fintech startups: Indian fintech firms to handle $1 trillion in assets by 2030: report

Funding in Indian fintech startups reached $7.8 billion in 2021, and the industry is expected to handle $1 trillion worth of assets by 2030, according to a new report by venture capital firm Chiratae Ventures and EY India.

Indian fintech firms are expected to have $200 billion in revenue by 2030, the report added.

Currently, most of the funding is skewed towards digital payments firms. Of the total $7.8 billion raised by the sector last year, $3.5 billion (about 44%) went to fintech payments firms, it said.

As India’s payments landscape evolves, technologies such as near-field communication (NFC) payments, soft point-of-sale (PoS) penetration and central bank digital currency (CBDC) use cases are expected to drive new innovations in this space, according to the report.

Fintech models are evolving to be “pervasive” across most sectors and have found applications across segments such as agriculture, supply chain and e-commerce, among others, Chiratae Ventures co-founder and vice-chairman TC Meenakshi

told ET.

“Financial services are the plumbing infrastructure. Our belief is that fintech will become more and more horizontal, supporting itself at the intersection of agri-tech, proptech and B2B supply chain. The regulatory environment for the sector is also evolving and we are seeing much more openness from the government and the regulator towards fintechs to integrate with the economy, he said.

“We believe that fintechs will drive $1 trillion in assets under management by 2030, across lending, insurance, wealth management and new banking,” Sundaram added.

According to the report, half of the trillion-dollar AUM expected by 2030 will be driven by digital lending fintech firms, with $515 billion worth of assets managed by startups in the space.

Nearly $1.2 billion was poured into Indian fintech lending firms in 2021, up nearly 71% from the previous year.

The Reserve Bank of India is closely monitoring the activities of lending startups as it looks to tighten regulations for the sector. In June, the central bank issued a memo prohibiting prepaid payment instruments (PPIs) from being loaded through credit lines.

It is now looking to bring in further clarity on operating guidelines for the sector through its long-awaited digital lending guidelines.

“India is recognized as a strong fintech hub globally and is increasingly becoming a talent destination for fintech companies,” said Rajiv Memani, Chairman and Managing Partner, EY India.

According to the report, models such as first loss guarantee (FLDG), which lead to significant operational risk, will give way to new models such as joint borrowing, which will help reduce risk.

By 2030, the report added, wealth technology fintech companies will manage $237 billion of investor AUM, while insurtech and neo-banking will contribute $88 billion and $215 billion, respectively.

India was home to 21 fintech unicorns – privately held companies valued at $1 billion or more – as of March 2022.

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