Financial technology startups, or fintechs, are set to grow at a fast pace on the back of rising credit demand from Indian businesses as well as consumers.
According to Bain and Co.’s India Fintech Report 2022, published on 19 October, the boom in smartphone adoption in India, set to breach 1.1 billion units by FY26, could push the net valuation of fintech services by 3.5 times in India, from $100 billion to $350 billion in four years. By 2026, fintech startups may account for 15% of domestic financial services industry, up from 7% now. Bain expects India’s financial services market to grow from $1.3 trillion now to $2.3 trillion by FY26.
Its estimates are in line with the projection for Unified Payments Interface (UPI) services. The National Payments Council of India (NPCI)’s mobile-linked payment system witnessed aggregate growth rate of over 75% annually since its launch. In September, UPI hit a record monthly transaction value of ₹11.2 trillion, according to NPCI data. UPI payments for merchant and peer-to-peer (P2P) transactions reached ₹32.5 trillion in Q2FY23, up 71% from ₹19 trillion in the year ago.
Rakesh Pozhath, partner at Bain & Co., said software-as-a-service and fintech infrastructure providers, servicing legacy banks with digitized services may grow at a brisk pace. Firms providing credit to small businesses are also expected to grow at 15% annually.As banks and non-banking financial companies digitize services, there is a gap in financing consumer purchases and enterprise business plans, he said.
