The Indian fintech ecosystem is the third-largest in the world, according to “State of the Fintech Union 2024,” a joint report by Boston Consulting Group (BCG) and Z47, released on August 29. Unsurprisingly, this fastest-growing ecosystem globally continues to demonstrate growth, with revenues rising to $25 billion in 2023, up 56% year-on-year, despite a drop in funding.
Poised for exponential growth and scale in the coming years, it is imperative that the sector prioritizes sustainable profitability through value creation, unit economics and governance strategies.
It is at this intersection of projected growth and rising concerns over governance amid policy pushes from the Government of India and a growing consensus on mitigating rising cybersecurity and fraud risks that The Economic Times (ET) is set to host a deep dive into the fintech sector at the third edition of the ET Soonicorns Summit 2024, a pioneering emerging technology initiative of The Economic Times that returns to Bengaluru on September 20.
Amidst a series of hand-picked conversations, an esteemed line-up of speakers including Akash Sinha, Co-Founder & CEO, Cashfree Payments; Lizzie Chapman, Co-Founder, SwiffyLabs; Hardika Shah, Founder & CEO, Kinara Capital; and Dhirendra Mahyavanshi, Co-Founder, Turtlemint will take the stage to deliberate on the panel discussion titled ‘Fintech: How to strike a balance between regulatory lens and growth?’
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Should SROs balance innovation and prudent regulation?
There is no funding winter when it comes to fintechs in India.
“The sector has received investments of around 6 billion dollars “Only in the last two years,” said Reserve Bank of India (RBI) Governor Shaktikanta Das.
Speaking at the Global Fintech Fest, Das added: “Publicly available data puts the number of fintech companies founded in India at around 11,000.”
Das highlighted the need for greater collaboration between policymakers, regulators and innovators, making it clear to industry leaders that strict adherence to the Reserve Bank of India’s directives would be crucial. The rise in fraudulent attacks, mule accounts and fictitious traders has prompted industry regulators to keep a close eye on how fintechs, while promoting financial inclusion, are also opening doors for fraudsters in the regulated ecosystem.
Agencies such as the Indian Cyber Crime Coordination Centre (I4C), along with other agencies under the Union Ministry of Home Affairs, are actively working with regulators to address these challenges.
Das also recommended that self-regulatory organisations (SROs) would be ideally suited to navigate the tightrope of innovation and prudent regulation for the fintech sector. “SROs, which include industry participants with a good understanding of the unique challenges and opportunities, would be in a position to make appropriate suggestions to regulators on regulations that are practical and effective,” Das said.
Of the three applications that the RBI has received from industry associations seeking self-regulatory status, the central bank has decided to recognise the Fintech Association for Consumer Empowerment as an SRO.
Das also highlighted the growing capabilities of artificial intelligence (AI) and machine learning (ML) and their potential role in regulatory compliance as “algorithmic trading” redefines the financial landscape.
Read also: PM Modi’s vision on Indian fintech
Prime Minister Narendra Modi lauded the achievements of the fintech sector in making a positive impact on people’s lives through products like Open Network for Digital Commerce (ONDC) and UPI.
Modi was speaking at the Global Fintech Festival in Mumbai last week when it announced the era of local Indian products with global application.
He reiterated that India’s fintech system will help improve the quality of life for everyone. “The best is yet to come,” he said.
“I have faith that our fintech ecosystem will bring quality of life to Indians,” Modi said.
Meanwhile, the Prime Minister also stressed that fintech regulators need to take significant steps to combat cyber fraud and increase digital literacy.
“The government is taking all steps at the policy level to help the fintech sector and has also abolished the tax on angel investors,” he said. Modi highlighted the recent push, including the removal of the tax on angel investors and the proposed creation of a Rs 1 trillion fund, as part of the Indian government’s commitment to support the fintech sector at the policy level. Notably, experts praise The abolition of the angel tax across all classes of investors as a landmark reform to further boost India’s startup ecosystem.
At the start of his address to the fintech sector, Modi had said, “There was a time when the world was amazed at our cultural diversity. Now they are amazed at our diversity in fintech.”
The “middle phase” of Indian fintech
According to the joint report by BCG and Z47, over the past four years, the number of minicorns (valuation of at least USD 1 million but less than USD 1 billion) in the country has increased 3.5-fold, while the number of unicorns and soonicorns (startups that are growing rapidly and have the potential to become a “unicorn” valued at USD 1 billion) has tripled.
The report noted that by 2023, the country’s fintech market will reach a revenue size of USD 25 billion, marking a year-on-year growth of 56%, which is a notable contrast to the global fintech growth rate of just 13% during the same period.
However, the report also added that despite generating over USD 100 billion in value over the past decade, Indian fintechs are still considered in the “intermediate” phase of their development, especially when compared to traditional companies that have created USD 600 billion+ in value in 30 to 50 years.
The next frontiers of fintech expansion in the country are expected to come from Tier 2 cities.
For more information on the ET Soonicorns Summit, visit the site website.
To register now, Click here.
(This article has been generated and published by ET Spotlight team. You can contact them at [email protected])
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