Currently accounting for about 7 per cent of India’s $1.4 trillion financial services enterprise value, the fintech sector is expected to touch $350 billion in enterprise value by 2026, according to a Bain and Company report.

This would mean fintech represents nearly 15 per cent of the financial services market cap in India. The report added that the Brazilian market, with similar macro fundamentals and demographics to India, saw fintech’s share in financial services market capitalisation grow from 2 per cent in 2017 to 35 per cent in 2021. This could be attributed to Covid-19 leading to transformational shifts in consumer behaviour and accelerated digital adoption.

Bulk of funding

Further, the first half of 2022, has seen conservative funding of $4.2 billion, which is lower than H1 FY21, but twice the funding received in H1 FY20. While payments and lending continue to attract the bulk of funding (60 per cent), other segments, including financial infrastructure, wealthtech, and neobanks, are now catching up.

“Amassing a sizeable customer base through their core offerings, fintechs are now seeking to boost customer retention and engagement by introducing new revenue streams and cross-selling related services and products,” the report added.

Formal Credit Growth

While traditional players will remain key beneficiaries of formal credit growth, fintechs are expected to increase market share over the next five years. The report estimates consumer credit to grow at ~13 per cent CAGR, partially contributed by growth in fintechs.

With the help of UPI, fintechs have established a strong foundation in the payments space and are now gradually expanding their presence in other financial services categories as well. New-age discount brokers are expected to rapidly grow customer base at ~20 per cent CAGR by FY26. The analysts at Bain and Company added that digitally sourced health insurance policies are also expected to grow at 23 per cent CAGR by FY26.

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