Why it is the right time for India’s Fintech Industry to go global

With over 2,000 Fintech start-ups currently operating in India, is the Indian Fintech Industry poised to go global in the coming years? Let us discuss.

Sep 16, 2020 07:09 IST India Infoline News Service

Total investments touching almost $1.5 billion – that is a 60% increase over the previous year’s investment. Plus, over 70 major funding deals in the first half of the year – that has contributed nearly $4 billion of funding to the industry.

No – we are not talking of industry figures from 2019 – or prior to that. These are some indicators of the Indian Fintech industry in the first six months of 2020 alone – all amid a crippled economy and global lockdown.

Image source: Pixr8

Even as the global Fintech industry is suffering from a major downturn because of the prevailing pandemic, India’s Fintech industry is seeing a major upsurge – with global players like Google and Amazon investing in online payments and financial services. Additionally, for the first quarter of 2020, India has overtaken China to occupy the first position in Fintech funding in the Asian financial market.

With over 2,000 Fintech start-ups currently operating in India, is it poised to go global in the coming years? Let us discuss that in the following section.

Indian Fintech – Why is it the right time to go global?

Thanks to the high local demand for financial services in India, the Indian Fintech industry has grown over the last few years but has been largely limited to services within India. Foreign markets have largely been perceived to be difficult and inaccessible for Indian Fintech companies.

Going by recent trends, Indian Fintech companies are in a prime position to grow through global markets. Here are 3 key factors that are driving this trend:

1. Technology is now transforming the global financial sector

You cannot talk about the Financial Technology (or Fin-Tech) industry without mentioning about various technologies that are transforming this sector. The meteoric rise of the Indian Fintech sector has been primarily driven by technologies such as digital payments, mobile banking, artificial intelligence (AI), and blockchain – that are enhancing the customer experience.

Image source: Business Standard

Thanks to its increased focus on digitalization, global banks and NBFCs have increased their investments into digital technologies – as a reliable model to improve growth and cut costs. Besides, global demand is also increasing in technology-enabled financial areas like digital payments, insurance claim processing, cybersecurity, and digital cryptography. This presents a great opportunity for the Indian Fintech industry to offer new and innovative financial solutions at a lower cost to the global market.

2. India’s existing base of global financial institutions (or FIs)

As mentioned in the previous point, India offers a viable and low-cost alternative for global investors. As an advantage to the Indian Fintech industry, the country already has a base of in-house centers of excellence and innovation belonging to global FIs and investment companies. Through partnering with Indian Fintech companies, these global FIs can look forward to creating value-based solutions for their clients.

Thanks to this collaboration, Indian Fintech companies have the necessary technical skill and experience to cater to the demands of global customers – and can utilize this knowledge to go global and benefit foreign investors with efficient services and faster transactions.

3. Evolving expectations of global investors

Over the last decade, the growth of the Indian Fintech sector has been largely driven by an under-utilized domestic market as well as sound policies by the Indian government. For instance, the digital payment sector has been boosted thanks to the government’s demonetization of high-value currency notes.

Image source: PwC

However, this industry can no longer simply rely on domestic investment opportunities to provide good returns to its investors. As discussed in the previous point, global FIs are looking to cut costs – as well as improve their ROI - through Indian Fintech companies.

Besides these FIs, Fintech companies are also dependent on continuous fundraising and capital from venture capitalists (or VCs). While most Fintech companies are providing steady returns, which do not fit the investment expectations of VCs looking for fast growth and returns as well as quicker exits.

To cater to evolving expectations of both global FIs and VCs, the Indian Fintech industry must look beyond their borders at other investment opportunities that can boost the returns.

Conclusion

The Indian Fintech is poised to take the next major leap in the field of digital and financial transactions along with other finance-related activities. Despite the overall economic uncertainty, this industry has continued to benefit from increased funding and investments from global players. Technological innovations along with government initiatives have driven the emergence of Fintech start-ups all around the country. Can this industry go on to create a large global footprint? Time to ponder and look ahead to this immense potential.

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