As the first quarter of the year comes to a close, the Indian Fintech space remains poised at a critical juncture, one where opportunities and challenges both present themselves in equal measures. If, on one hand, the Fintech space continues to see significant investment from VCs as well as major legacy banks and FIs for newer innovation-led and technology-backed growth models to acquire the next 500 million customers, on the other hand, regulatory and legislative pressures around customer acquisition and digital services continue to hamper growth and add to headwinds.
Global Fintech Snapshot
- There are 41 VC-backed fintech unicorns worth a combined $154.1B
- India surpasses China for the top Asian fintech market –
- India was the top Asian market for VC-backed fintech funding in Q1’19 with $286M in funding, narrowly surpassing China.
- Indian Fintech firms are serving close to 300 million customers
Focus Areas to look out for in 2019
Given the challenges surrounding online verification of customer identity via Aadhaar and the strong focus of UIDAI on offline authentication of Aadhaar ID, we expect significant effort and focus on developing offline modes for customer on-boarding using secure QR Code, real-time OCR engines, customer liveliness check via VideoKYC capabilities and digital XML signatures.
Voice & Vernacular Support
With Fintechs focusing on financial inclusion of the digitally disenfranchised, it is important to note that only the top segment of the overall population communicates/interacts in English. Voice support & strong local vernacular support will go a long way in bridging the education gap as well as digital divide among the user base.
Creation of API marketplaces
The Indian fintech landscape now has a mature and evolved API stack with various entities exposing their services & data banks via APIs. The next evolutionary step is the creation of API marketplaces that leverages this vast amount of data and services and makes it available via a common marketplace wherein consumers/FIs/NBFCs can quickly register themselves and start using products instead of building one-to-one integration tunnels.
DIY Model for Solutions Development
The rapid pace at which business models are changing makes it imperative for entities to rapidly prototype and model their solutions and launch services quickly to gain competitive advantage in the market. This also means firms will have to start using tools to rapidly build, design, configure and launch their own solutions and applications directly to start capturing and building customer engagement. Expect this space to blow up significantly in 2019.
Open Banking Initiatives
2018 witnessed significant steps in this segment with banks like DCB and Federal bank embracing the Open Banking framework and starting to build & expose their services for larger consumption. We expect 2019 to be a critical year for the Open Banking movement in India with significant investment and participation of large scale legacy banks that will only lead to greater innovation and emergence of digital leaders in this segment. Open Banking initiatives will also be critical for legacy banks to fend off attacks from upstarts and challenger banks/FIs in the form of Payment Banks and other service aggregators.
CB Insights – Fintech Report 2019