Fintechs, including e-commerce, have been leaders in the Indian unicorn landscape, with the sector spawning five unicorns having an aggregate valuation of $22 billion - highest amongst Indian unicorns, the report added
Bengaluru: Indian fintechs have attracted close to $10 billion in equity capital funding, over the past decade, with digital payments and lending startups being the largest recipients in this sector, according to a report by global wealth management firm Credit Suisse.
As per the report titled ‘100 Unicorns: India’s changing corporate landscape’, India is home to the third-largest set of unicorns globally, behind the US and China, which command a total valuation of $90 billion. Fintechs, including e-commerce, have been leaders in the Indian unicorn landscape, with the sector spawning five unicorns having an aggregate valuation of $22 billion - highest amongst Indian unicorns, the report added.
Over the past decade, digital payments-led startups have raised $4.2 billion, followed by digital lenders raising $2.5 billion.
“Indian fintech companies have attracted $10 billion of capital and are now at the forefront of India’s startup ecosystem. Digital payments are primarily leading the fintech scaleup in India and have grown 10 times over the last five years, now having a 30% share totaling $450 billion," said Ashish Gupta, head of Asia Financials Securities Research and head of India Securities Research, Credit Suisse.
Riding on the public payment infrastructure, including Unified Payments Interface (UPI), digital payments have leapfrogged in India growing almost 10.5 times over the past five years to an annual payment run-rate of $450 billion, constituting close to 30% of retail transactions, according to Credit Suisse.
Digital payments in India continue to grow, with over 200 million active users and acceptance at more than 30 million merchants, the report said.
Credit Suisse notes that UPI is the major driver of this accelerated payment digitisation as it opened up an interoperable payment network to large technology companies.
An analysis of credit card spending by customers revealed that the pace of increase in the share of digital spending was vastly accelerated by the pandemic, with online spending increasing by almost 10 percentage points within nine months from 44% to 53%. It also showed that there is a marked shift in consumer spending from offline to online, said the global wealth management firm.
“Covid-19 has accelerated the pace of digitisation globally across communication, shopping and payments space. While part of this shift should gradually recover, as we come out of the pandemic, there is widespread consensus that it has brought a structural change in categories such as shopping and payments," said Gupta.
In particular, consumer payment players have expanded to offer investing, insurance, lending, and e-commerce. Merchant payment players have also added value-added services, merchant lending, and consumer financing at point-of-sale terminals to garner a higher wallet share.
Digital lenders have also grown to $10 billion with more than a 40% share in new personal and consumer durable loans and are adding new loan products as confidence in their underwriting models increase, remarks Credit Suisse.
Fintechs have also forged partnerships with banks to embed credit products as well as investment and protection products, while adding new channels of monetisation and increasing user engagement. These partnerships also help incumbent banks to expand reach and increase their share of digital business.
On the back of proprietary digital platforms and partnerships with fintechs, digital has helped drive cross-selling, new business acquisition and customer servicing channels for incumbent banks.
Credit Suisse also states that larger private sector banks and the State Bank of India have developed their proprietary digital platforms, which source 60% to 70% of new retail customers, 60% to 80% of retail fixed deposits, and contribute to now 75% of new credit card sourcing and 50-60% of new home and micro, small and medium enterprises loans.
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