In the last few years, India has emerged as a global leader in the financial technology (fintech) sector. The country has the highest fintech adoption rate in the world and it is the second-highest funded sector (by new class investors) after e-commerce in the country. India has the world’s third-largest fintech startup ecosystem globally with billions of dollars flowing every year and new businesses being launched every month.
As per the Invest India website on the sectoral outlook, “Digital payments value of $65 bn in 2019 is expected to grow at a CAGR of 20% till 2023.
The overall transaction value in the Indian FinTech market is estimated to jump from approximately $65 bn in 2019 to $140 bn in 2023. India has overtaken China as Asia’s top FinTech funding target market with investments of around $286 mn across 29 deals, as compared to China’s $192.1 mn across 29 deals in Q1 2019.
The sector is growing at a rate of more than 20 per cent with different lending, payments services, investing services, and wealth management apps being launched every month over the internet.
One of the reasons behind the exponential growth of the fintech sector is the low penetration of banking and financial sector services in India through traditional methods. Given low levels of urbanization and low income, more than half of India’s population was away from banking services – lending to payments.
Moreover, the frustratingly inefficient public sector banks which torture their customers to get simple things done are also responsible for the adoption of fintech in the country.
Now the sector is growing at a breakneck pace with everyone having bank accounts and payment cards under Jan-Dhan Yojna, digital payments services through UPI, and with account aggregators, lending will also be democratized in the next few years.
With apps like Zerodha, retail investing in the stock market is also getting democratized and now the Sensex and Nifty are driven by sentiments of domestic investors, not FIIs and DIIs.
For decades, Mumbai has been the hub for the Banking and Finance Industry (BFSI) of India. Be it the Reserve Bank of India, or most of the top public or private sector banks of the country, or even the stock market (Bombay stock exchange and National Stock Exchange of India), almost every company related to business and finance has its head office in Mumbai.
However, with the rise of financial technology, the trend is changing and Bangalore has become a favourable choice for most FinTech companies.
Zerodha – the largest stockbroker in the country, is based in Bangalore. Even the largest payments companies like the Flipkart owned PhonePe also have their head offices in Bangalore and numerous insurance and credit companies are also either based in Bangalore or Gurugram.
The revenue of the financial technology companies has grown exponentially given the easy scaling that is prevalent across the internet-based industries. The rise of financial technology means that Mumbai is all set to lose the banking and financial services industry worth billions of dollars to Bengaluru. In the next couple of decades, Mumbai would no longer be the financial capital of India. With the rise of cryptocurrency and government-issued digital currencies, even the role of the Reserve Bank of India is in danger.
The innovative startup ecosystem of Bangalore is well-known and it also has world-class human resources, so most of the FinTech players have either set up offices in the city or have emerged from here. CM Grover, MD&CEO, IBSFinTech, said, “It’s the Silicon Valley of the Country- which gives a lot of resources, environment, infrastructure for the technology, because you get good and quality resources here. You not only get local but global resources here.”
Now the Silicon Valley of India is getting international FinTech businesses too. Many London based industries are also outsourcing a lot of business to the city. In the next few decades, Bangalore is expected to gulp the businesses of not just the Indian BFSI industry but also of Europe and the United States.
