India’s Fintech sector, the third largest in the world, is expected to grow ten fold this decade, and touch assets under management (AUM) of $1 trillion between lending, asset management and insurance by the year 2030, according to a new report from Chiratae Ventures and EY India.

As of 2021, the total AUM of Indian Fintech market (excluding payments) was about $102 billion. Payments landscape alone is expected to touch transaction volumes of $100 trillion by 2030.

Spurt in digital lending

This report —$1 trillion India Fintech Opportunity — highlighted that fintech sector revenues (including those from payments space) is estimated to grow to $200 billion by 2030 from about $18 billion in 2021. Much of the growth in the fintech sector will be driven in the digital lending market, which is expected to grow to $515 billion in book size by 2030, from a level of $38 billion in 2021, the report noted. 

Digital lending revenues have been projected in the report to grow to $105 billion by 2030 from level of $8 billion in 2021. Digital lending growth will be driven on the back of customised segment-specific solution, according to the report. In 2021, digital lending clocked more than $1 billion in investments. 

Home to 21 Fintech Unicorns (out of 2100+ fintechs), India is now being recognised as one of the largest Fintech ecosystems. 

Evolving marketplace

The report said that co-lending is likely to evolve as a marketplace model that assists lending partners in mitigating their risk exposure. 

“In the future, we expect Co-lending to emerge as a marketplace model that supports lending partners to mitigate their risk exposure. Fintechs and traditional lenders have to work with each other. It has already started”, TC Meenakshi Sundaram, Co-Founder and Vice Chairperson, Chiratae Ventures, told BusinessLine.

Chiratae Ventures India Advisors is a technology Venture Capital funds advisor. The funds advised by Chiratae Ventures India advisors collectively have close to $1 billion under management and 110+ investee companies across SaaS, consumer media and tech, Health-Tech and Fintech.

The report highlighted that payments, digital lending, wealthtech, Insurtech and Neo-banking will all be contributing to growth in the Fintech space with Agri+Fintech and Prop+ Fintech considered to be big bets. Also, new asset classes, Crypto & NFTs will continue to attract investor interest. 

Asked if he sees fintechs “eating” into the lending business of traditional banks, Sundaram replied in the negative. “I don’t think fintechs will be eating into traditional lenders’ loan book. We see their coexistence. We are not believers that suddenly fintechs will come and take over the market,” he added. 

Agile regulators

Sundaram said that he was confident that regulators would keep pace with industry. “We expect them to be sometimes little ahead and sometimes little later. Later will be more in terms of protecting the end consumer. In last few years, regulators have become far more agile in terms of catching up with the requirements of the industry,” he said.

The report also highlighted that a lot of activity is expected to happen around WealthTech and InsurTech. New sub-segments are going to be innovated by the fintechs with new class of products. A case in point being fractionalisation of investments to potentially serve the need of a new class of investors that is emerging now. 

The report also said that Buy Now Pay Later (BNPL) has become mainstream, and is on an accelerated growth trajectory, emerging strong not only in B2C, but also B2B payments space. BNPL, which clocked GMV of $3 billion in 2021, is projected to have a GMV of $35 billion by 2026, according to industry estimates.