Photo: Mint
Photo: Mint

Fintech reach limited in India, says study

Most fintechs eye tech-literate clients in tier-I cities, which leaves 80% of low and moderate-income market untapped

New Delhi: Four out of five fintech companies are located in India’s three metro cities—Bengaluru, Mumbai, and Delhi-NCR—with their focus largely on the affluent segment comprising 23% of the overall population, according to a study by international financial inclusion consulting firm MicroSave.

“Most fintechs target affluent and tech-literate customers in tier-I geographies. This leaves 80% of the addressable LMI (low and moderate-income) market untapped. Going by conservative estimate, fintechs are yet to tap around 320 million working adults in India," said Mohit Saini, senior analyst, MicroSave. The study, conducted in collaboration with IIM-Ahmedabad’s Centre for Innovation, Incubation and Entrepreneurship (CIIE) and supported by JPMorgan, finds that fintechs present a unique opportunity to improve the financial health of LMI households, which are currently either unserved or underserved. Fintechs can provide these LMI households with appropriate tools and resources to manage their financial lives, the study said.

According to Saini, the number of fintech users will triple in the next five years, and a majority of these will emerge from the LMI segment. The growth of fintech in the LMI segment will be bolstered by the reducing cost of smartphones and the internet, he added. Fintechs refer to technology-focused or technology-led firms that use or provide modern, innovative technologies.

The study also shows that despite the growing influence of fintechs, about 57% of them focus on credits and payments and transfers only.

Nearly 1,800 angel investors and over 180 venture capitalists are looking at the fintech space in the Indian market, which has been growing rapidly in terms of numbers, transactions and reach,the study said.

While the LMI segment offers a sea of opportunities, there is a significant disconnect between fintechs and investors, as well as fintechs and incumbents financial institutions, the study finds.

“The LMI segment prefers convenience over affordability and struggles to adopt and use digital platforms to avail financial services," the study added.

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