Executive Summary

This report assesses the rise of fintech (financial services technology) as a new
chapter in the Indian Financial Services (FS) sector. One of the core objectives of this
report is to throw light on the emergence of fintech tools across new frontiers such as
next generation payments, P2P lending, security and biometrics, Bank in a Box,
blockchain, robo advisory and financial inclusion in India. Alongside, we have aimed
to capture a glimpse of the fintech evolution in India and its adoption of the “fourth
industrial revolution” by India’s financial and technology hubs. For this, we have
taken an approach that learns from the best-in-class fintech ecosystems of mature
markets of the United Kingdom (U.K.), the United States (U.S.), Singapore, Israel,
Australia and Hong Kong. 

FinTech is broadly an omnibus term used to describe emerging technological

innovations in the financial services sector, with ever increasing reliance on
information technology. Commencing as a term referring to the back end technology
used by large financial institutions, it has expanded to include technological
innovation in the financial sector, including innovations in financial literacy and
education, retail banking, investments, etc.

Technological innovation is considered to be one of the most influential developments

affecting the global financial sector in the near future. Innovations related to
payments, lending, asset management and insurance pose a challenge to business
models and strategies of financial institutions; yet, these also bring opportunities for
both the incumbent market participants and newcomers. At the same time, innovation
can create new risks for individual financial institutions, consumers of financial
services, as well as the financial system as a whole.

FinTech or digital innovations have emerged as a potentially transformative force in

the financial markets. A recent FSB (Financial Stability Board) study highlighted
some of the potential benefits of FinTech, including efficiency improvements, risk
reduction and greater financial inclusion.

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 It also identified some of the key challenges associated with FinTech, such as
difficulty of regulating an evolving technology with different use cases, monitoring
activity outside the regulated sector, identifying and monitoring new risks arising
from the technology.

This report also helps in identifying key fintech themes which are shaping up the
industry and investigates each one to understand leading practices that can be
replicated in India.

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 Chapter 1: Overview

1.1 Introduction

The term “FinTech” is a contraction of the words “finance” and “technology”. It

refers to the technological start-ups that are emerging to challenge traditional banking
and financial players and covers an array of services, from crowd funding platforms
and mobile payment solutions to online portfolio management tools and international
money transfers.

Some of the major FinTech products and services currently used in the market place
are Peer to Peer (P2P) lending platforms, crowd funding, block chain technology,
distributed ledgers technology, Big Data, smart contracts, Robo advisors, E-
aggregators, etc. These FinTech products are currently used in international finance,
which bring together the lenders and borrowers, seekers and providers of information,
with or without a nodal intermediation agency.

FinTechs are attracting interest both from users of banking services and investment
funds, which see them as the future of the financial sector. Even retail groups and
telecom operators are looking for ways to offer financial services via their existing
networks. This flurry of activities raises questions over what kind of financial
landscape will emerge in the wake of the digital transformation.

Financial institutions are seeking to increase their knowledge in relation to

technological innovation, both through partnerships with tech companies and by
investing in or acquiring such companies. Despite this, there are wide differences in
the preparedness of market participants for these changes in practice.

According to Financial Stability Board (FSB), of the BIS, “FinTech is technologically

enabled financial innovation that could result in new business models, applications,
processes, or products with an associated material effect on financial markets and
institutions and the provision of financial services”.

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This definition aims at encompassing the wide variety of innovations in financial
services enabled by technologies, regardless the type, size and regulatory status of the
innovative firm. The broadness of the FSB definition is useful when assessing and
anticipating the rapid development of the financial system and financial institutions,
and the associated risks and opportunities.
FinTech innovations have the potential to deliver a range of benefits, in particular
efficiency improvements and cost reductions. Technological developments are also
fundamentally changing the way people access financial services and increasing
financial inclusion.

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1.2 Overview of the industry

India’s FinTech sector may be young but is growing rapidly, fueled by a large market
base, an innovation-driven startup landscape and friendly government policies and
regulations. Several startups populate this emerging and dynamic sector, while both
traditional banking institutions and non-banking financial companies (NBFCs) are
catching up. This new disruption in the banking and financial services sector has had
a wide-ranging impact.

In India, FinTech has the potential to provide workable solutions to the problems
faced by the traditional financial institutions such as low penetration, scarce credit
history and cash driven transaction economy. If a collaborative participation from all
the stakeholders, viz., regulators, market players and investors can be harnessed,
Indian banking and financial services sector could be changed dramatically. FinTech
service firms are currently redefining the way companies and consumers conduct
transactions on a daily basis.

The Indian FinTech industry grew 282% between 2013 and 2014, and reached USD
450 million in 2015. At present around 400 FinTech companies are operating in India
and their investments are expected to grow by 170% by 2021.

The broad FinTech products/services offered in Indian financial markets are as under:

Fig 1.1

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The FinTech startups are currently presenting the financial companies with innovative
business models and technologies. In the current competitive business strategies, the
startups from the financial sector are focusing on competitive technologies such as
retail banking and payment technology. Though these technologies are competitive,
there is always a potential for technology innovation. To encourage innovation, many
other industries such as healthcare and life science have started using the latest
technology for optimizing their business processes, cost cutting, and so on. Since
there are opportunities that many industries using the technology, the Fintech
industries get the cost-effective processes and fewer regulations in the traditional
financial sectors.

Each year, the economic crisis is continuing to be an unpredictable situation, and

financial industries are facing various challenges. Some of the common problems are
the rapid rise in asset prices, low-interest rates for a long period, huge savings and
credit imbalances, and so on. The reports from the World Economic Forum have
already predicted that the mentioned challenges are going to continue as a risk in the
market. In the earlier decades, the exceptional growth and the capitalism to its best
have now created the market to adapt to tighter credit, slow pace of globalization,
government intervention, and no growth in the economy. Since the regulations are
changing in the United States and the lack of credit availability, the financial
industries are facing risks in the business growth.

Most ATMs across the nation charge a fee for using them. It is better to be aware of
your bank charges before you start using them. Most banks offer us maximum six
times to use the ATMs free of charge on a monthly cycle. ATMs apparently provide
services like withdrawals, transfer of funds, bill payments, recharging mobile and
cheque as well as cash deposits and these services should be carried only in your bank
tellers, as tellers of other banks charge a fee for processing each transaction.

Check deposits in the ATM usually take one business working day to get cleared. A
mere receipt from the ATM doesn’t allow you to access funds immediately after the
deposit. But after depositing the check in the ATM, you get access to your first $200
of your check instantly and usually remaining on the next working day depending on

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the ATM you have used. If you have used a shared branching, it might need an extra
time to clear your checks. There is no fee levied to deposit a check in your account.

ATM fees charged by the banks do not discourage us from using them if you use it
consciously as stated above; fees are kept to the minimum. The services offered by
the ATMs are plentiful. We need to manage our free transactions in such a way that
we reap maximum benefits out of it.

Future Trend
The following are the unique trends that enable the future growth of the financial
industries:
 Globalization in banking – Many banks such as Citibank, JPMorgan,
American Express operate in multiple regions. Some of the factors for
banks being an important reason for the financial sectors are improved
finance supply, credit to small industries, and reduced interest rate. To
achieve a consistent growth with banking relationships, the financial
industries will have to provide and get access to the emerging markets as
well. Even today, few regions in Africa and Asia, the market growth
opportunities for profit and market share price are not in parallel. This could
be one of the major reasons for companies with an aggressive growth
strategy are not operational in these regions. The market share and profit not
in parallel do not mean that these companies cannot be successful in these
areas. Global banking is recommended to achieve significant growth in the
financial companies. Global banking is recommended to achieve significant
growth in the financial companies.

 E-Banking – As per a recent report, approximately 4 billion people

around the world are using cell phones. Out of 4 billion people, almost 90%
of the people are using smartphones. It is also expected that 10% of 20%
growth each year in smartphone usage. Considering the latest technology
and the feature in these smartphones, all banking sectors have now started
their own mobile application (app), and banking transactions have become
easier through E-banking. The same report also indicated that people prefer
to use e-banking/online banking to do banking transactions. Thus, E-
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banking capability is quick and is also becoming a mandatory requirement
to be successful from the competitors. Since all the major banking activities
can be done through E-banking/Online Banking, this initiative has become
popular. The financial industries can also do the same initiative to attract
customers and stay productive in the market.

 Mobile Money – Unlike E-banking, there are other platforms where

customers can pay or get paid. This low-cost initiative has become famous
across the world, enabling the customers to accept money, send money, and
transfer the money to the bank. For example, one of the leading mobile
operators, Vodafone has introduced its M-Pesa mobile-based money
transfer technology. Using this technology, customers are using the mobile-
based money transfer/accept as an alternative method. One of the primary
reasons that Mobile Money has become famous is because people do not
have to worry about internet banking, credit cards, password, PIN, and so
on. Similarly, financial industries such as life insurance and general
insurance can also follow this initiative to attract the customers, for new
policy and renewing the policies.

 Networking / Collaborating –Networking is one of the important

aspects of the business and for being competitive in the market. For future
success in any business, instant access to information, product integration,
and geography are the mandatory requirements. Financial industries need to
compromise or need to be ready to reduce the price, based on the demand
and supply of the global market. One of the cost-effective initiatives is that
the mobile service operators from one country have tie-up or collaboration
with another company, where there is no service to that location. Instead of
starting a new service, the cost becomes lesser when it comes to
collaboration. In this way, financial industries can start with collaboration
for easy access to many destinations with lower cost. This method would be
helpful for the growing industries trying to expand their services to many
destinations.
  Self-Service – According to IBM, when it comes to the financial
services, the customer and self-service should be the primary focus. There
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 are various self-service portals that enable the customers to get instant
access to various services and to check the status of the account online.
Many service providers have also automated to connect to the customer
service representatives instantly for support. Unlike waiting and selecting
various options from the phone, a one-click button enables the customers to
get in touch with customer service representatives instantly. This type of
service in the financial industries would definitely help the customers for
building a good relationship.  
  
Revolution of Fintech
Fintech (Finance and Technology) has created a major impact in the financial sectors,
from leveraging some of the latest innovations such as Artificial Intelligence,
Robotics, Biometric applications, Blockchain, Peer-to-Peer lending, and so on. If
FinTech has created a bigger revolution in the financial sectors, then there will be
subsequent opportunities to seize the market. To get the similar opportunities, some of
the start-up companies are providing enhanced options such as PayPal, GoldMoney,
and Alipay. To elaborate more on the options, for example, PayPal, customers can
send and accept money in all types of currencies. The additional benefit of PayPal is
that customers can also convert the foreign currency to local currency and transfer the
converted currency directly to the bank. Currently, the financial sectors using PayPal
have grown significantly in all the regions.

Fig 1.2
Apart from FinTech creating revolution in the financial sectors, let us also explore the
options, which the financial sectors roll to next ways of innovations.  

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 Robo advisory – The concept of robo advisory is to provide
financially related bits of advice, to reduce human interventions. And these
advices are mainly through complex algorithms. The algorithms are carried
out through computers and hence, human interventions are not required.
Intermediaries played an important role between the investors and the stock
market.
Sometimes, this also leads to transactions that are not traceable as well as
inefficient. Robo advisory helps the investors to access the stock market
with value-added services in an easier and transparent manner.

 Alternate lending – Some of the banking industries found that lending

funds to small business are not profitable. FinTech has taken an opportunity
to provide peer-to-peer lending based on mutual terms and conditions at
low-interest rates. This service has become popular with the investors and
set to grow in the emerging markets. In some developed countries, the
alternate lending services are payday loans, money orders, mortgage loans,
refund anticipation loans, car title loans, and so on. Some of the popular
alternate lending companies are SpringLeaf financial, Lendmark Financial
Services, and Duvera Financial Inc.

 Blockchain – For online transactions, third-party validation is required

for all the transactions. Blockchain is one of the technologies that eliminate
reconciliation of third party concept and provides additional security. One
of the trends that has made Blockchain technology so popular are Bitcoins.
Bitcoins are an unregulated currency which can be traded or exchanged in
multiple currencies. The future application of blockchain in finance
industries will be through cryptocurrencies, which is called Bitcoin Mining.
The term Bitcoin Mining refers to a peer-to-peer process to verify bitcoin
transaction, which is the payment from one person to another through a
decentralized network.
Since the blockchain technology and cryptocurrencies are getting popular,
many fintech startups have already started to send/store bitcoin and other
currencies through digital.

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  Digital payments – As smarter payment options are hitting the market,
FinTech start-up companies have provided quick and convenient payment
modes to the customers. For example, PayPal is a famous digital payment
method used popularly in the US. Upon successful registration in PayPal,
the process to send and receive money requires only a valid email address.
Some of the payment options are already popular in all over the world and
soon it is expected that ATM services will become redundant and customers
in the developed countries might go for digital payments for all transactions.
With the demonetization push in India, we see huge spike in the use mobile
payment apps and mobile banking in order to transact cash, and it will
reflect in many other emerging countries in the near future as well.

Financial services have to be sustainable and have to be steadily expandable in order

to get a steady growth in the market. Due to various reasons, many financial industries
have not been in a position to capitalize in many locations across the world. The lack
of no service in many locations results in failure of wider business opportunities. It is
recommended that the financial industries must also start to invest in the mature
market. This is necessary because, by 2030, these mature markets might be equal in
terms of growth and business from the faster-growing companies in the market. One
of the major benefits of investing in other locations or in mature markets is because of
the constant growth. For example, if the revenue in one location is not up to the
required level, then the loss can be compensated from the revenue that is emerging in
the mature market. Similarly, the same conditions also apply from one geography to
another.

In conclusion, the future of the finance industry is bright like a diamond and every
year on we will find increasing use of mobile and card payments and sharp reductions
in cash transactions. Fintech industries are fostering swift innovations in a short
period of time and we are likely to see more advancements in the future to come.
Chapter 2: Research Methodology

2.1 Objectives and scope

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  To study the Indian landscape of Fintech from the global
perspective.
 To identify key Fintech themes which are shaping up the
industry and investigate them to understand leading practices
that can be replicated in India.

2.2 Research design

Exploratory Research: It is defined as a research used to investigate a problem which
is not clearly defined. It is conducted to have a better understanding of the existing
problem, but will not provide conclusive results. For such a research, a researcher
starts with a general idea and uses this research as a medium to identify issues, that
can be the focus for future research as it helps in providing insights and
understandings to define a problem.

2.3 Sources of data collection

The data will be collected through Secondary Research Study Methodology with the
help of Internet form various websites and research papers.

2.4 Data analysis - tools/techniques

The data analysis tools which was mainly used for the study was Website articles and
Industry reports.

2.5 Limitations of the study

 Limited study of the industry due to time constraint.
 It is a small research which may be insufficient to give the real picture
of the whole fintech industry.
 It was not possible to map every single items or tools related to fintech.

Chapter 3: Conceptual Background

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Financial technology (Fintech) is used to describe new tech that seeks to improve and
automate the delivery and use of financial services. At its core, fintech is utilized to
help companies, business owners and consumers better manage their financial
operations, processes, and lives by utilizing specialized software and algorithms that
are used on computers and, increasingly, smartphones. Fintech, the word, is a
combination of "financial technology". 

Broadly, the term "financial technology" can apply to any innovation in how people
transact business, from the invention of digital money to double-entry bookkeeping.
Since the internet revolution and the mobile internet/smartphone revolution, however,
financial technology has grown explosively, and fintech, which originally referred to
computer technology applied to the back office of banks or trading firms, now
describes a broad variety of technological interventions into personal and commercial
finance.

Some of the most active areas of fintech innovation include or revolve around the
following areas:

Peer-to-Peer (P2P) Lending Services

These companies use alternative credit models and data sources to provide consumers
and businesses with faster and easier access to capital, providing online services to
directly match lenders with borrowers who may be individuals or businesses.
Examples are Lendbox, Faircent, i2iFunding, Chillr, Shiksha Financial, Gyan Dhan,
and Market Finance.

Personal Finance or Retail Investment Services

Fintech companies are also growing around the need to provide customized financial
information and services to individuals, that is, how to save, manage, and invest one’s
personal finances based on one’s specific needs. Examples are FundsIndia.com,
Scripbox, Policy Bazaar, and Bank Bazaar.

Miscellaneous Software Services

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Companies are offering a range of cloud computing and technology solutions, which
improve access to financial products and in turn increase efficiency in day to day
business operations. The scope of FinTech is rapidly diversifying at both macro and
micro levels, from providing online accounting software to creating specialized digital
platforms connecting buyers and sellers in specific industries. Examples include
Catalyst Labs in the agriculture sector, AirtimeUp which provides village retailers the
ability to perform mobile top ups, ftcash that enables SMEs to offer payments and
promotions to customers through a mobile based platform, Profitbooks (online
accounting software designed for non-accountants), StoreKey, and HummingBill.

Crypto currency
India being a more conservative market where cash transactions still dominate, usage
of digital financial currency such as ‘bitcoin’ has not seen much traction when
compared to international markets. There are, however, a few bitcoin exchange
startups present in India – Unocoin, Coinsecure, and Zebpay.

Developments in Block chain Technology in India

Block chain, a seemingly unassuming data structure, and a suite of related protocols,
has recently caught the attention and spurred efforts of a number of domestic firms.
IDRBT has taken the initiative of exploring the applicability of BCT to the Indian
Banking and Financial Industry by publishing a White Paper detailing the technology,
concerns, global experiences and possible areas of adoption in the financial sector in
India. In order to gain first-hand experience of the implementation, the Institute has
also attempted a Proof-of-Concept (PoC) on the applicability of BCT to a trade
finance application with active participation of NPCI, banks and solution provider, the
details of which are presented in the White Paper13. The results of the PoC have
been quite encouraging, giving comfort and confidence in the implementability of
BCT in the Indian financial sector. The PoC provided a good insight into the
workings of the Blockchain eco-system demonstrating the following key aspects:
• Complete transparency of various events triggered by various counter-parties
• Automated flow triggered by the occurrence of specific events.
• Private distributed ledger
Developments in Payments landscape in India

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Fintech enablement in India has been seen primarily across payments, lending,
security/biometrics and wealth management. The modes of payments in India have
leapfrogged from cash to alternate modes of payments registering phenomenal
growth. The innovations have happened in all spheres - from common USSD channel
access through NUUP, Immediate Payment Service (IMPS) – initiation of
transactions through various options for real-time payments to end customer, with the
latest being the Unified Payments Interface (UPI). Some of the developments in this
regard are discussed below:

Fast Payments
Leveraging on the high mobile density in India, with a population of more than one
billion, many PSPs utilize mobile payment apps to link underlying payment
instruments with mobile phone numbers for fast payments via the Immediate Payment
Service (IMPS) or for issuance of m-wallets. The Unified Payment Interface (UPI)
developed by NPCI provides complete interoperability for merchant payments as well
as P2P payments. The UPI enables users to link their bank accounts with their mobile
phone numbers through an application provided by the payment service providers
(PSPs) and obtain a virtual address which can be used for making and receiving
payments. Introduction of UPI has the potential to revolutionize digital payments and
take India closer towards being a “Less Cash” society.

Process Innovation
With the nation-wide implementation of Aadhaar, providing a unique identification
number to all residents of India, NPCI has launched an Aadhar Enabled Payment
System (AEPS) that is a safe and convenient channel enabling micropayments with
every transaction validated by biometric authentication. In a further impetus to digital
innovations, Unique Identification Authority of India (UIDAI) in collaboration with
TCS plans to roll out an Android-based Aadhaar-Enabled Payment System (AEPS).
The application can be downloaded by merchants on a smartphone and would require
a fingerprint scanner to use it. The application is intended to facilitate undertaking
transactions without any Card or PIN.

Wallets

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The traditional modes to make payments include cheque, electronic payment modes
viz., NEFT, RTGS, etc. and card (debit and credit) payments. The need for prepaid
payment instruments in the form of physical card or e-wallet was felt to give non-
bank customers the facility to use electronic modes of payments and give existing
bank customers a safeguard measure that limits the extent to which they are exposed.
The emergence of bank (State Bank Buddy, Citi MasterPass, ICICI Pockets) and non-
bank (PayTM, Mobikwik, Oxigen, Citrus Pay, etc.) payment wallets in India has
changed the landscape of payments. Many start-ups have entered the space to simplify
mobile money transfer, such as Chillr application, which provides peer-to-peer money
transfer without using bank account details. Several leading banks have launched their
own digital wallets leveraging NPCI’s IMPS platform. These digital wallets are
integrated with social media features as well. Digital Innovators are also promoting
the Online to Offline (O2O) model to facilitate digital payments at local stores.

BHIM (Bharat Interface for Money)

BHIM is a mobile app developed by NPCI, based on the Unified Payment Interface
(UPI) and was launched on 30 December 2016. It is intended to facilitate e-payments
directly through banks and as part of the drive towards cashless transactions. BHIM
allow users to send or receive money to other UPI payment addresses or scanning QR
code or account number with IFSC code or MMID (Mobile Money Identifier) Code to
users who do not have a UPI-based bank account.
BHIM allows users to check current balance in their bank accounts and to choose
which bank account to use for conducting transactions, although only one can be
active at any time. Users can create their own QR code for a fixed amount of money,
which is helpful in merchant transactions.

Lending
Fintech is also overhauling credit by streamlining risk assessment, speeding
up approval processes and making access easier. Billions of people around the world
can now apply for a loan on their mobile devices, and new data points and better risk
modeling is expanding credit to underserved populations.

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Additionally, consumers can request credit reports multiple times a year without
dinging their score, making the entire backend of the lending world more transparent
for everyone. Credit companies worth noting include Tala, Petal and Credit Karma.

Insurance
While insurtech is quickly becoming its own industry, it still falls under the umbrella
of fintech. Insurance is a somewhat slow adopter of technology, and many fintech
startups are partnering with traditional insurance companies to help automate
processes and expand coverage. From mobile car insurance to wearables for health
insurance, the industry is staring down tons of innovation. Some insurtech companies

to keep an eye on include Oscar Health, Root Insurance and PolicyGenius.

Fig 3.1

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Government & Regulators:
The following multi-pronged approach has been taken to enable penetration of the
digitally enabled financial platforms to the institutional and public communities:

Funding Support
• The Start-Up India initiative launched by the Government of India in January 2016
includes USD 1.5 billion fund for start-ups.

Financial inclusion and enablement

• Jan Dhan Yojana: added over 200 million unbanked individuals into the banking
sector.

Tax and surcharge relief

A few notable initiatives on this front are:
• Tax rebates for merchants accepting more than 50 percent of their transactions
digitally.
• 80 percent rebates on the patent costs for start-ups.
• Income tax exemption for start-ups for first three years.

Infrastructure support
• The Digital India and Smart Cities initiatives have been launched to promote digital
infrastructure development in the country as well as attract foreign investments.
• The government recently launched a dedicated portal to provide ease in registration
to start-ups.

IP facilitation support
• Startups will get support from the government in expenses of facilitators for their
patents filing, trademark and other design work.

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Investors:
Investors are coming to terms that fintech is more than just payments technology and
investor interest is beginning to manifest itself in a variety of sub-segments such as
investing, lending, wealth management, credit reporting among others.
Traditionally and going forward, while Venture Capital firms have been early stage
investors in fintech businesses, the global trend of banks and other financial
institutions acquiring or investing in fintech start-ups is being witnessed in India as
well. Additionally, they are developing platforms themselves for such start-ups to
thrive, or are beginning to invest in such platforms.

Start-ups:
Evolution of start-ups is imperative for a successful fintech ecosystem. The
flourishing effect of fintech start-up has been catalysed by an increasing demand for
digital financial products by consumers, rampant rise of connected devices and
support of venture capitalists.
While start-ups are redesigning the financial services processes with their high-end
technological expertise, incumbent players are also following suit and investing
heavily in creating new products of their own. The trend is increasingly shifting from
start-ups seen majorly as disrupters to also being enablers of change.

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Hence, there is greater collaboration being seen and expected between different
players of the ecosystem with the start-ups.

Financial institutions:
To address the multi-faced impact of this growing disruption, the BFSI incumbents in
India are adopting a four-pronged strategy:

Investment driven
The BFSI sector is gearing for both acquisitions and funding based routes to increase
its presence in the emerging fintech space. For example Citi Bank, Barclays and
Goldman Sachs have launched fintech-focused accelerator programmes.

Partnership driven
Partnerships by fintech product firms (in point-of-sale hardware, credit deals and
social lending) with banks with a synchronized go-to-market strategy are addressing
the immediate demand of digital-age consumers. Example:
• SBI has teamed up with Ezetap to provide mobile POS devices across India14.
• Bank of India offers a wallet15 from Paynimo powered by TechProcess.

Market driven
To counter a steady challenge by venture backed fintech firms, many incumbents are
augmenting their value chain with competing offerings and leveraging their own
distribution and client base.

Collaboration driven
Setting up, managing or investing in centers of excellence and fintech hubs is an
excellent strategy to take an inside view of the emerging fintech firms’ working, and
to nurture talent for a future competitive advantage.

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Universities and research institutions:
The leading institutions in India have consistently led the administration and
management led initiatives, setting up events, competitions and courses. Example:
• IIT Roorkee has launched Global Entrepreneur Conclave to build entrepreneurial
skills along with academic competence of technology in students.
• IIT Delhi is organizing Open house 2016 to promote innovative research and
product development projects.

Incubators, accelerators and innovation labs:

Indian fintech has recently seen a strong upsurge in support and mentorship in 2014-
15. The sector is driven by young, first generation entrepreneurs who are now
competing with the largest financial institutions in an extremely tough, cost-conscious
Indian market. Therefore in India, the role of incubators, accelerators and sponsored
innovation labs is critical for not just funding, mentorship and peer connections but
also financial industry exposure and soft skills. Some of the notable initiatives on this
front are 91 Springboard, Innov8, K-start and Zone Startups India. The prime
stakeholders are categorized as given below:

Financial institutions
Financial institutions are the strategically closest partners to fintech that are
discovering core sector talent and codeveloping platforms, products and solutions,
along with providing funding and industry exposure. Example:
• Societe Generale Global Solution Centre (SG GSC) in collaboration with
NASSCOM 10,000 Startups has announced its Accelerator Program CATALYST, a
10 week programme to focus on advanced technologies relevant to the BFSI sector.
• Kotak fintech mobility hackathon has partnered with NASSCOM 10,000 Startups to
identify founders developing apps around banking innovation.
• PayPal’s StarTank at Chennai provides mentorship and fintech infrastructure
support.

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Industry associations
Associations, driven by sector-level development and readiness goals are playing a
critical part in bringing in technology and industry experts, and addressing the
requirements from a long-term vision.
NASSCOM is playing a particularly vital role in the expansion of start-ups in India
with its 10,000 start-up program. Some of the notable initiatives in fintech are given
below:
• NASSCOM 10,000 Startups is a programme partner for Axis Bank’s soon-to-be-
launched fintech accelerator programme, Barclay’s RISE acceleration programme and
Accenture’s Open Innovation programme and Accelerator programme in Hong Kong.
• NASSCOM 10,000 Startups co-organized a virtual Appathon with ICICI Bank in
February 2016 and is assisting Kotak Mahindra Bank to reach out to Women in Tech
through curated programs.

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 Chapter 4: Data Analysis and Findings

On the basis of quantitative analysis and complimentary qualitative studies, impact

levels of key attributes were market drivers were found for each mature fintech
market, as detailed in this stage below.

Fig 4.1

The United States

The U.S. is the gravitation centre of entrepreneurs as well as hi-tech talent, which
has attracted the highest fintech investment and built the largest network of start-
up firms.

Fig 4.2

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The United Kingdom

The U.K. has established itself as one of the most attractive locations in fintech
with high digital connectivity, an indigenous financial services workforce and
solid funding landscape.

Fig 4.3

Hong Kong

Hong Kong is shaping up as a strong fintech hub in Asia, backed by robust

investment support from the government and venture capitalists to nurture
entrepreneurship.

Fig 4.4

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Australia

Australia has an emerging fintech start-up ecosystem, and has recently started
gaining substantial attention from government and venture capitalists.

Fig 4.5

Israel

Israel uses indigenous technology skills and a strong network of foreign investors,
providing favourable environment to foster fintech innovations.

Fig 4.6

Singapore
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Singapore is attracting investors and foreign industry players along with extensive
government support and expertise of corporate mentors to position itself as an
international leader.

Fig 4.7

India

India is gaining ground on the growth of the fintech ecosystem with fair supply of
proficient and inexpensive talent, a potential to capture a large portion of the
unbanked population and a steady inflow of funds.

Fig 4.8

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Fig 4.10 Fig 4.11

India is slowly moving up the fintech growth ladder, primarily driven by its robust
fintech ecosystem where several players are increasingly supportive both in terms of
providing funds as well as building technological and entrepreneurial skills. A strong
talent pipeline of an inexpensive and easy-to-hire tech workforce is one of the most
advantageous factors of the country.

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Indian Digital payment witnessed exponential growth in last years:

Fig 4.12

Some roadblocks in the widespread adoption in India are the lack of authentic
consumer information on digital media and low technological and digital
infrastructure despite of increase in digital payment transactions as shown in the
above graph but it can further improve at a rapid speed if suitable steps taken.
Also, as identified from growth driver analysis, governmental incentives, regulatory
mandates and a robust business environment will be the most impactful levers in
getting the Indian fintech market up to speed and enable it to better address these
roadblocks.

Greater collaboration between market participants to leverage and cross-pollinate

learnings and entrepreneurial experiences is an impetus for the growth of this sector.

The second most impending aspect is building a cohesive fintech environment which
includes 100 per cent digital infrastructure penetration, unbiased incubation support to
start-ups and lucrative incentives. And since, fintech is growing without any
boundaries, the final stride is to build an independent fintech focused trade body that
can consolidate the effort and create a formal sector for budding entrepreneurs.

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 Chapter 5: Discussion and Conclusion

The rendering of financial services is changing at an accelerated pace, as fintech start-

ups emerge as enablers for the business of extremely large traditional financial
institutions. While start-ups seem to be in the spotlight for the most part, government
bodies and market players across the mature markets have been robustly serving their
part to establish an environment for the growth of innovation and technological
advancement in the financial services sector. A continued strong commitment from
the government, the industry and the fintech firms is critical to allow the fintech
revolution dig its roots deep in any financial system.

Firstly, it is important to study the potential impact of all the market participants in the
thriving Indian ecosystem to harvest the fintech opportunity.

Secondly, the complex interplay of these factors is important to understand and plan
for, to enable holistic growth of the ecosystem. Two approaches are notable in this
regard:
• Market-driven approach: In many key markets around the world, including the UK
and the US, incumbent Financial Institutions (FIs) have sought to emulate the best
features of fintech innovations within their existing business lines. This approach
clearly benefits consumers overall, as they get improved offerings from their existing
institutions, spurred into action by the competitive threat from fintech. However, for
FIs to do this successfully, it is important to have very strong IT leadership and build
capabilities that are not always found immediately within FIs.
• Collaboration-driven approach: For the emerging fintech markets, strategies focused
on collaboration may offer a sustainable change in the market, and may be easier to
implement. However, it will need a deeper commitment from the stakeholders to
allow a suitable gestation period for collaboration to come about between
stakeholders across the spectrum.

Thirdly, it is important to identify and plan for the inflection points - those key
checkpoints in the evolution journey where the risk of failure for the nascent fintech
firms are the most prevalent.

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We found that top inflection point in this market is when a fintech firm is seeking to
collaborate with FIs, and thus is crossing the chasm from being a small, successful
business into potentially scaling their solution for a very large customer base within
an FI.

A common (and critical) approach taken by FIs when seeking to integrate and test
new fintech solutions is to run a Proof of Concept (POC) project. Successfully
running a POC requires very skillful leadership and a robust approach, and this is
often the point at which fintech/ FI collaborations break down. FIs need to build or
outsource the capability to run robust POCs which is where real business value is
tested. If well managed, they create the foundation for a business case and eventual
roll-out. If not done correctly, they bring about delay and missed opportunities.

Indian fintech firms need to play their part in the POC process, by being willing to
subject their innovations to the kind of testing and reporting that is required by many
large FIs, but they need support (often from professional services firms) to do this.
Successful POC projects will have another measurable benefit for Indian fintech
firms. Every successful POC creates proof points and metrics that will make it much
easier to offer their fintech innovation to FIs in overseas markets, e.g. the UK, the US.
Another inflection point for the fintech firms is the transformation of a successful
POC into a large rollout to the FI customer segments. This massive up-scaling
exercise is a challenge faced by FIs working with fintech firms around the world as
the enormity of an FI customer base often puts the fintech solution viability to the
ultimate test, leading to a point of no return.

To prepare for this crucial stage, there is a golden opportunity to leverage the
traditional IT strengths of big tech firms in India to help smaller fintech firms to make
their solutions robust enough for the FI market. Fintech industry players in India
should seek to use the existing IT ecosystem to create a few examples of successfully
scaled innovation for FIs. These use cases could potentially open the door to global
sales for both Indian IT firms and Indian fintech.

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 Chapter 6: Recommendations

Recommendations to the Government

Develop a dynamic digital infrastructure

For the success of the fintech ecosystem, it is imperative that the digital infrastructure
of the country be adaptable and supportive. India should work towards higher
penetration of mobile, internet and IoT infrastructure so that communication and
connection is smooth across all channels.

Introduce special work visa for start-up entrepreneurs and technology experts to
attract foreign talent
Developed countries like the U.K. and the U.S. have taken leaps in terms of fintech
development in the last few years. Many of their successful start-ups are expanding
geographically. India needs to aid them with an effective policy so that these start-ups
can build infrastructure in the country. These aids include easy business set-up
processes and special work visa for foreign start-up entrepreneurs and technology
experts.

Build a strong technological and entrepreneurial talent pool by engaging

universities and institutions
India needs to adopt a cautious approach towards the migration of its young and
working population to foreign lands. This requires conscious effort on the part of the
educational system of the country to impart adequate technical and entrepreneurial
skills.

Offer coherent tax incentives to start-ups and venture capitalists

The Indian government is working passionately towards the development of a robust
fintech ecosystem in the country through the ’Digital India’ and ’Start-up India’
initiatives. The state governments should also provide additional benefits, especially
in areas where educational institutions and innovative entrepreneurs are high in
penetration.

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Recommendation to Financial Institutions

Form an independent fintech focused industry association to give the sector an

identity and a platform to voice opinion
With a number of innovative start-ups cropping up across the country, it is important
to have a fintechfocused trade body that can consolidate the efforts and create a
formal sector for budding entrepreneurs. This is expected to streamline processes,
facilitate cross-pollination of knowledge and information and also give a strong voice
to the sector.

Providing incubation support to fintech

A framework needs to be developed for incubating innovative minds and giving them
a direction for succeeding with their businessplans.

Recommendation to fintech firms

Leverage incubation support

Work with players in the ecosystem that provide expertise in development of product
and services beyond the prototype and marketing it effectively to the global players.

Mobilise both domestic and foreign venture capital funds

a. Explore fundraising initiatives by partnering with private players and financial
institutions.
b. Create awareness amongst investors and showcase the potential by participating in
industry events and driving collaborations with the established players

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32
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