million in 2014 to more than $1.5 billion in 2015, with the likes of Paytm, Freecharge and Mobikwik accounting for the lion’s share.

But investors are yet to be convinced with the services offered by the incumbents.

“Most companies we meet are doing the established business models. If you are a lending company and you have brought it online, it is still a lending business. We want to figure out what is the fundamental business that is going on around here. We haven’t seen too many fintech companies which are doing something drastically different from something which exists," said Sailesh Lakhani, investment adviser at Sequoia Capital, at Mint Fintech Summit 2016 at Bengaluru on Thursday.

According to Srinivasa, fintech start-ups should ideally create new products. “I have been talking to companies where at every layer, there can be a platform play. Somebody around authentication, somebody around UPI-based payments. Somebody might be able to get a credit card valid for only seven days. Something which is a new use case of products. That is what I mean by saying new product for a new market," he said, adding, “There are a lot of interesting companies which make tools to make existing players hit the next 400 million consumers. As legitimate opportunity as anything else."

According to investors, start-ups need to think about solving real world problems instead of merely addressing technology problems. They also need to work towards expanding distribution of services like banks, and earn the consumers’ trust.

“Because we associate technology with finances, there are a lot of technology teams out there addressing technology problems but (these) may not be real world problems that they are trying to solve," said Nikhil Balaraman, managing director, Orios Venture Partners.