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Indian financial technology (fintech) companies have been on the rise despite the pandemic. Currently, the country is home to about 3,174 fintech start-ups, the second largest next to the US and known as one of the fastest-growing fintech hubs globally.
The growth of fintech companies, particularly start-ups, has not been limited locally. Several Indian fintech companies have started entering the Southeast Asia market for expansion opportunities.
Fintech dominates the Indian start-up ecosystem
This year saw a dramatic surge in India’s start-up landscape. So far, India has had 55 start-ups that have become unicorns, meaning they’ve reached at least a $1 bn valuation. The start-up boom could help India achieve its target of producing 100 unicorns by 2023 despite the pandemic, a TiE Delhi-NCR report shows.
Moreover, Indian start-up funding has increased by almost 96% in the first five months of 2021, to $9.4 bn from $4.8 bn during the same period in 2020. According to an Inc42 Plus report, that amount already makes up 82% of the $11.5 bn raised by start-ups in all of 2020. In addition, the number of start-up deals also went up by nearly 50% during the period, from 335 in 2020 to 502 in 2021.
Of the 502 startup deals made during the first five months of the year, fintech secured 88 deals or 17% of the total number of transactions. The fintech sector also represented a 60% increase from the 55 deals made during the same period in 2020.
The fintech sector start-ups were able to raise over $2 bn in funds in 2021 so far, increasing by 400% from $495 mn in the January to May period in 2020. Notable fintech deals were: a $296 mn Series C and D round by e-commerce firm CRED, a $108 million fundraising by B2B company BharatPe, and Zeta’s $250 mn Series C funding round – a banking technology startup.
The rise of start-ups coupled with the increased adoption of fintech has caused a disruption in India’s banking, financial services, and insurance (BFSI) sector. As a result, Indian banks are now working with fintech start-ups to help them with system upgrades and improvements in their operations to provide a better customer experience. Additionally, this collaboration with fintech firms has enabled BFSI companies to cut costs and reduce their dependence on legacy systems.
Mobile applications developed by Indian fintech companies to cater to BFSI products have also gained traction. The long manual process of making investments, such as systematic investment plans, is now available in digital form through these apps.
India’s Fintech enter into Southeast Asia
The Southeast Asian region is considered one of the fastest–growing markets globally in fintech, with an estimated market value of around $70 bn to $100 bn in 2020. Over the past years, Indian fintech companies and start-ups have experienced tremendous growth, encouraging them to look at Southeast Asian markets as potential expansion targets.
The lack of access to financial tools and a large number of unbanked people are among the leading factors in the fintech sector’s growth in Southeast Asia. According to the World Bank, only 49% of adults in Indonesia have formal bank accounts, while the Philippines, Vietnam, and Cambodia are at 34%, 31%, and 22%, respectively. The numbers are even lower when it comes to insurance and wealth management.
Last April, India’s Pine Labs acquired Singapore-based consumer fintech start-up Fave for more than $45 mn. Fave’s rewards app offers savings across thousands of retailers to millions of Southeast Asian customers. Both companies have expressed excitement in the partnership and their expansion into both India and Southeast Asia.
Indian payments company Electronic Cash and Payment Solutions (ECAPS) merged with Philippines-based digital financial services provider Ayannah in June 2020 to form Ayannah Global. The merged entity is headquartered in Singapore and will provide services for South Asia and Southeast Asia’s expanding middle class. The combined company plans to focus on its open banking and omnichannel distribution platforms, which will eventually include savings and investment products. In the Philippines, the group introduced its Kaya digital marketplace that establishes a connection between banks, lenders, and insurers, with middle–class clients and business owners.
After reaching unicorn status in 2020, payment gateway provider Razorpay raised $160 million in a Series E financing round, pushing its valuation to $3 bn. Razorpay targets small businesses and enterprises for its payment service. Following the financing round, the company expressed plans to launch its services in Southeast Asia.
Razorpay CEO Harshil Mathur said the company wants to take its learnings from India to the Southeast Asian market and explore mergers & acquisitions opportunities in the region. The company is currently looking to fill more than 600 positions in various markets in Southeast Asia.
