The Indian fintech ecosystem is the third largest worldwide, according to “State of the Fintech Union 2024”, a joint report from Boston Consulting Group (BCG) and Z47, published on August 29. No wonder that this fastest-growing ecosystem globally continues to demonstrate growth, with revenues surging to $25 billion in 2023—up by 56% year-on-year—despite a dip in funding.
Poised for exponential growth and scale in the coming years, it becomes imperative for the sector to prioritise sustainable profitability through value-creation strategies, unit economics, and governance.
It is at this intersection of projected growth and growing concerns about governance amid policy pushes from the Government of India and a growing consensus on mitigating rising cybersecurity risks and fraud 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 startup-tech initiative by The Economic Times that returns to Bengaluru on 20 September.
Amid a lineup of carefully curated conversations, an esteemed lineup of speakers, featuring Akash Sinha, Co-founder and CEO of Cashfree Payments; Lizzie Chapman, Co-Founder of SwiffyLabs; Hardika Shah, Founder & CEO of Kinara Capital; and Dhirendra Mahyavanshi, Co-founder of Turtlemint is set to take the stage to deliberate on the panel discussion titled ‘Fintech: How to strike a balance between the regulatory lens and growth?’
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SROs to balance innovation and prudent regulation?
There is no funding winter when it comes to fintechs in India.
“The sector has received investments of about $6 billion in the last two years alone,” The Reserve Bank of India (RBI) Governor Shaktikanta Das said.
Speaking at the Global Fintech Fest, Das added, “Publicly available information places the number of fintechs founded in India at approximately 11,000.”
Das stressed the need for greater collaboration between policymakers, regulators, and innovators, making it explicitly evident to industry leaders that strict adherence to RBI directives would be crucial. The surge in fraud attacks, mule accounts, and dummy merchants has prompted sector regulators to closely monitor how fintechs, while advancing financial inclusion, are also opening doors for fraudsters into the regulated ecosystem.
Agencies like the Indian Cybercrime Coordination Centre (I4C), along with other Union Home Ministry agencies, are actively working with regulators to tackle these challenges.
Das also recommended self-regulatory organisations (SROs) as ideal to navigate the tightrope of innovation and prudent regulation for the fintech sector. “SROs, comprising industry participants with a good understanding of unique challenges and opportunities, would be in a position to give appropriate suggestions to the regulators on regulations that are both practical and effective,” Das said.
Of the three applications from industry associations that RBI has received for self-regulatory status, the central bank has decided to recognise the Fintech Association for Consumer Empowerment as an SRO.
Das also foregrounded the burgeoning capabilities of artificial intelligence (AI) and machine learning (ML) and their potential play in regulatory compliance as “algorithmic trading” is set to redefine the financial landscape.
Also read: PM Modi’s vision of Indian fintech
Prime Minister Narendra Modi lauded the achievements of the fintech sector in making a positive impact on the lives of people via products such as Open Network for Digital Commerce (ONDC) and UPI.
Modi was speaking at the Global FinTech Festival in Mumbai last week when he heralded the era of India’s local products with global application.
He reiterated that India’s fintech system will help increase the ease of living of the whole world. “Our best is yet to come,” he said.
“I have faith in our fintech ecosystem that it will provide quality life to Indians,” Modi said.
Meanwhile, the PM also outlined that regulators in the fintech sector must take significant steps to combat cyber fraud and increase digital literacy.
“Government is taking all steps at policy level to help the fintech sector and also abolished angel tax,” he said. Modi highlighted recent impetus, including the removal of the angel tax and the proposed creation of a ₹1 lakh crore fund, as part of the Government of India’s commitment to support the fintech sector at the policy level. Notably, experts hail the abolition of the angel tax across all investor classes as a landmark reform to further bolster the Indian startup ecosystem.
At the start of his address to the fintech sector, Modi had said, “There was a time when the world would be surprised at our cultural diversity. Now they are astonished by our fintech diversity.”
Indian fintech’s “middle phase”
As per the joint report from BCG and Z47, over the past four years, the number of minicorns (valuation at least USD 1 million but less than USD 1 billion) in the country has increased by 3.5 times, while the number of unicorns and soonicorns (startups that are growing quickly and have the potential to become a “unicorn” valued at USD 1 billion) has tripled.
The report noted that in 2023, the country’s fintech market achieved a revenue size of USD 25 billion, marking a 56% year-on-year growth, which is a remarkable 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 within the last decade, Indian fintechs are still considered to be in the “middle” phase of their development, especially when compared to traditional incumbents who have created USD 600 billion+ in value over 30 to 50 years.
The next frontiers of fintech expansion in the country are expected to come from the Tier 2 cities.
To learn more about the ET Soonicorns Summit, visit the website.
To register now, click here.
(This article is generated and published by the ET Spotlight team. You can get in touch with them at [email protected])