India’s Fintech Sector to Reach US$1T in AUM by 2030

India’s Fintech Sector to Reach US$1T in AUM by 2030

by September 7, 2022

India has emerged into one of the largest fintech ecosystems in the world, owing to surging funding activity, rapid adoption of digital financial services and supportive government initiatives.

Over the next decade, the sector will continue to rise substantially, with total assets under management (AUM) projected to grow at a compound annual growth rate (CAGR) of 28.3% to reach US$1 trillion by 2030, and fintech revenue set to climb to a total of US$200 billion, according to a new report by consultancy EY and venture capital (VC) firm Chiratae Ventures.

Digital lending, insurtech and wealthtech are amongst the subsectors set to witness the strongest growth, the report says, driven by greater customization of segment-specific solutions, rising awareness and ease of policy purchase and claims processes, and booming demand for investment solutions.

Assets under management and revenue growth by fintech segment, Source: EY/Chiratae

Assets under management and revenue growth by fintech segment, Source: EY/Chiratae

Digital lending segment specialization

By 2030, revenues from digital lending, insurtech and wealthtech will grow more than tenfold, respectively, the report says.

Digital lending will bring in a total of US$105 billion, soaring 1,213% from 2021’s US$8 billion. This growth will be driven by the proliferation and adoption of segment-specific solutions.

Evidence of this trend includes the entry of players like Vayana and Flexiloans, which are seeking to address the capital gap of micro, small and medium-sized enterprises (MSMEs). India is home to 63 million MSMEs with a large number of them tending be informal and seeking working capital.

Vayana is a network for trade financing, connecting corporates and their supply chain, to financial institutions, and Flexiloans is an online lending platform which aids SMEs and startups with equipment financing, invoice discounting and business loans without collateral.

Buy now, pay later (BNPL) is another area expected to see accelerated growth. Total retail gross merchandise value (GMV) will surge from US$2 billion in 2021 to US$24 billion in 2026, while total online BNPL retail customers will soar to 30 million in 2026 from 5 million in 2021, the report says, citing ZestMoney’s India BNPL Report 2021.

India BNPL GMV and customer base, Source: ZestMoney 2021

India BNPL GMV and customer base, Source: ZestMoney 2021

Insurtech expands beyond discoverability and listing

Insurtech revenue, meanwhile, will reach US$36 billion by 2030, the EY/Chiratae Ventures report predicts, growing 1,100% from just US$3 billion in 2021.

This growth will be driven by increased consumer awareness, and the expansion of insurtech products beyond listing and discoverability to tap opportunities across entire value chain whitespaces like claims management, analytics and API solutions, health-related insurtech products, and gig economy-focused insurance.

Claim Buddy, for example, offers tech-backed, end-to-end management solution for hospitals to process claims; Mantra Labs provides artificial intelligence (AI)-based self-service chatbot, workflow automation and intelligent lead management services to insurance firms; Plum offers group health insurance solutions to SMEs and startups; and Gigacover offers income protection plans, critical illness cover and life insurance services, serving gig workers, freelancers and self-employed professionals.

Wealthtech rises on the back of a growing base of retail investors

By 2030, wealthtech revenue is projected to soar 1,050% from just US$200 million in 2021 to US$2.37 billion, the report says. This rise will be fueled by rising demand from first-time and underserved investors for holistic investment solutions on the back of higher disposable incomes and increased awareness to financial wealth creation.

The past few years have seen the establishment of innovative wealthtech startups. These include StockGro, a social investment platform; RuleZero, an all-in-one equity management platform; and Tyke, an online platform for investing in startups.

Demand for greater access to new asset classes, cryptocurrencies and non-fungible tokens (NFTs) will also increase demand for wealthtech solutions, the report says. Providers in the market include Strata, a fractional real estate investment platform that makes investing in premium commercial properties easy, transparent and affordable, and CoinSwitch, a cryptocurrency trading app supporting more than 100 cryptocurrencies.

According to a recent report by the United Nations Trade and Development (UNCTAD), more than 7% of Indians owned cryptocurrencies in 2021, placing the country at the 7th position globally in terms of crypto adoption.

Digital currency ownership as share of population: Top 20 economies, 2021, Source: UNCTAD, 2022

Digital currency ownership as share of population: Top 20 economies, 2021, Source: UNCTAD, 2022

One of the world’s largest fintech ecosystems

Besides these three subsectors, digital payments and neobanking as well as are expected to record substantial growth, with revenues set to rise nearly sevenfold and fivefold, respectively. This will come on the back of rising adoption of UPI and fintech services in general, and greater push by industry stakeholders for increased neobanking adoption among the unbanked and underbanked segments, the report says.

Home to 21 fintech unicorns, India has grown into one of the largest fintech markets in the world, a position that’s been enabled by booming fintech adoption, and bullishness among investors in the prospects of technology and digital platforms to address the market’s large population of unbanked.

In 2021, Indian fintech companies raised a total of US$7.8 billion, the third largest sum after the US (US$62.9 billion) and the UK (US$11.6 billion). The amount represents a threefold increase from 2020’s US$2.9 billion.