India's fintech startups have raised about $10 billion in the last decade led by payment platforms, Credit Suisse has said. In a report titled: "India's 100-strong unicorn club drives radical change in the country’s corporate landscape", the wealth management firm said that India is now home to the third-largest set of unicorns globally and commands a total valuation of $90 billion.
Constituting 30 percent of India's unicorn ecosystem, fintechs -- including e-commerce -- have been leaders in the Indian unicorn landscape, with the sector spawning five unicorns having an aggregate valuation of $22 billion, which is the highest amongst Indian unicorns, the report added.
"Indian fintech companies have attracted $10 billion of capital and are now at the forefront of India’s startup ecosystem. Digital payments are primarily leading the Fintech scale-up in India and have grown 10 times over the last five years, now having a 30 percent share totaling $450 billion," said Ashish Gupta, Head of Asia Financials Securities Research and Head of India Securities Research at Credit Suisse.
Riding on the UPI platform, digital payments have grown 10.5 times over the past five years to an annual payment run-rate of $450 billion, constituting 30 percent of retail transactions, the report added. Over the last 10 years, payment startups have raised $4.2 billion in funding and digital lenders have raised $2.5 billion.
Credit Suisse noted that UPI is the major driver of accelerated payment digitisation as it opened up an interoperable payment network to large technology companies.
Digital payments in India continue to grow, with over 200 million active users and acceptance at over 30 million merchants compared to 5 million traditional point-of-sale (POS) terminals, the report added.
“Covid-19 has accelerated the pace of digitization globally across communication, shopping and payments space. While part of this shift should gradually recover, as we come out of the pandemic, there is widespread consensus that it has brought a structural change in categories such as shopping and payments,” said Ashish Gupta.
An analysis of credit card spending of customers by Credit Suisse revealed that the pace of increase in the share of digital spending was vastly accelerated by the pandemic, with online spending increasing by almost 10 percentage points within nine months from 44% to 53%. The study showed a marked shift in consumer spending from offline to online.
Consumer payment players, in particular, have expanded to offer investing, insurance, lending, and e-commerce services. Merchant payment players have also added value-added services, merchant lending, and consumer financing at POS terminals to garner a higher wallet share.
Digital lenders have grown to $10 billion with more than a 40% share in new personal and consumer durable loans and are adding new loan products as confidence in their underwriting models increase, the report said.
Fintech companies have also forged partnerships with banks to embed credit products as well as investment and protection products. At the same time, these platforms added new channels of monetization and increasing user engagement
On the back of proprietary digital platforms and partnerships with fintechs, digital has helped drive cross-selling, new business acquisition and customer servicing channels for incumbent banks. Larger private sector banks and the State Bank of India have developed their proprietary digital platforms, which source 60% to 70% of new retail customers and 60% to 80% of retail fixed deposits. Additionally, 75% of new credit cards and 50-60% of new home/micro, small and medium enterprises loans are scored from these digital entities.
(Edited by : Jerome)