The market for fintech firms in India is expected to double to $2.4 billion by 2020, KPMG and industry body Nasscom reported on Tuesday. The growth is attributed to smartphone penetration, growing customers’ expectations and evolving commerce ecosystem.
Fintech investment in the country which has approximately 250 fintech start-ups, increased by $1.2 billion from 2014 to 2015, the report found. Some of the big deals that occurred during that time include Paytm that raised $890 million, Freecharge that raised of $113 million, PolicyBazaar that raised $69.6 million and Mobikwik that raised $56.6 million.
Globally, fintech has approximately 12,000 startups and $19 billion investment. Fintech firms in the US raised about $7.3 billion in 2015. According to Nasscom, the global fintech software is expected to be worth $45 billion by 2020.
India has fewer number of angel investors than the US. However, the country saw the numbers of angel deals increasing from 370 in 2014 to 691 in 2015. There are about 1,800 angel investors in India as compared to around 300,000 in the US.
The report comes at a time when twenty one new entities have been given banking licenses. This move is expected to change the dynamic of financial industry as new companies will seek to adopt technology at a rapid pace. According to Richard Rekhy, KPMG’s chief executive officer in India, banks are expected to collaborate with fintech firms to form an ecosystem that will offer customers banking products or services at a low cost.
The report suggest that creating a strong collaborative ecosystem – where fintech companies engage in external partnerships with banks, venture capitalists, universities and research institutions, government agencies and technology experts- is expected to be one of the main enablers for the development of this sector
The main drivers for fintech growth in India are the significant growth in internet and mobile coverage and digital transactions in public services. Therefore, fintech start-ups are able to address the problems of low banking penetration and dormancy in the banking sector in India.
However, the main challenges that are yet to be addressed include lack of regulatory support and hardware ecosystem and inability of small and medium to access funds from the banks.
“The roadblocks of low digital and technological infrastructures coupled with insufficient consumer information can be avoided through regulatory mandates, a robust business environment and continuing government initiatives,” Said Naresh Makhijani, Head of Financial Services and Partner, KPMG India.
Regulations are very important because they will define the term fintech and anything that falls into that category. Proper regulations of fintech increases ease of doing business streamline process for fintech firms provide them support to grow and try their products and services and give them access to global market.