About the author: Anjan Krishnamurthy is a Management Consultant at Zinnov with the Global Advisory & Performance Consulting Practice.
In a letter to shareholders last year, JP Morgan CEO Jamie Dimon warned of growing competition for Wall Street in the form of new age Fintech startups.
“Silicon Valley is coming” Jamie Dimon, CEO, JP Morgan.
I believe this warning is applicable to banks across the world. A disruption in the Fintech industry has just begun and it is certain to change the way how banking is done. The question is only ‘By when and by how much?’
India too is proving to be a hot-bed for Fintech, as these startups have raised over USD 1.3 Bn over the last 3 years. These include payment start-ups (Mobile Wallets & mPOS), p2p platforms, marketplaces and aggregators, crowdfunding platforms and financial services. Mobile Wallet startups have received the most funding over the last 3 years with PayTM alone raising over USD 890 Mn. This growth is attributed to the rise of the Indian e-commerce and the active M&A’s in the mobile wallet space, with Snapdeal acquiring Freecharge, Ola acquiring Qarth, Flipkart acquiring PhonePe and Amazon acquiring EMVANTAGE.
Another sector to watch out for is the p2p lending with more than 80% of the P2P lending startups founded over the last 3 years. With more than 50 Mn. SMEs and growing – quick access to capital, avoidance of tight regulations and credit checks, coupled with an unfriendly banking system has aided the growth of P2P lending start-ups.
As on today, majority of the Indian Fintech startups are curating platforms for alternate lending, mobile wallets, marketplaces & aggregators. While there are startups in financial services that facilitate risk analysis and fraud detection, improve customer experience, automate trading systems etc., this number is significantly low. In the long run, It would be great to see more product startups with a global focus, building deep tech solutions.
A growing number of startup accelerators too has helped in nurturing the ecosystem. While there are 70+ broad-themed accelerators across the country, a number of Fintech focused startup accelerators too have emerged. These include Start Tank (part of PayPal), Startup Studio, amongst others. Barclays’ RISE program is set to launch in Mumbai in 2016.It wont come as a surprise if a number of other banks, especially in the private sector incubate similar initiatives in the near future.
And finally, the India stack with open APIs, especially the payments layer, could redefine banking solutions for Indian SMEs & consumers. It will be interesting to see how one could leverage the stack in order to enable efficient B2C or G2C services.
As the high tide is set to create newer energies & synergies, it is interesting times ahead for anyone who is a part of the Fintech ecosystem.