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Indian Fintech: An Industry Perspective

The Indian financial ecosystem has strong growth potential. Total financial assets in India are only 1.58 times GDP, compared to the same metric being 3.14 and 6.73 for emerging and advanced economies respectively. Importantly, the total financial assets in India have grown at a faster rate of 15.32% for 2005-2019, while the growth rate for emerging and advanced economies has been 14.72% and 4.57% respectively. Fintech is expected to capture large amount of the potential value creation in the financial services sector, as evidenced by VC investments, which is considered an informed indicator of future growth. As of last year, Fintech companies received 39.7% of the VC funding in the financial sector. The amount of VC dollar into Fintech has grown at a rate of 35.6% between 2006-2020, twice the rate of growth in the BFSI sector. Notably, six out of 37 Indian Unicorns are Fintech firms. Within Fintech, Payment is the dominant vertical, receiving 59% of the cumulative 2006-2020 VC flow, and in the process contributing four Unicorns. The Insurance vertical, although modest in terms of total VC flow, has generated the remaining two Fintech Unicorns. Going forward, Fintech is expected to have more diversified growth due to recent regulatory initiatives and the enabling ecosystem for fintech businesses. The non-bank Lending vertical is the potential future star, already accounting for 43% of total Fintech funding rounds between 2015-2020. The creation of Account Aggregators and Open Credit Enhancement Networki, paves the way for strong future growth of the vertical.