The BFSI industry is undergoing a rapid transformation amidst demand for lower costs, scale, innovation, and agility. Instead of banks viewing technology as a cost centre, the thought process has started to realign, and it is now being seen as a driver to manage profit and loss as well as reduce the cost-to-income ratio. Investment in technology across financial segments is expected to witness high growth over the coming decade.
The backbone of this digital innovation is revolutionary with public infrastructure like the India Stack, Account Aggregator, ONDC, KYC and DBU regulations. The recent Digital Personal Data Protection Act (DPDP) of 2023 will also push financial institutions and their partners to reorient their architecture and business for better data governance.
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This digitization has led to the growth of Embedded Finance platforms and increased investments in API-enabled infrastructure. This shift towards Embedded Finance providers is creating an opportunity for Anything As A Service i.e. XaaS. Banking (BaaS), Lending (LaaS) and Payments (PaaS), have already emerged as key areas of investment for VCs. Digitisation is underway in the retail business for Saving Accounts, Credit Cards and Personal Loans and has just begun for the MSME and Corporate segments.
According to a report titled Unlocking Indian Enterprise Fintech Market by tech-VC fund advisor Chiratae Ventures and The Digital Fifth, a fintech and digital finance consulting and advisory firm, banks and NBFCs will evolve to become fully digital for the Retail and MSME segments in the next 10 years.
The report, which focuses on enterprise FinTechs that play a pivotal role in streamlining product, sales and service delivery as well as enhancing efficiency within the BFSI segment in six essential sectors, namely, BankingTech, LendingTech, PayTech, RegTech, InsurTech and WealthTech, says enterprise FinTechs will expand with projections estimating a market size of approximately US$ 20 billion by 2030.
Financial sector enterprises are at a cusp of digital transformation, and with regulators’ continued support, FinTechs building technology-led solutions will play a pivotal role and capture this burgeoning opportunity
TC Meenakshisundaram
TC Meenakshisundaram, Founder and Vice-Chairman says, “Financial sector enterprises are at a cusp of digital transformation, and with regulators’ continued support, FinTechs building technology-led solutions will play a pivotal role and capture this burgeoning opportunity.”
Large banks have started investing heavily in technology and are focusing on scaling their digital business, which is being replicated by small and mid-sized banks. FinTechs and Embedded Finance players are driving customer engagement in partnership with banks, and this digital push is gradually expanding to complex business banking, including Trade Finance and Treasury. Meanwhile, regulatory frameworks around Digital Lending have continued to evolve and are positively influencing technology spend by lenders. Lenders are experimenting with innovations like Pre-Approved Loans, B2B BNPL, Supply Chain Finance, Secured Credit, etc.
India’s Wealth Management sector is experiencing growth with increasing asset classes, new entrants, and tech investments. The country has shifted to an investment mindset, with a declining focus on traditional physical assets. India is the 9th largest Life Insurance market globally and is expected to reach US$ 200 bn by 2027. Technological advancements such IoT, telematics, and surveyors boost trust in insurance, reduce fraud, realign workloads, and improve decision-making in claims and underwriting.
The tide of change is upon us, and it’s happening right now. The last decade witnessed a continuous influx of funds into Enterprise FinTechs. This, coupled with the entry of new-age players in various Enterprise segments, is shedding light on the previously untapped potential of this market
Sameer Singh Jaini, Co-Founder and CEO, The Digital Fifth
Sameer Singh Jaini, Co-Founder and CEO, The Digital Fifth, said, “The tide of change is upon us, and it’s happening right now. The last decade witnessed a continuous influx of funds into Enterprise FinTechs. This, coupled with the entry of new-age players in various Enterprise segments, is shedding light on the previously untapped potential of this market. The distinctiveness of this sector lies in its capacity for multiple contenders to drive the market. Every breakthrough in this sector ripples through the BFSI realm, advancing it tenfold.”
India is swiftly transforming into a less cash economy and will aim to eliminate it over the next decade. Payment innovations have been driven by regulatory initiatives and there will be a demand for agile Payment as a Service (PaaS) platform to orchestrate transactions with multiple bank payment infrastructures.
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Factors like the Government’s Digital India initiative, India Stack APIs and the regulator’s focus on consumer protection have driven demand for RegTech solutions, ensuring compliance, data security and seamless transactions across the FinTech ecosystem.
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