The Fintech Industry: New Developments, New Demands

London’s position as the gateway to the European market could come to an end with Brexit, thus impacting the growth and funding of the Fintech industry in the UK. It may lead to a positive outcome: that of private equity (PE) and venture capital (VC) funding being diverted to India, given the potential and growth of the Fintech industry in India.

The mobile payment industry in India has been valued already at about $1.15 billion for the year 2016. Over the past few years, Fintech providers have been instrumental in paving the way for the adoption of next generation payments in India. The increasing adoption of smartphones, especially in rural areas, has fuelled this phenomenon. It has also accelerated the talent requirement for these cash-rich start-ups, who are hunting to fill leadership positions including Business Heads to Product Heads. The key developments have been initiated in companies like Flipkart, Paytm, and Scripbox. In fact, as per reports, more than 25% of senior executive hiring in the technology space in India is expected to come from the Fintech industry in the next two years.

In India, cash is still king. It is still growing and remains a hurdle that the UPI system has to overcome in order to drive mobile payments into mainstream use. The implementation of UPI is expected to have a significant effect on mobile wallet companies. Wallets which focus only on providing limited liability and the ease of making transactions will be impacted as the UPI system will directly challenge their value proposition. But, players like Paytm and other wallet companies with payments bank licences will be the major beneficiaries.

The implementation of Bharat Bill Payments System (BBPS) standards will further help companies get aligned and consolidate their position. Infact, all the leading wallet companies including Paytm, Oxigen, PayU, and Billdesk are lining up their new products and hardware to accommodate the change. This will further accelerate the talent need to allow for the capture of more than 1.5 million utility service points across the country. The key challenge will be to have a team to penetrate the semi-urban and rural markets, where the bulk of the acquisitions will happen. Global giants like Google and Apple are also carefully planning their moves and local partners.

As the proposed day of the commercial launch of payments banks is nearing, there are only eight players left to fulfil the RBI’s ambitious plan to start niche banks in the country. This promises to be a watershed in the financial history of the country.

Profitability concerns, coupled with the limited scope of business activity, are proving to be the biggest deterrent. At the same time, product specialists and business leaders, who will be in demand by these potential banks, will find interesting opportunities. Once the UPI system reaches its full potential, an added fillip will be provided to the sector.

The Indian online market is also looking at consolidating various loose ends in order to compete with global players. Snapdeal’s acquisition of Freecharge and Flipkart’s taking over of PhonePaisa is reflection of this trend. More recently, PayU’s acquisition of Citrus is aimed at consolidating their position in the Indian market. This trend is also expected to throw light on the first set of winners and losers in the market.

The significant development of technology platforms and the emergence of a new generation of young Indians willing to conduct transactions online is contributing to a boom in both the number of online lending platforms and users. The number of start-ups in the online consumer lending space has grown significantly from a mere two in 2013 to more than 35 in 2016. Leading non-banking financial companies (NBFCs) like Capital First, Neogrowth, Bajaj Finserv, Neogrowth, Lending Kart, and Capital Float are trying to capture a slice of the e-commerce transactions pie by offering instant lending facilities to consumers. The last two years have also seen a significant growth of peer-topeer lending platforms like India Lends, Lendbox, Loancircle, Loanmeet, Faircent and Cashkumar in the market.