The growing collaboration between technology and finance has fired the imagination of entrepreneurs to come up with innovative solutions, thereby expanding the scope of India’s tech startups, reports Prabhu Mallikarjunan
Freecharge, the digital wallet company owned by e-commerce major Snapdeal, last week took its ‘chat n pay’ feature to the next level by introducing Freecharge on WhatsApp. It allows consumers to WhatsApp ‘money’ to any of their contacts in less than 10 seconds. Also, with ‘chat n pay’, merchants and customers can connect over chat and initiate payments.
Technology is changing the way people transact and do banking operations. A slew of startups in the fintech space, backed by venture financing, are disrupting the financial services and banking industry. Many of these emerging companies are focused on building financial products, developing innovations that include peer-to-peer lending platforms and creating frictionless payment and trading solutions.
According to a report “Indian Fin-tech Products—Innovation Driving Growth” by The National Association of Software and Services Companies (Nasscom), India is quickly emerging as an fintech products hub with a presence of close to 400 companies in the fintech space which have received about $420 million investment in 2015.
Meanwhile, Data analytics company Traxcn pegs a different number and claims that, in 2015, the investment in fintech had touched $1.2 billion, a large part of which was the $890 million raised by Paytm.
The Nasscom report says that the total fintech software and services market is estimated to be worth $8 billion and pegged to grow 1.7X by 2020, and payment processing (that include transaction gateways and platforms, online/ mobile wallet, ATM & POS services,
remittance and cash cards) and trading are key emerging segments in Indian Fin-tech landscape. Worldwide fintech software market is estimated to be valued at $32 billion in 2015 and is forecasted to reach to $45 billion by 2020.
In 2015, apart from Paytm, the mobile wallet company raising big round of funding, other companies like BankBazaar, a startup that lets Indian consumers compare financial products online, had secured $60 million in a Series C round funding led by Amazon; wallet company MobiKwik had raised $25 million in a Series B round; Fintellix, a risk, compliance and financial analytics startup had raised $15million in a Series C round; Itzcash, a payment startup providing cash card and remittance solution had raised $15 million in Series C round and SME lending platform Capital Float has raised $25 million.
Speaking to FE, Alok Goel, Managing Director , Saif Partners, which has invested in fintech companies like Paytm, Capital Float and Walnut, said, “India is making forward looking steps in the fintech space. With payment banks and unified payment interface, the movement of cash will be less expensive and it will further help fintech companies to disrupt the market in newer ways. The steps taken by the RBI in this regard is not fully materialised yet, but once that happens, it will be a very interesting market from the global perspective.”
With the increasing internet penetration in the country, more and more people have started to buy things online and using digital wallet services to make payments. The Nasscom report adds that banking, financial services and insurance (BFSI), e-commerce and retail verticals are leading the adoption of fintech and the industry is expected to grow significantly in the future, driven by increased demand for mobility and analytics solutions.
In India, the proliferation of the connected devices especially the smartphones has led to the incubation and growth of startups in the fintech sector. There is a huge demand to provide mobility solutions.
In the fintech space, transaction gateways and platforms, mobile banking and ATM & POS services are the emerging horizontals. Startups are more focused around payment processing and trading solutions.
Govind Rajan, chief operating officer of Freecharge told FE ,”At this point in time, we see a lot of momentum for digital payments and government is taking initiatives to address the challenges. The biggest challenge is that acceptance of digital payment is very low in India. There are a lot of barriers in accepting conventional payment mechanism which are done through the point of sale machines. We believe that these barriers can be dispensed with digital payments. As a company, we have moved on from just being a deals oriented consumer internet company to being a wallet focused company with an aim to connect every merchant with the consumers and make payments frictionless.”