INDIA

FINTECH
REPORT
2 ND EDITION — EXECUTIVE SUMMARY
2 EXECUTIVE SUMMARY

India FinTech Report 2020

Research Methodology

The India FinTech Report is a comprehensive others that facilitated valuable data-driven
120+ pages study based on MEDICI’s proprietary insights.
FinTech data of thousands of startups, deep
market intelligence derived from years of tracking Primary research formed the most crucial source
the FinTech industry, and secondary research, of information gathering for this study. It
refined through brain-storming sessions and in- complemented the secondary research with
depth interviews with segment experts to extract insights from industry veterans in Payments,
valuable market signals, identify market trends, Lending, Insurance, Wealth Management, and
and develop point-of-views in the report. Corporate Banking segments. Over 100
interviews were conducted with industry experts
MEDICI has a rich volume of information in both across a span of seven months to gain the most
quantitative and qualitative forms, curated updated and valuable insights on segments
through our industry analysis and market covered in the report.
engagement initiatives. In the secondary research
process, we conducted an in-depth study of the The qualitative & quantitative findings and
Indian FinTech landscape, understanding the key insights from these research stages were curated
stakeholders, drivers, trends, challenges, and by MEDICI analysts to present a comprehensive
opportunities. The key sources referred for the view of the FinTech landscape. These were
secondary research process spanned from further refined through years of deeply tracking
company & industry reports, press releases, the industry developments and bringing together
government & other official sources, national & the ecosystem. Please do visit the last page of this
international databases, our partners, and many executive summary to access the full report.

MEDICI India FinTech Report in partnership with FCC of IAMAI is being released
at GLOBAL FINTECH FEST (GFF)
 3 EXECUTIVE SUMMARY

The Story of India’s Emergence as a

Leading FinTech Hub
The global FinTech ecosystem continues to grow at a rapid pace. Hundreds of new startups are being founded every month across
the globe. The US has been a leading destination in terms of the number of home-grown FinTech startups with a massive
contribution toward global VC funding (generally on the top every year). In 2010–2015, the US saw 2003 FinTech startups being
founded, the most for any country in the world. However, in recent years, India has come out of the shadows to emerge as one of the
fastest-growing FinTech hubs.

NUMBER OF NEW FINTECH Between 2010 and 2015, India saw 1216 new FinTech
startups founded in this period. In 2014–15, there was a
STARTUPS FOUNDED (2015–H12020) massive uptick in the number of new FinTech startups; the
India has seen explosive growth in the number of new numbers grew from 210 in 2014 to 454 in 2015—a 116%
ventures launched in the FinTech space driven by adoption increase in growth. The period between 2015 to June end
2020 has seen phenomenal growth in new startups across
2500 Payments, Lending, Wealth, and others. India’s evolution as a
progressive FinTech nation is not a miracle. It happened at
2000
the back of executing a four-point approach. Firstly, solving
1500 for identity in the form of Aadhaar for formalization. Secondly,
getting everyone a bank account or equivalents (PMJDY) to
1000
store money. Thirdly, building scalable platform(s) to move
500 money (IMPS, UPI, BBPS, etc.). And finally, allowing banks
and FinTechs and wealth/insurance/lending players also to
0 access platforms like UPI, GSTN & Digi Locker to innovate.
US UK Australia This framework has led India to a FinTech revolution.
India Singapore
Note: This analysis does not include China.

India’s FinTech story will be incomplete without talking about customer base, and Razorpay has onboarded over 0.8 million
the governmental push, which we discuss later in detail. merchants to its platform. Zerodha, an online brokerage firm,
Drives such as demonetization proved to be a blessing in has the largest customer base of brokerage firms and has
disguise for digital transactions in general and those FinTech 19.4 lakh active clients.
companies that were able to take advantage of it in particular.
FinTech startups are better suited to cater to some customer
Still, this FinTech revolution has to also become a financial segments such as the 60 million+ SMEs in this country.
inclusion revolution—and that is a much more difficult task. FinTech startups offer efficient and effective solutions, which
Small wins will not make much difference to improve the benefit SMEs by providing them with increased access to
quality of life for underbanked or unbanked communities and more diverse funding options. E.g. Khatabook, one of the
people. To understand this, let's look at India 1, India 2, and fastest growing FinTechs, is digitizing the business ledger of
especially India 3 (more than a billion people with lower than small merchants and kirana stores at scale. We discuss other
$1.3K per capita). While FinTech has impacted India 1 and to such segments and opportunities in the full 120+ page report.
some extent, India 2, for financial inclusion, we need to cater
to India 3 as well. So far, we do not see the impact of FinTech Large tech companies are getting super-interested in
in India 3 except for a few companies like Kaleidofin, Eko FinTech. The GAFAMs (Google, Apple, Facebook, Amazon,
financial services, Jai Kisan, GramCover, PayNearby and Aye Microsoft) and the Flipkart/WhatsApp(FB)/Truecallers of the
Finance. Most startups do not operate in that segment. world are using their tech brainpower, user base, and data to
offer superior financial services experiences. The onslaught
While we have made significant progress in formalization with has started in many countries, including India. We expect
digital ID and the ability to transact (access) with the ID and many of them to offer a whole array of financial services in the
payment rails, we must bring the costs down using future. Some large home-grown companies like Reliance Jio
technology and create incentives (and financial education) for are new and yet powerful entrants into the FinTech space with
India 3 to use digital money and FinTech. deep financial muscle and distribution in place. It will be
interesting to see how Jio partners with BigTech players like
Could FinTech be the solution? At scale, FinTech looks FB/WhatsApp, Google (also now, investors) to solve the SME
promising from the penetration perspective. Indian mobile digitization problem that spans across financial (payments,
wallet Paytm has more than 200 million users, including loans) and non-financial areas (logistics).
women and rural families, who can now participate in the
digital economy. Paytm also has over 15 million acceptance Apart from typical FinTech startups started by first-time
points (QR codes), making it ubiquitous (relatively). entrepreneurs, there is a growing number of FinTechs by
seasoned entrepreneurs such as Sachin Bansal (ex-Flipkart
Additionally, PhonePe has 10 million merchants as its founder) and his firm Navi Technologies.
 4 EXECUTIVE SUMMARY

India FinTech Landscape

India currently has around 2174 FinTech startups.
Here’s the breakdown:
Bengaluru and Mumbai lead the momentum in FinTech, and together, these cities represent 42% of the startup
headquarters. Apart from the top five FinTech destinations, which include Mumbai, Bangalore, New Delhi,
Gurugram, and Hyderabad, the rest of India accounts for 738 FinTech startups.

CITY-WISE BREAKUP (TOP 10 CITIES)

Delhi NCR region has

413+ FinTechs
208
Gurugram
128 Noida
77
Kolkata
Ahmedabad
47
35
Pune
Mumbai
88
437 Hyderabad
133
Bengaluru

447
Chennai
104

This table illustrates the

405 365 313 173
segment-wise breakup. Payments Lending WealthTech Personal Finance
(Less PFM) Management

NUMBER OF FINTECH
111 58 748
STARTUPS BY InsurTech RegTech + Other
SEGMENTS Cybersecurity Segments
 5 EXECUTIVE SUMMARY

Market Landscape
WealthTech: 486 Startups
[Illustrative]
PERSONAL FINANCE MANAGEMENT

INVESTMENTS PLATFORM

ROBO-ADVISOR

OTHERS

Lending: 365 Startups

[Illustrative]
DIGITAL CONSUMER LENDING

SME FINANCING

AGGREGATORS

P2P LENDING

OTHERS

Note: There is a growing trend of re-bundling and companies expanding into multiple segments. This representation is therefore directional in nature as companies might
be present in more than one subsegments or segments. Please reach out to us if you want to change the segment of your company or just want to discuss the rationale.
Some companies shown in the landscape may have shut down operations or scaled down operations significantly during the COVID-19 period from March to June 2020.
 6 EXECUTIVE SUMMARY

Market Landscape
InsurTech: 111 Startups
[Illustrative]
AGGREGATORS/POLICY MANAGEMENT

SOFTWARE/WHITELABEL/INFRASTRUCTURE APIs/OTHER APIs

INTERNET OF THINGS

CLAIMS ONLINE FIRST INSURANCE

Digital Payments: 405 Startups

[Illustrative]
PAYMENT GATEWAYS

BILL PAYMENTS & DIRECT MONEY TRANSFER

SOFTWARE/WHITELABEL/APIs

eroute technologies
a fintech company

POS/MOBILE POS

MOBILE DIGITAL WALLETS

P2P PAYMENTS PROXIMITY PAYMENTS/ACCEPTANCE

Note: There is a growing trend of re-bundling and companies expanding into multiple segments. This representation is therefore directional in nature as companies might
be present in more than one subsegments or segments. Please reach out to us if you want to change the segment of your company or just want to discuss the rationale.
Some companies shown in the landscape may have shut down operations or scaled down operations significantly during the COVID-19 period from March to June 2020.
 7 EXECUTIVE SUMMARY

India FinTech Investments Trends

(2019-H12020)
STAGE-WISE BREAKUP OF TOTAL FINTECH FUNDING
($5.4 BN) IN INDIA – 2019–H12020
2000 120
1,818.0
97 100
1500 1,452.5
80

1000 868.8 53
53 60

48 40
484.3
500
330.2 180.8 20
7 165.5 26 8 105.3 33
18
18 3
0 4.55 0
Angel Seed Series A Series B Series C Series D Series E Series G Others

Total Funding Total No of Deals

TOP 8 FUNDING DEALS

Paytm Policybazaar
(Series G, Nov. 2019 – $1,000 Mn) (Series G, Nov. 2019 – $150 Mn)
One97 CRED
(Series G, Dec. 2019 – $668 Mn) (Series B, Aug. 2019 – $120 Mn)
Navi Technologies Digit Insurance
(Series: Unknown, Apr. 2020 – $395 Mn) (Venture Series, Jan. 2020 – $84 Mn)
DMI Finance PhonePe
(Series: Unknown, Jan. 2020 – $230 Mn) (Corporate Round, Dec. 2019 – $82 Mn)

ACTIVE INVESTORS [Not An Exhaustive List]

 8 EXECUTIVE SUMMARY

Government & Regulator Initiatives

A Sneak Peek

Central Government – Generates Necessary Tailwinds: Since the beginning of 2019, there has been a concerted effort by
the central government through appropriate policies to leverage innovation to bring about visible societal-level changes. While
some of these policies have been heavily debated in the context of already-operational FinTech business models, some have a
far-reaching impact on fundamental issues such as data. Abolishing MDR on UPI and RuPay payments was one such heavily
debated policy measure. Even as some of the existing revenue models in payments have come under extreme stress due to this
mandate, it is expected to push the agenda of digital payments adoption much further.

The Reserve Bank of India mandated all payment service providers to localize data within the country with no option to mirror
the data outside of the country. Considering the significance of data, security, and access in an exponentially growing digital
payments landscape and the fact that the majority of big players are foreign enterprises, this might have been an important
move. However, the cost of this mandate to these enterprises is still being argued upon. The Personal Data Protection Bill was
taken to the parliament in early 2020 but was delayed due to the COVID-19 pandemic. Clarity on the localization of data and the
nuances of data protection, sharing, and portability are heavily dependent on the safe passage of this bill.

The Supreme Court of India ruled against the RBI, lifting the ban on cryptocurrency trading.

Regulators – Initial Traction, Long Way to Go: The RBI has been proactive in examining and setting up regulatory
frameworks across various FinTech verticals such as digital payments, P2P lending, and more. In January 2020, the RBI gave
its nod to video-based KYC as an alternative to physical verification. The video-KYC process allows due diligence of the
customer and identifying documents via video chat. Additionally, the RBI also authorized the use of digital lockers for paperless
document management as part of the KYC process. These steps will particularly help banks, NBFCs, prepaid wallet players,
and Neobanks, all of whom have been pushing the edge of fully digitized onboarding for a while. Additionally, this should
augment financial inclusion, with the cost of onboarding reducing significantly.

While SEBI and IRDA have constituted committees to study the growing impact of FinTechs in the WealthTech & InsurTech in
India, the advances for proactive regulatory policies that will facilitate disruptive innovations have been relatively slow. However,
the initiative for setting up regulatory sandboxes where startups can develop and experiment with innovative products in a
controlled environment is a step in the right direction. The IRDA sandbox received over 150 applications.

In June 2020, the SEBI clarified that corporate Registered Investment Advisors could also distribute mutual funds. This should
encourage several budding robo-advisors in India to re-strategize on their business models.

State Governments – Up the Ante!: State governments in at least eight states have taken steps to create favorable policies to
foster FinTech startups or establish FinTech hubs. With its own FinTech policy, Maharashtra continues to lead the way for other
states with their vision. Here’s a time-lapse of Maharashtra’s initiatives:

FEBRUARY 2018: LAUNCH OF POLICY MARCH 2019: FINTEGRATE ZONE 2019

Maharashtra becomes the first Indian state to launch its Launches the Uday FinTech Education Platform and
own FinTech policy. distribution of the second set of grants by Governor of
Maharashtra.
JUNE 2018: MUMBAI FINTECH FESTIVAL
Launches a FinTech registry for identification and MAY 2019: FINTECH EDUCATION PLATFORM
information collection on the FinTech ecosystem. Launches the FinTech Education Platform (FEP) that
Furthermore, it launches an API sandbox to facilitate the hosts e-learning modules for technical, functional, and
creation of new products in a secure environment. miscellaneous skill sets.

NOVEMBER 2018: SINGAPORE FINTECH FESTIVAL JUNE 2019: FINTECH INVESTMENTS & DEALS
Eight shortlisted startups from the MFH Registry were FInD platform was launched for matchmaking
invited to showcase their solution at the festival. between startups and investors.

DECEMBER 2018: ACCELERATOR 1.0

Launches the inaugural version of its accelerator program
in which 13 startups were selected from over 200+
applications.
9 EXECUTIVE SUMMARY

IndiaStack — Gateway to Opportunities

IndiaStack is the most ambitious societal initiative globally, aimed at putting up a public digital infrastructure based
on open APIs in order to promote public and private digital initiatives. IndiaStack has played a catalytic role in India’s
digital foundation and evolution.

It is founded on the core principles that services can be:

1. Presenceless
or capable of being authenticated from anywhere
2. Paperless
or reliant on digital records
3. Cashless
or truly universalizing the access and usage of digital payments
4. Consent-based
or allowing secure movement of data authenticated by its owners

Aadhaar and UPI have been the most prominent components of the stack over the years. A number of incremental
developments were introduced on various parts of the stack during the last 18 months ending June 2020. UPI was
upgraded with new services such as eMandates and recurring payments to make collections easy for financial
institutions and subscription-based businesses. On the back of RuPay going international, UPI is also being piloted
for international launches in the UAE and Singapore. The ambiguity that prevailed on Aadhaar usage for onboarding
has now been cleared with regulated financial entities allowed to use eKYC and unregulated entities allowed to use
offline XML-based KYC. Account Aggregation, overseen by the RBI, is expected to go fully operational in the latter
half of 2020 with seven account aggregators and several large banks and NBFCs launching consent-based data
sharing. DigiLocker came out of the shadows and saw massive adoption in the last 12 months.

Based on the success of IndiaStack, over 20 countries have shown interest in studying and implementing a digital
identity system inspired by Aadhaar and the software stack built around it. In 2018, Singapore and India had signed
a high-level agreement to “internationalize” the IndiaStack. The agreement has been followed up with the creation of
an India-Singapore Joint Working Group on FinTech to develop API-based platforms for the ASEAN region. A
number of countries and international agencies such as the World Bank and the Gates Foundation have also
approached India with requests to help build digital identity and payment architectures in other markets.

KEY METRICS FOR A SELECTED SUBSET OF THE SYSTEMS

APIs/
LAYER PROVIDER VOLUME/IMPACT
FUNCTIONALITY
Presenceless UIDAI Authentication 1.25 Bn Enrolled
43.56 Bn Authenticated to Date
1.18 Bn in June 2020
Paperless UIDAI KYC 8.26 Bn eKYC to Date
104.53 Mn in June 2020

MeitY/DigiLocker Documents 3.79 Bn Issued Authentic Documents

Cashless NPCI/UPI Payments 1336.93 Mn Transactions in June 2020

AEPS, Aadhaar Pay Payments 397.39 Mn Transactions in June 2020

Source: Websites of various providers.

10 EXECUTIVE SUMMARY

India’s Account Aggregation Framework

India has chosen to have a very different approach to open banking. Unlike many other geographies where instant payment
initiatives are running parallel to open data initiatives, India flipped the equation by implicitly launching open banking with
payments first on what is now widely considered the best real-time payment network in the world—UPI. Having tasted success
on a large scale with UPI, India is now on the cusp of going live with the Account Aggregation framework, which will be its first
foray into consent-based financial data sharing. Account Aggregators are trusted intermediaries that are empowered to broker
consumers’ financial data between data providers and data users. Data providers and users are accredited enterprises. They
currently fall under the ambit of one of the four Indian financial services regulators—RBI, SEBI, PFRDA, and IRDA. The
exchange of data happens strictly based on consumer consent. India is now on the cusp of going live with the Account
Aggregation framework, which will be its first foray into consent-based financial data sharing.

Account Aggregation is envisioned to usher in a new kind of digital data model wherein Account Aggregators (regulated by the
special NBFC-AA license) will act as data access fiduciaries between users/entities who are the primary owners of data, and
banks, FIs, and NBFCs that maintain & manage it. In this case, users/entities will be classified as financial data owners, and
banks, MFCs, insurance service providers, tax/GST platforms will be financial information providers (FIPs). Standardized API
specifications are made available by ReBIT to make AA a very interoperable and technology agnostic framework. Specifications
are purpose-built for and made available to aggregators, information providers, and information users.

As of June 2020, three operating and four in-principle NBFC-AA licenses have been issued by the RBI. A host of banks and
NBFCs are in various pilot stages with the initiative. These include large FIs such as SBI, ICICI Bank, HDFC Bank, and Bajaj
Finserv.

The application of account aggregation spans a broad set of use cases, such as personal finance, wealth advisory, credit
decisioning, access to credit, and access to insurance. Some of the concrete use cases have been illustrated below:

FLOW-BASED CREDIT
Account Aggregation will help individuals and small businesses use consented data-sharing to increase access to
cheaper credit.

1 2 3

Pull Use this Consume data

transactions/ data to directly from the
cash flow underwrite. source at a much
data from lower cost than
banks. what is currently
out there.

AGGREGATED FINANCIAL
POSITION & CASH FLOW
1 2 3

FIU receives Transactional data Loans and credit

consent to is combined with lines are granted
read and data from other based on insights
access digital sources such as out of cash flows
transactions, GSTN, credit and other
assets and bureau to attributes as
liabilities underwrite and opposed to
assess borrowing based on assets
power
11 EXECUTIVE SUMMARY

India’s Stack-Powered Digital Ecosystem

Put together, the layers, power the IndiaStack and a robust digital ecosystem across applications, and devices as
represented below to solve unique use cases across each of the industries:

INDIA’S STACK-POWERED DIGITAL ECOSYSTEM

www.goMEDICI.com

The impact of IndiaStack through its different layers developments that enable identification through
has been huge since its inception. It has acted as a alternative means, such as QR codes, voice-
disruptive force and reinvented the wheel to build new recognition, and beyond.
processes and provide the low-cost digital push India
needed to move from a data-poor to a data-rich As parts of the IndiaStack have progressively evolved
economy, as highlighted in the sections above. over the last five years, its promised benefits are
starting to deliver. The growth of the digital payments
There have been significant benefits such as lower cost ecosystem around UPI and DigiLocker becoming
of transactions, lower onboarding costs for businesses, mainstream are testimony to this fact. Aadhaar based
providing a broad-based, ubiquitous platform and due diligence and DigiLocker have reduced user
personalized offerings at scale, allowing new onboarding costs and increased inclusion. With
businesses, developers, enterprises, and the Account Aggregation soon going operational, India
government to build their digital footprints in the would have completed the rollout of what is arguably
country. IndiaStack enables businesses to tap into the most unique societal platform deployed anywhere
customer segments that were previously out of reach. in the world.
In the future, a range of different digitally verifiable
identity systems will continue to evolve in line with the
Supreme Court of India’s ruling with regulatory policy
changes underway and further technology
12 EXECUTIVE
INDIA FINTECH
SUMMARY
REPORT 2020

SEGMENT-WISE
OVERVIEW
13 EXECUTIVE SUMMARY

Neobanking
Over the last decade, the Indian FinTech ecosystem has witnessed a plethora of innovations. The first wave of disruption in
financial services was led by digital payment startups, followed by digital lending, wealth management, and InsurTech startups.
However, the second wave, or as we like to call it “FinTech 2.0,” is led by Neobanks that aim to redefine customer-centric
consumer and business banking experiences. Problem statements being addressed include fully digitized account opening,
free debit cards, instant payments, personal finance advisory, cash flow analysis & projections, GST-compliant invoicing, and
accounting integration. As of publishing this report, there are about 15 neobanks in India, several of them under development
or in beta stages.
Digital-Only Banking Models
Global digital-only banking landscape consists of non-licensed over-the-top banks (also called Neobanks), digital-only brands
of incumbent banks, and licensed challenger digital banks.

Licensed Digital Challengers Over The Top Neobanks Digital-Only Brands of Banks

These are digital-only banks which These are stand-alone digital platforms that do These are stand-alone, digital-
have obtained a fully operational not have their own banking licenses. They offer only brands created by traditional
banking license. This model enables either niche products or a bouquet of products incumbent banks. Technology-led
them to offer products & services, in partnerships with FIs, banks, and FinTech and operationally separate from
raise capital, and lend on their own. firms but at a cost quite lower than that of their parents; they mostly target
Lower operating costs help them traditional banks. Highly tech-driven and an the younger segment. Being
offer better interest rates to overlay over licensed banks, they differentiate greenfield initiatives, they tend not
customers. Partnerships with themselves by offering unique features/VAS to carry the legacy technology
FinTechs and even other banks are and better banking experiences. In the absence baggage from their parent
common in this model, and some of differentiated digital banking licenses, this is entities. This has been a
offer marketplaces. The Reserve currently the most sought-after model in India. reasonably successful model in
Bank of India does not offer such a India since 2016.
differentiated license.

With FinTech segments like payments and digital lending getting overcrowded, investors' interest has shifted towards India’s
Neobanking. The total funding raised by Indian Neobanks so far totals $139.8 Mn. This does not include $93 million raised by
Razorpay since 2019, a part of which will fund their newly launched Neobanking initiative. In their efforts to become a part of the
next wave of FinTech innovation, venture capital & private equity investors have started to invest heavily in Neobanking startups.

Startup Total Funding Latest Funding Stage

Investors have started to
$49.2 Mn Series B recognize the enormous
$37.4 Mn Series B potential of the Indian
Neobanking segment. This
$26 Mn Seed has attracted prominent
$13.2 Mn Seed global investors like
Tencent Holdings, Sequoia
$7.8 Mn Series A Capital, and domestic
$4.7 Mn Seed investment institutions like
Omidyar Network and
$1.5 Mn Seed Matrix Partners.
Undisclosed Seed

INVESTORS & NUMBER OF NEOBANKING DEALS

Sequoia Capital Matrix Omidyar Network Tiger Global Management
(4) (3) (2) (2)
Flourish VC Better Capital 3one4 Capital
(2) (2) (2)
14 EXECUTIVE SUMMARY

Digital Lending
Digital lending FinTechs are targeting the unmet demand from Indian MSMEs as well as consumers for credit. Many banks in
India have so far focused on highly creditworthy segments primarily due to a lack of credit history of others. The traditional ways
of banking approve only ~25 to 40% of the loan applications. However, with access to more data for credit scoring such as
transaction, behavior, app-based data, location information, social data, and more, these new lending models aim to increase
this threshold by an additional 10–15%, which is a huge market opportunity. From a small segment a few years ago, India now
has over 338 lending startups. The acquisition of Mumbai-based consumer lending platform PaySense by digital payments
provide PayU at a valuation of $185 million, further brought the spotlight to the potential of digital lending in India. Several new
models of digital lending have emerged, such as DMI Finance offering FinTech startups API access to sandboxes, thus helping
them develop bespoke financial products and Apollo Finvest positioning themselves as ‘AWS for Lending’ by enabling partners
to offer digital loan products to their end-customers through APIs. In consumer credit, the urban population is likely to leverage
FinTech lending services to avoid heavy documentation. The rural population (which is new to credit) can benefit from
alternative credit scoring mechanisms to avoid loan sharks. This would provide access to a market with over 300 million
unbanked households. Hence, the use of identity, authentication, credit score, job eligibility, and social data to generate ratings
for various use cases is likely to draw more attention in the near term.

New-Age Lending: The Power of IndiaStack

The maturing IndiaStack and growing API-based data availability have
fundamentally transformed every step of the credit value chain. Near end-to-
end digital lending has become a reality, with loan approval turnaround times
as short as one day. Over 338 lending (consumer and SMEs) startups in India
are leveraging on Aadhaar authentication, eKYC, and UPI platforms to offer
quick background checks, credit scores, and instant loans to the urban, rural,
and underserved populations.

Flow-Based Credit System Powered By Account Aggregator Framework:

In a well-implemented account aggregation scenario, a small borrower should be able to provide consent to a lender through
an account aggregator to access various categories of financial data held at multiple custodians (banks, wallet providers,
Aadhaar database, DigiLocker, mobile data). In the transaction flow above, the borrower requests the lender for a microcredit
line. To assess this facility’s viability, the lender requests for the borrower’s data held at various other custodians (FIs, mobile
carriers, wallet providers) to be passed on to them via a data access fiduciary (account aggregators in the case of financial
services). With the borrower’s consent, the fiduciary requests and fetches data from one or more custodians and passes on the
acquired and aggregated data to the lender. The lender may then combine this data with various other data sources such as
public data, economic data, and other such sources to apply state-of-the-art credit decisioning models and forecast the
likelihood of default with much better accuracy and confidence. Real-time access to data at will based on consent also dispels
the need to have collateral security to grant microloans.

Consumer Credit ($300-Bn Gap) SME Financing ($200-Bn Gap)

• Demographic Data Personal Finance • CIBIL Score Transaction Behavior Collateral
UNDERWRITING Bureau Management Models Social Data • Non-Traditional Data Sources Audited Financial
APPROACHES • App-based Data Access Location • Surrogate Data Statements
Information Machine Learning • Leverage AI/ML/Data Analytics

Future Model: Cash Flow Based Digital Lending Top Funded Digital
Lending based on Account Funding: Breakdown Lending Startups in
Aggregation of $1,673 Million India
Borrower (> USD 100 Million)
1
P2P Digital
Lender/ Consent Data Lending Consumer
24.27%
Data User Managers Custodians 0.06% Finance
Providers Others Digital
Models 2
Account Consumer
Aggregator Banks
SME Finance
4
Telco 3
Financing 53.32%
SME Financing
Aggregator 22.33%
Aggregated
Data Set Wallets | Carriers
15 EXECUTIVE SUMMARY

WealthTech
India has witnessed a phenomenal increase in the wealthy research supports or financial advice. Globally, because of the
population in the last few years. Against this backdrop, India low-cost structure, discount brokers are quite popular among
has witnessed many advancements in the wealth management traders, but not among investors. E.g., Zerodha, 5Paisa, Upstox,
industry. We have been witnessing the democratization of Samco
investment advisory services, where wealth managers are E-Commerce Firms & Digital Wallets Offering Investment
leveraging technology to offer low-cost investment advisory to Products: Due to regulatory changes brought in by SEBI’s e-
mass segments. commerce companies and digital wallets are now offering
Robo-Advisors in India: Robo-advisory in India is rapidly mutual funds through their apps. E.g., PhonePe (financial arm
evolving. We are seeing startups going beyond Mutual Fund of Flipkart) and Paytm.
distribution to offering digitized, long-term financial planning. Hybrid Models of Investment Advisory: To get the best of
They are using algorithms and artificial intelligence to both worlds, established financial advisors offer a hybrid model
understand the goals and aspirations of users better and to the clients. The insights and experience of the traditional
provide them with personalized advice rather than just offering financial planners are combined with the agility, accessibility,
a generic portfolio. As more and more millennials pick up stock and advanced technology of the robo-advisors. Financial
market investing and other investment avenues, financial planning companies outsource the repetitive and mechanical
literacy is also improving, leading to a mature outlook towards tasks to robo-advisors while the more intricate tasks of
aspects such as financial life goals and retirement planning. providing personalized advice and risk management advice
The services of these platforms range from automated plans, based on insights and direct interaction with the client are
goal-based asset allocation, and end-to-end advisory based on being taken care of by the traditional financial advisors.
information taken from the client. Today, not only startups but
also established financial advisory services, such as Birla, Bajaj UPI to Act as Key Enabler for WealthTech Startups: It will
Capital, ICICI Securities, and Sanctum Wealth Management, help them expand their digital footprint by digitizing mutual
are optimistic about the future of robo-advisory. The fund products. However, there is a limit that has been set by
competition in robo-advisory is resulting in the expansion of the NPCI that restricts users to buy units worth than Rs. 1 lakh via
WealthTech market. UPI. Users can also apply and pay for IPO allotments through
their preferred UPI app. UPI is already being leveraged by
Thematic Investment: Investment platforms are facilitating players, such as IDFC, LIC Mutual Fund, Aditya Birla Sun Life,
thematic investing. Each theme consists of a diversified Reliance Nippon Life AMC, Motilal Oswal, Quantum, and
portfolio of stocks based on an idea. An investor can focus on Baroda Pioneer AMC, for enabling online investments.
his ideas instead of individual stocks. E.g., smallcase, Fyers,
Karvy Goal-Based Investing in Mutual Funds: Funds are
recommended based on customer’s age, life stage, risk
Discount Broking Models: Discount brokers are those appetite, and market conditions. Once a customer invests in a
houses that charge clients significantly lower fees than goal, the portfolio is monitored continuously, and suggestions
traditional ones and offer only online trading facilities, but no are made when changes are required. E.g., Upwardly

WealthTech Startups: Leveraging IndiaStack

IndiaStack has enabled Wealth Management processes
with over 440 startups (personal finance management,
robo-advisory, marketplaces, investment brokerage) that
leverage it and build various innovative solutions. Startups
leverage Aadhaar authentication, eKYC, and UPI for
transactions and fees, and eSign for document signatures.

Top Retail Brokers in India WealthTech Funding: Top Funded

by No. of Active Clients – Breakdown of $213 WealthTech
2020 (Value in Lakhs) Million Startups in India
20.0 (> USD 50 Million)
Mar-19 Mar-20 Jun-20
15.0 Others
19.10%
10.0 Investment
Platforms
5.0 28.57%
Personal 52.32%
Finance
0.0 Management
Zerodha, India’s largest stock
Axis Securities
Sharekhan
5paisa

Motilal Oswal
RKSV (Upstox)
ICICI
Zerodha

Kotak
HDFC
Angel

broker, is a bootstrapped
startup that has turned
profitable and is valued at
around $1 billion.

Note: There is a growing trend of unbundling and companies expanding into multiple segments. This representation is therefore directional in nature as companies might be
present in more than 1 subsegment or even segments. Reach out to us if you want to change the segment classification of your company or want to discuss the rationale.
16 EXECUTIVE SUMMARY

InsurTech
InsurTech landscape is quite nascent in India. The current
insurance penetration is quite low, i.e., 2.76% in life insurance schemes are priced at lesser than Rs. 10, making it affordable
and 0.93% in non-life insurance compared to the global for the users to get covered under insurance worth lakhs of
average of 6.5%. ‘Lack of customer trust’ remains the key rupees. These bite-sized insurance policies are being offered
challenge facing the InsurTech segment, and so far, industry by startups (e.g., Toffee Insurance), IRCTC, insurance
players have found it as a hard nut to crack. The current companies, and Pradhan Mantri Bima Yojana.
InsurTech space in India is being dominated by few new-age
insurers like Toffee, Digit, and Acko with their ability to attract Emerging Business Models: The newer business models,
and popularity among millennials. such as microinsurance on-demand, are changing the nature
of the insurance industry by moving from complex long-term
Preventive Insurance Models: Armed with the capabilities of insurance products to short-term insurance products based on
AI/ML, predictive analytics, and data captured by IoT-driven time, usage, and activity. The focus on niche segments is
connected devices, InsurTech players are exploring ways to driving this trend. E.g., Toffee Insurance.
make the most out of deep data insights and drive the
transition from a reactive approach to proactive prevention. Underwriting & Risk Management: Using advanced
Preventive insurance is gaining traction across the entire technologies like Big Data, AI insurance companies can
insurance value chain from health insurance to leverage a data-driven, risk-scoring model, thereby enabling
home/equipment/transit/automotive insurance. E.g., Kruzr, help them to make better risk coverage decisions across all
Niramai, Carnot Technologies lines of businesses such as life & health, retirement planning,
commercial, and investment. E.g., i3 Systems, Health Vector.
Neo-Insurance Carriers in India Leveraging the Concept of
Embedded Insurance: New-age digital insurers have started Conversational UI: The digital engagement via chatbots is
to adopt the practice of offering insurance policies to gaining industry momentum. Chatbots bring better customer
customers during their purchase of a product or services. This experience allowing insurance firms to deploy distribution,
POS insurance model enables digital insurance to access the claims, and customer service. Chatbots help in functions like
large consumer base of online service providers and e- general customer service questions, personalized product
commerce aggregators. recommendation, general questions from agents/brokers,
direct-to-consumer (D2C) sales, claims, and more. E.g., Ask
Digital Insurance Advisors: These are the aggregator Arvi
platform that enables customers to compare and buy insurance
products of both new-age online insurers and traditional Insurance Infrastructure APIs: Innovative and fast-growing
insurance companies. There has been a significant uptick in the infrastructure APIs solution provider InsurTechs are poised to
number of aggregators since 2013 when a regulation was create a space of ‘insurance as a service’ companies in India.
passed on web aggregators. These infrastructure API players can support product
innovation and distribution via digital channels for insurance
Sachet Insurance: Small-Ticket Insurance, popularly known companies and platform economy players. E.g., Riskcovry
as ‘sachet insurance,’ is being adopted on a wide scale among
the Indian population. These insurance

Developments in the InsurTech InsurTech Funding: Top Funded

Space in India Breakdown of $445 InsurTech
• Connected ecosystems can help insurers
Million Startups in India
better understand risk profiles and spot issues Software/
(> USD 50 Million)
quickly. E.g., Kruzz White Label APIs
• Artificial Intelligence and ML are leveraging AI 0.30%
for functions like claim automation, fraud IOT (Preventive
prevention, underwriting & risk management, Insurance/
and insurance chatbots. E.g., Artivatic.ai Telematics)
• Wearables can provide near-real-time data to
the insurers, helping them better manage risks. 9.60%
E.g., GOQii
• Blockchain offers features such as efficient Aggregators/
Policy
information exchange, trust, and smart Online First Management
contracts. E.g., Sofocle Technologies. Insurance
• Robo-advisors rely on rules and machine
48.50%
41.50%
learning to handle customer interactions and
even sell. E.g., Ask Arvi
• Advanced analytics helps insurers in analyzing
data and making better decisions. E.g.,
Pentation Analytics.

Note: There is a growing trend of unbundling and companies expanding into multiple segments. This representation is therefore directional in nature as companies might be
present in more than 1 subsegment or even segments. Reach out to us if you want to change the segment classification of your company or want to discuss the rationale.
 17 EXECUTIVE SUMMARY

Digital Payments
Digital payments has been the flag bearer of the Indian FinTech space. In recent years, we have witnessed a plethora of exciting
innovations like UPI, biometric payments, e-wallets initiations by banks, BharatQR code, and sound-wave-based payment
technologies. One of the primary reasons can be attributed to the forward-thinking of central & state governments and Reserve Bank
of India for successfully bringing a digital payment revolution in India.

Government-led Initiatives: The Indian payments landscape has been revolutionized by the regulators and the central bank’s
proactive initiatives, e.g., IndiaStack and UPI. India has emerged as one of the most exciting markets for digital payments across the
world. Last year, home-grown payment networks (RuPay and UPI) took the lion’s share of the total digital transactions, i.e., 65%,
showcasing how their efforts have been in the right direction for achieving targets.

The success of UPI: Could it be a model for the world? Recently, tech giant Google wrote to the US Federal Reserve, praising the
UPI model that has taken the digital payment space in India by storm and recommended creating similar open-payment architecture
in the US. Furthermore, With UPI going global, it sets up the stage for the FinTech players as they have already started receiving
queries from international financial institutions, banks, and governments. This has further opened immense opportunities for FinTech
players who can share their technology with foreign countries like China, the Philippines, Sri Lanka, Bangladesh, and other SEA
countries.

P2P PAYMENT FLOW USING UPI

UI (Mobile Device) UI (Mobile Device)

There are two sides to digital payments: a consumer-facing

Sender Sender
side, which comprises mobile wallet (Paytm, PhonePe, etc.),
credit card, debit cards, and new form factors (such as OEM-
native payment apps, and wearables); and a merchant side, Sender’s Receiver’s
which is developing at a really slow pace. It is not a question of VPA @ VPA @
whether digital payments will alter merchants’ fortunes in the
Sender’s Bank Existing Payment Rails Sender’s Bank
future—that is a given (based on empirical data). The question (or PSP) (or PSP)
is: how soon? India has been trying to shift from cash-
dependent society to a cashless society for quite some time
Sender’s Global Receiver’s Global
now. The biggest hurdle lies in the adoption of digital
Identifiers Identifiers
payments infrastructure on the merchant side. However,
1. Mobile# NPCI Data 1. Mobile#
initiatives like UPI 2.0, MDR cuts by the RBI, and Near Field 2. Aadhaar# 2. Aadhaar#
Technology schemes have been silently but swiftly changing Depository
3. Biometrics 3. Biometrics
the merchant payments landscape in India. 4. Bank Account # 4. Bank Account #

RBI’s Newest Proposal: A Gamechanger for India’s Retail Payments Sector

The Reserve Bank of India (RBI) has proposed setting up of a new pan-India umbrella entity (NUE) for retail payment systems,
which will be responsible for setting up, managing, and operating new payment systems, especially in the retail space,
including ATMs, white label PoS, Aadhaar-based payments, and remittance services. The RBI has floated a framework for
establishing the new entity and has invited comments on the draft framework by February 25, 2020. The new entity will also
have to develop new payment methods, standards and technologies, and monitor related issues in India as well as abroad. The
central bank said it would have to operate clearing and settlement systems and manage risks such as settlement credit. The
proposed entity can either be a for-profit company or a non-profit organization, the RBI said.

Growth in No. of POS Terminals Digital Payments Top Funded Digital

in India Funding: Breakdown Payments Startups
of $2,467 Million in India
(> USD 80 Million)
3.4x Mobile/Digital
Growth in
the last 3.5 Wallets

5.08 Mn
years 78.68%

Apr. 2020
Software/ 0.41%
1.5 Mn White 8.63%
Oct. 2016 Label APIs Payment
Gateway

Pre- Post- 12.10% 0.17%

SME/Merchant Proximity
Demonetization Demonetization Payment Payments
18 EXECUTIVE SUMMARY

Emerging Themes at the Intersection of

FinTech
Beyond the core segments of the Financial Services industry, Agriculture, Healthcare, and Real Estate are witnessing new
business models based on digital platforms, developments in data collection, storage & processing for real-time insights, and
simplification of information & monetary transactions. AgriTech, HealthTech, and PropTech startups are disrupting traditional
ways of doing business in three industries that facilitate the nation’s most vital necessities—food, healthcare, and shelter for
citizens. These startups not only can improve efficiencies in production and availability but also ease the process of trade and
movement of money for market players. As a result, financial services players can benefit in these organized markets that can
provide alternative data to improve the payments, lending, and (or) insurance underwriting practices to become customer-
centric services.

AgriTech is an enabler to agriculture HealthTech is solving problems PropTech is powered by new-age

data creation, deep analysis using around unstructured, fragmented, technologies and data sources that
advanced algorithms, as well as end and inaccessible data, as well as can eliminate prevailing challenges of
usage by players across the creating real-time health data that data asymmetry through real-time
agriculture value chain. With new can be vital to many industry players inputs, advanced analytics, and
technologies that focus on data such as insurers and healthcare simpler user interfaces for
collection and analysis, these providers. transactions, financing, and
innovators are becoming valuable documentation.
assets for data deprived financial
services industry.

AgriTech

Leverage data to
improve payments,
Bridging the lending, and insurance
HealthTech data gap with underwriting + focus on
alternative data customer-centric
services

PropTech
19 EXECUTIVE SUMMARY

Financial Inclusion via FinTech

CONVERTING THE UNBANKED POPULATION

Financial inclusion in India has seen a significant flip in recent years due to the government’s JAM (Jan Dhan-Aadhaar-
Mobile) initiative. With the launch of the Pradhan Mantri Jan Dhan Yojana, India’s banked population more than doubled
from 2011 to 80% by 2017, and by 2018, 66% of about 536 million no-frills accounts were Jan Dhan accounts.

USAGE OF BANKING SERVICES

Though a large number of bank accounts were opened, the usage of these accounts has not been encouraging. A World
Bank study states that only 7% of the Indian population borrowed from an established, licensed financial institution. This
rate has not changed much in the last five years despite the increase in formal banking services. Low financial literacy
levels meant that many people remain unaware of the potential benefits they could reap from their new Jan Dhan
accounts.

RISE OF THE CONNECTED POPULACE

According to a study by IAMAI-Nielsen, in 2019, the number of rural internet users at 277 million outnumbered urban
areas at 227 million by 10%. The digital divide that existed earlier has now been bridged. India also has the lowest cost of
mobile data compared to any country in the world. The number of smartphone users in the country crossed 500 million
last year, with 4G penetration extending to more than 88% of the country. With increased smartphone adoption and
inexpensive internet usage, the stage has been set to cover the last mile of financial inclusion. India’s financial services
industry can take a leaf out of the FMCG sector and its innovative methods in serving the rural population, which has led
to 45% of its revenues being generated from this populace. Along with banks and NBFCs, the Indian startup ecosystem
also has a crucial role in achieving this goal of last-mile connectivity.

DIGITAL TRANSACTIONS ARE PAVING THE WAY FORWARD

India has been at the forefront of digital transactions during the last few years. The rise in internet usage and
smartphone penetration has played a critical role in this regard as well. Aadhaar-Enabled Payments Channel (AEPS), a
Micro ATM system, has clocked an annual growth rate of 150% since 2016, thereby emerging as one of the fastest-
growing payment systems in the country, second only to the UPI system. A study of the RBI’s data on ATM deployment
by banks shows that only 19% of ATMs were deployed in rural areas. In such a situation, these Micro ATMs can play a
crucial role in enabling this population to access funds for their basic needs. With increased focus by the government on
Direct Benefit Transfers for transferring the government schemes to its citizens, such access infrastructure will go a long
way in fulfilling the government’s financial inclusion mandate.

ACCESS TO CREDIT IS A MAJOR STUMBLING BLOCK

Credit is the driving engine of an economy, and financial inclusion cannot be achieved without providing access to
inexpensive and easy modes of credit to the deserving. As discussed earlier, credit through traditional banking channels
has been difficult to access for the general populace in India. It is not just individuals, but also MSMEs that are struggling
to access credit. The MSME sector continues to struggle in particular, with only 10% of small businesses having access
to formal credit. With the rise in internet usage and smartphone penetration, financial services firms are looking at digital
lending models driven by cutting-edge technologies such as artificial intelligence and machine learning to bridge this
gap. Digital lending has some inherent advantages over traditional lending, such as speedier approval of credit, use of
alternate data to assess creditworthiness, and operating cost efficacy. Some of the popular digital lending models that
are working towards financial inclusion include mobile lending, supply chain financing, crowdfunding, PoS lending, and
invoice financing.

FINTECH PLAYERS
FinTech players have embraced the challenge of working towards financial inclusion and are facilitating the rapid
adoption of financial services such as P2P mobile payments, alternative lending to small businesses & consumers, and
more. Quite a few startups have emerged in this space, such as Jai Kisan, which empowers farmers through agri-credit;
GramCover, which offers insurance for rural India; Kaarva, a credit line for regular income workers; Lakshya, which is
working on improving the financial health of the urban underserved, and more. These, along with the traditional players,
such as Paytm, PhonePe, and Lendingkart, will play a crucial role in ensuring that financial services reach every citizen of
the country.

Source: NPCI
About MEDICI
MEDICI is the world’s leading FinTech Research and Innovation Platform. MEDICI is a partner to banks, tech companies and FIs
globally with over 13,000 FinTechs on the platform, enabling FinTechs to scale and create global economic impact. MEDICI is
committed to supporting the complex financial services ecosystem and enabling stakeholders benefit from the industry’s
accelerated growth and global impact.

Aditya Khurjekar Amit Goel

CEO & Founder CSIO & Founder
[email protected] [email protected]

About Internet and Mobile Association of India (IAMAI)

IAMAI is a young and vibrant association with ambitions of representing the entire gamut of digital businesses in India. It was
established in 2004 by the leading online publishers, and in the last 16 years has come to effectively address the challenges facing
the digital and online industry including mobile content and services, online publishing, mobile advertising, online advertising,
ecommerce and mobile & digital payments among others. Sixteen years after its establishment, the association is still the only
professional industry body representing the online industry in India. The association is registered under the Societies Act and is a
recognized charity in Maharashtra. With a membership of nearly 300 Indian and overseas companies, and with offices in Delhi,
Mumbai, and Bengaluru, the association is well placed to work towards charting a growth path for the digital industry in India.

About Fintech Convergence Council (FCC)

FCC is formed under Internet and Mobile Association of India (IAMAI) and represents the FinTech industry and traditional
companies in the BFSI space. The purpose of the council is to encourage collaboration, seek complementarities and build synergy
between leading BFSI companies and the emerging FinTech start-ups. The council has worked towards interpreting the regulatory
and legal framework, aggregating the concerns and feedback of the various players within the larger FinTech community,
communicating it to regulators and lawmakers, and organizing events and gatherings for the industry participants to meet, share
ideas and work together in the interest of creating a safer, more open and more collaborative operating environment through a
transparent forum.

Gaurav Chopra Neha Bajaj

Vice President Asst. Vice President
[email protected] [email protected]

Get your copy of the

full report!

DOWNLOAD

gomedici.com/ifr2020