The India Advantage: The Promising Future of Fintech

TLDR

Bertelsmann India Investments (BII) on The India Advantage and Why India's Fintech Moment Is Still Just Beginning

• With at least one unicorn in each of the six fintech segments, India has grabbed the #3 ranking across the board in areas of fintech deal volume, number of fintech, and unicorn presence. This isn't just a coincidence. The result of a strategy of infrastructure development over the past 10 years, unseen in any other market at this magnitude or pace.

• The numbers tell the story. Indian fintech revenues are projected to grow at over 35% annually, reaching approximately $190 billion by 2030.

• The foundation is DPI 1.0: Aadhaar and UPI, which now processes 10,000 transactions per second and has become one of the most successful financial infrastructure deployments in history. The next frontier is DPI 2.0, which comprises ONDC, CBDC, Health Stack, and Agri Stack, and could bring about breakout growth well beyond payments. We need around $100-120 billion in technology enablers to fully leverage this opportunity in India. BFSI SaaS is a USD 18 billion market, with up to 50% of revenue generated from export markets.

• There are five fundamentals that drive India structurally differently: Lite apps, Voice-in-Vernacular, AEPS-based last-mile CICO points, Account Aggregator, and Telco-based underwriting models. These are not features, but the architecture of real-people, population-scale financial inclusion.

• This is the type of structural opportunity that aligns with our sector-agnostic, conviction-driven approach to early-growth-stage investing at Bertelsmann India Investments. We support founders who are building on and with this infrastructure and not just on it.

In the dynamic landscape of global fintech, India has emerged as a powerhouse, claiming the #3 spot regarding deal volume, number of fintechs, and unicorn presence. This validates the country's robust fintech ecosystem and underscores its prowess in innovation, talent, and regulatory support. With at least one unicorn across all six fintech segments, India has positioned itself as a significant player globally.

Fintech Nation Status: Unveiling the Numbers

Remarkable achievements mark India's fintech journey. The country boasts a more than 6% share of global funding, showcasing the depth and breadth of its fintech endeavors. At least one unicorn in the six fintech segments further solidifies India's standing. This collective success is a testament to the innovation, talent pool, and supportive regulatory environment that define India's fintech landscape.

The projections are equally promising. With an annual growth rate exceeding 35%, Indian fintech revenues are set to soar to approximately $190 billion by 2030. Exporting India Stack, a set of APIs that form the backbone of the country's digital infrastructure, to emerging nations could unlock an additional $60 billion in revenues.

Riding the Wave of Innovation

India's fintech growth story is divided into DPI 1.0 and DPI 2.0 phases. The first phase, marked by the Aadhaar stack and UPI, revolutionized the financial landscape, fostering innovation and inclusion. The staggering volume of 10,000 UPI transactions per second is a testament to the success of DPI 1.0.

With DPI 2.0 on the horizon, encompassing initiatives like ONDC (Open Network for Digital Commerce), CBDC (Central Bank Digital Currency), Health Stack, and Agri Stack, India is on the brink of a new era of innovation. The potential for breakout growth is immense, setting the stage for a transformative journey across various sectors.

Fintech for all Indians is not just a vision but a national imperative. The five key unlocks – Lite apps, Voice-in-Vernacular, Aadhaar Enabled Payment Services (AEPS)-based Cash-in-Cash-out (CICO) points for last-mile transactions, UPI, Account Aggregator, and Telco-based underwriting models – are the building blocks of this inclusive vision.

To realize these ambitious goals, India needs approximately $100-120 billion in tech enablers, covering critical and emerging technologies and enterprise infrastructure. This investment is crucial for driving research and development and ensuring India remains at the forefront of fintech innovation.

Moreover, India's influence in the global fintech landscape is set to expand. BFSI SaaS (Banking, Financial Services, and Insurance Software as a Service) presents an $18 billion opportunity, with up to 50% of earnings expected from export markets. This underscores the scalability of India's fintech solutions and positions the country as a global fintech hub.

ONDC: Paving the Way for Future Transactions

One of the pivotal components of India's fintech landscape is the Open Network for Digital Commerce (ONDC). With daily transactions ranging from 100,000 to 150,000, ONDC is on a faster trajectory than UPI, signifying its potential for expansion.

ONDC's capabilities extend beyond transactions. It has the potential to enable flow-based lending and sachetized insurance, leveraging users' digital footprint and verifiable credentials. This opens up new avenues for financial services, making them more accessible and tailored to individual needs.

As India stands at the intersection of its fintech journey, the trajectory is clear – upward and forward. With a strong foundation, a focus on innovation, and a commitment to inclusion, India is not just participating in the global fintech revolution but shaping its future. India's advantage is real, and the transformation of the fintech landscape is a testament to the nation's unwavering commitment to progress and innovation.