GURU NANAK DEV UNIVERSITY

Seminar Report on Fintech Revolution

MBA 2nd Semester
Submitted to:Sonia Mam
Submitted by: Ayush Gupta
Roll no: 27462112317

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Table of Content
Contents
What Is Financial Technology – Fintech?...........................................................................................................5
What is the status of India’s Fintech Revolution?.............................................................................................6
Rise of FinTech in India......................................................................................................................................8
Phases of India’s Fintech Revolution.................................................................................................................8
What are the contributing factors for India’s Fintech revolution?..................................................................10
Opportunities Related to FinTech...................................................................................................................10
FinTech Sectors...............................................................................................................................................12
Digital Payments.............................................................................................................................................12
Alternative Lending.........................................................................................................................................13
BNPL................................................................................................................................................................13
P2P.................................................................................................................................................................. 14
MSME..............................................................................................................................................................14
InsurTech.........................................................................................................................................................15
Paytm: The Journey of India's Leading FinTech Company...............................................................................17
Business Model of Paytm................................................................................................................................18
Revenue Model of Paytm................................................................................................................................18
Paytm Wallet...................................................................................................................................................19
Mobile Recharge Business...............................................................................................................................20
Paytm Digital GoldPaytm Digital Gold.............................................................................................................21
Paytm Mall......................................................................................................................................................22

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Acknowledgement
I am highly indebted to my seminar course instructor Mrs. Sonia
mam for encouraging me to take such distinctive topic as my senior
subject and providing healthy and constructive inputs and criticism
which helped to shape my ideas on the topic in a structured manner.
This topic helped me gain knowledge on the Financial Technology
(FinTech) implications:
Indian context and this knowledge will be useful in my future
endeavors. I am grateful to him for providing me the opportunity to
sharpen my skills on the subject.

Ayush Gupta

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Introduction
There was a time when going to market without carrying a wallet loaded without cash
was unfathomable. Eventually, the ATM cards reduced the amount of cash we needed
to carry in our wallet to some extent. In today’s time and era, be it roadside vegetable
vendor or bog store in mall, all are accepting digital payments. There are interesting
times when mobile payments are surpassing ATM cash withdrawals.

This has brought ease to the customer and had immensely expended the scope of digital
ecosystem in the financial sphere. The long queues at highway tolls and subsequent
delays have been reduced to great extent with automated FASTag system. The
pandemic

India’s Fintech sector has evolved at a remarkable pace in the past decade, and at
present, India is in the middle of the Fintech Revolution. The once fully cash-dependant
Indian economy has been transformed by the convenience and efficiency of digital
services. As India moves ahead into the tech-decade —‘techade‘, that is inclusive of
technologies, innovation ecosystem, human-centricity, and progressive policies, it will
establish India’s fintech revolution for the world. Today, India is anchoring itself as a
global hub for technology and innovation in the digital economy. In just two decades,
the evolution of India’s fintech ecosystem has been extraordinary, and the outlook for
the future is promising. Recently, India has overtaken China as Asia’s top financial
technology (FinTech) market. Having emerged as the world’s second-largest fin-tech
hub (trailing only the US), India is experiencing the ‘FinTech Boom’.

Fintech is used to describe new technology that seeks to improve and automate the
delivery and use of financial services. The key segments within the FinTech space
include Digital Payments, Digital Lending, BankTech, InsurTech and RegTech, Crypto
currency.

FinTech now includes different sectors and industries such as education, retail banking,
fundraising and nonprofit, and investment management to name a few. FinTech is
amongst the most thriving sectors at present in terms of both business growth and
employment generation. Apart from this, FinTech can also help in the furtherance of the
goal of financial inclusion.

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What Is Financial Technology – Fintech?
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, smart phones. Fintech, the word, is a
combination of "financial technology".

When fintech emerged in the 21st Century, the term was initially applied to the
technology employed at the back-end systems of established financial institutions.
Since then, however, there has been a shift to more consumer-oriented services and
therefore a more consumer-oriented definition. Fintech now includes different sectors
and industries such as education, retail banking, fundraising and nonprofit, and
investment management to name a few.

Fintech also includes the development and use of crypto-currencies such as bit coin.
While that segment of fintech may see the most headlines, the big money still lies in
the traditional global banking industry and its multi-trillion-dollar market capitalization

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.

Fintech now describes a variety of financial activities, such as money transfers,

depositing a check with your Smartphone, bypassing a bank branch to apply for credit,
raising money for a business startup, or managing your investments, generally without
the assistance of a person. According to EY's 2017 Fintech Adoption Index, one-third
of consumers utilize at least two or more fintech services and those consumers are also
increasingly aware of fintech as a part of their daily lives

Financial technologies (Fintech) include new technologies that seek to improve and
automate the delivery and use of financial services.

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What is the status of India’s Fintech Revolution?

Source: Yojana

India’s fintech revolution is at a population scale, exceeding those of most countries

globally. For instance,
– BHIM UPI clocked over 3.2 billion transactions in July 2021, marking a game-
changing penetration of digital payments in India. Similarly, UMANG App has
witnessed cumulate 1.7 billion transactions.
-India is the 3rd largest FinTech ecosystem. Further, India has the highest Fintech
adoption rate globally (87%).
-India is amongst the fastest growing Fintech markets in the world. Of the 2,100+
FinTechs existing in India today, over 67% have been set up in the last 5 years.
-The Fintech sector has 1,860 startups. As of December 2021, India has over 17 Fintech
companies, which have gained ‘Unicorn Status’ with a valuation of over US$ 1 billion.
A few important ones include Acko, Bharatpe, Mobikwik, etc.

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-India is ahead of the US, UK and China combined when it comes to real-time online
transactions, with 25.5 billion real-time payments recorded in 2020.
Overall, digital payments have grown 160x in India since 2003, and by 2025 Fintech
sector is expected to add 26 lakh jobs and Rs 2.8 lakh crores in economic value.

Rise of FinTech in India

The number of startups in India has grown significantly over the past few years. The
number of newly founded startups has increased from 733 in 2016-17 to over 14000 in
2021-22, making India the third largest startup ecosystem in the world after the US and
China. Among them, around 6600 startups have been in the FinTech industry evaluating
to a market value of US $31 billion in 2021. This rapid growth in the number of startups
has been a result of a large talent pool, conducive regulations, and an increased venture
capital flow in the past decade. An increased Smartphone and internet penetration
coupled with a demand for tailored services and superior customer experience by the
public has helped as well.
Financial Technologies have received substantial funding from venture capital and
private equity firms. A total of US $8 billion has been invested in FinTechs across
around 1000 deals according to a Tracxn database obtained by Deloitte over a period
starting 2015 to mid-2020. With another US $8 billion investment in 2021 alone, there
has been an exponential rise in the funding. Majority of these deals have been in the
digital payment sector and recently in alternative lending and InsurTech as well. Top
investments include a PE investment of US $600 million in Pine Labs, and large VC
funding rounds by BharatPe (US $395 million), Razorpay (US $375 million), and Of
Business (US $325 million).

Phases of India’s Fintech Revolution

Digital Payments 1.0 (Prior to 2010s): This was a period defined by the shift from
cash to e-transfers. Cards and Real-Time Gross Settlement (RTGS) were the most
popular means of payment.
By 2010, all digital payments combined saw an over 2x increase that was primarily
driven by business transactions.
Limitations:
a) Digital payments were limited to premium retail and B2B segments,
b) Lack of education for individual customers, and
c) Mobile and internet penetration was still in their early stages.

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Note: RTGS was introduced around the year 2003-04 and recorded only 100
transactions in that year.
Digital Payments 2.0 (Between 2011-2016): This is the indicative phase of Indian
consumers’ ability to respond to the innovations in banking, Financial Services, and
Insurance (BFSI).
During this period, the focus invariably shifted to the use of digital payments by
individual consumers, and mobile banking. Credit and debit cards, new mobile banking
applications, and greater digital transformation for the front, back and middle offices
were witnessed enormous growth.
By 2013, digital wallets alone registered 3.3 crore transactions, and by 2016, mobile
transactions overall grew 10x.
Digital Payments 3.0 (After 2016): With the demonetization in late 2016, 86% of all
cash in India was withdrawn from circulation. This disruption acted as a catalyst for
further evolution.
This phase can be best described with technology and ecosystem advancement
converging to push the next stage of exponential growth.
During this era, India started exporting fintech solutions, rural internet use outgrew
urban usage, there was a record-high number of Person-to-Merchant (P2M)
transactions, and fintech entered the mobile-commerce age. Hence, this phase is also
called as ‘network effect’ era.
Upcoming phase, Digital Payments 4.0: This phase will focus on reaching the masses
with low-cost solutions. In India, the volume of digital payments is expected to reach
54,800 crores by 2025, a 16x rise in just five years (since 2020). This will be driven by
growth in digital commerce, personalized solutions, digital convergence, and regulatory
innovation.

What are the contributing factors for India’s Fintech

revolution?
(1) Surge in e-commerce and Smartphone penetration;
(2) Integrated ecosystem: All participants such as government agencies, financial
and research institutions, and technology experts discussed the ideas and turn the
market’s latent potential of fintech for business and economic growth;
(3) Indian innovations: The Additional Factor of Authentication (AFA) through
a PIN or OTP has been recognized globally as an Indian innovation responsible
for relatively lowering the incidence of fraud;
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 (4) Government’s philosophy of inclusion and innovation: The Government
policies and regulations in the Fintech sector have followed the philosophy of
inclusion and innovation. These include, (a) Jan-Dhan Yojana: The world’s
largest financial inclusion initiative; (b) e-RUPI: for cashless payments; (c)
India Stack: Public digital infrastructure based on open APIs; (d) FASTag:
Online toll collection; (e) International Financial Services Centre Authority
(IFSCA): – In the Union Budget 2021-22 the government has announced its
support for the development of a world-class Fintech Hub at the GIFT –
IFSC; (f) Multiple initiatives for financial literacy: Such as the
government’s National Centre for Financial Education and RBI’s Centre for
Financial Literacy project; (g) Infinity Forum: The forum will focus on how
technology and innovation can be leveraged by the FinTech industry.

Opportunities Related to FinTech

 Driving Financial Inclusion in India: A significant number of people in India
remain outside the purview of the formal financial system.
o Use of financial technologies can help address the gaps in financial inclusion
left by the traditional models of banking and finance.

 Providing Financial Assistance to the MSMEs: Lack of capital is one of

the biggest threats to their existence. According to the IFC Report, the total
addressable credit gap in the MSME segment is estimated to USD 397.5 billion.
o This is where FinTech comes into the picture, and has the potential to solve
the credit availability issues.
o With several FinTech start-ups offering easier and quicker access to loans,
MSMEs are no longer required to go through the tedious process of
documentation, paperwork and multiple visits to a bank.
 Enhancing Customer Experience and Transparency: FinTech start-ups
offer convenience, personalization, transparency, accessibility and ease of use –
factors that empower customers to a great extent.
o The FinTech industry will develop unique and innovative models for
assessing risks.

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 o Leveraging big data, machine learning, and alternative data to underwrite
credit and develop credit scores for customers with a limited credit history
will improve the penetration of financial services in India.

FinTech Sectors
Digital Payments
In recent years, there has been an extensive adoption and significant growth in the
digital payments sector with a compound annual growth rate (CAGR) of around 60%
from FY2016 to FY2020 and 37% from FY2019 to FY2021.
The use of digital payments increased significantly in the past few years, with the key
reasons being the demonetization initiative announced by Indian Government in 2016
and the outbreak of COVID-19 in 2020. Due to demonetization, the number of cash
transactions decreased as the old currency was replaced by new ones to put an end to
illegal transactions and tax evasion. This made people resort to using digital payment
methods. Similar effects were seen with the onset of the COVID-19 pandemic when
people started preferring contactless payment methods to curb the spread of
infection. Figure 1 shows that there is an exponential rise in the value of transactions
made using UPI. Figure 2 shows the yearly trend in the number of UPI transactions.
This increase in the use of UPI can be attributed to the ease with which UPI can be

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plugged in any consumer tech platform and help it add payment as a useful consumer-
centric feature.
In India, digital payment FinTechs has received the highest amount of funding among
all the FinTech sectors as per a report by EY.[2] According a Tracxn database obtained
by Deloitte and EY, over 500 FinTech startups was founded in this sector between
2014-19. Digital payments FinTechs obtained an investment of about US $1 billion in
just first five months of 2021 as opposed to just US $1.4 billion during the whole of
2020.
Due to a substantial increase in investments in 2021, 3 new unicorns were added to the
Digital payment sector by first quarter of 2022, taking the total to 8 unicorns valuating
to a total of US $243 billion and these unicorns include: Paytm,
RazorPay, PhonePe, Pine Labs, CRED, BharatPe, BillDesk, Zeta.

Alternative Lending
The aim of the FinTechs in the alternative lending sector is to deal with the large
demand-supply gap of credit in the country. They address the gap by focusing on
improving customer experience and gain operating efficiencies, by implementing both
conventional and alternative credit scoring models, and digital workflows.
According to Tracxn database obtained by EY, alternative lending as the second biggest
receiver of investment in FinTech after Payments sector, at 29% of the total
share. India’s retail digital lending space has grown significantly in the past decade
(2012-22) from US $9 billion to US $270 billion with a CAGR of 39.5%. This huge rise
in the lending space can be attributed to various factors.
Low credit card penetration: As per the data from RBI, the number of credit card
holders was 62 million in 2021. Though it has increased at a CAGR of 20% in last 4
years, the actual number is low keeping in mind India’s credit card eligible population.
Unbanked population percentage: According to the World Bank’s Global Findex
Report 2017, 80% of Indian adults (age 15+) have a bank account. This shows that
round 190 million Indians above the age of 15 don’t have a banking account and thus
no access to credit or any kind of loan.
High credit gap: India’s consumer financing gap stands at $300 billion while the
financing gap for the Micro, Small and Medium Enterprises (MSME) stands at $240
billion.
Around 450 FinTech startups were founded in this sector during the period 2014-19
with a total funding of US $1.7 billion. The unicorns in this sector
include Slice and Oxyzo Financial Services.

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The key business models that have worked for alternative lending FinTechs include
payday lending, EMI/Point of Sale (PoS), MSME lending, Buy Now Pay Later (BNPL)
loans and Peer-to-peer (P2P) lending.

BNPL
Buy now pay later (BNPL) is a short-term financing solution that allows customers to
make a purchase and pay for it at a future date, usually interest-free. The key value
proposition for BNPL is trouble-free credit during checkout. Similar to any lending
product, the primary revenue source for BNPL is the income through interests and the
fees incurred when customers don’t pay back on time. While the BNPL products prefer
to avoid the words ‘loan’ or ‘credit’, it is an IOU (acronym for I owe you) in different
form.
Until 2019, monthly 22 million Indian consumers were looking for credit and a 70% of
them dropped their applications mid-way due to various intricacies in the traditional
process. This is where the key features of BNPL products such as transparency with
costs and benefits, and frictionless payment made a significant difference and helped
mitigate the effects of high consumer credit demand and low credit card penetration.
Some examples of BNPL include food aggregators (Swiggy and Fassos) which use
platforms developed by startups like Simple and Lazypay which allow the customer to
pay for their food deliveries at a later stage. Cab aggregators (Uber, Olacabs) and e-
commerce platforms (Flipkart, Amazon) have also started providing “pay later” options
to their customers.

P2P
P2P lending is a monetary arrangement between two individuals without the
intervention of any mediator, thus removing the expenses made to the financial
institutions. Lenders who want to make higher returns from their surplus funds lend to
borrowers seeking low-cost and quick unsecured loans. The loans can include personal,
business or educational loans. Fintech Firms such as Faircent offer the necessary P2P
lending infrastructure to such lenders and borrowers.

MSME
MSMEs are important to India’s economy as they contribute over 29% to the country’s
GDP with a share of 49.4% and 49.8% in the total exports in 2021 and 2020
respectively. According to MSME Pulse report by Small Industries Development Bank
of India (SIDBI) made in collaboration with TransUnion CIBIL, MSMEs hold a total

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credit exposure of INR 17.75 trillion which is about one fourth of the total commercial
lending exposure for India totaling to INR 64.45 trillion as of Jan 2020.

InsurTech
The life insurance penetration in India was tracked at 3.2% in FY21, while the non-life
insurance penetration was at 1.0%, totaling to 4.2% overall penetration. Insurance
penetration is calculated as a percentage of insurance premium to GDP. However, the
insurance market in India has tremendous potential to grow due to its population
majorly in the middle-class income category, and favorable regulatory policies. India’s
total real premium growth was 6.9% which was more than twice the world average of
2.9%.
In recent years, the Indian insurance sector has begun aiming at implementing new
technologies for an efficient insurance distribution. These technologies include but are
not limited to wearables, IoT-linked products, etc. The market is experiencing a sudden
increase in demand for small premium bite-size insurance, microinsurance, remote
claims management capabilities, and chat bots for enhanced customer service. This has
given rise to new opportunities for InsureTech segment in India.
According to Tracxn database obtained by EY, there are more than 300 InsurTech
companies which include Acko, easypolicy, turtlemint, Policyboss.com, etc. The sector
has generated two unicorns as well: PolicyBazaar and Digit Insurance

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Paytm: The Journey of India's Leading FinTech Company
Paytm is India's one of the biggest fintech startups founded in August 2010 by Vijay
Shekhar Sharma. The startup offers versatile installments, e-wallet, and business stages.
Even though it began as an energizing stage in 2010, Paytm has changed its plan of
action to become a commercial centre and a virtual bank model. It is likewise one of the
pioneers of the cashback plan of action.

Paytm has changed itself into Indian mammoth managing versatile installments,
banking administrations, commercial centre, Paytm gold, energize and charge
installments, Paytm wallet and many other provisions which serve around 100 million
enlisted clients.

The areas served by Paytm are India, Canada, and Japan, it is also accessible in 11
Indian dialects. It offers online use-cases as versatile energizes, service charge
installments, travel, motion pictures, and occasions appointments. In-store installments
at markets, leafy foods shops, cafés, stopping, tolls, drug stores and instructive
establishments can be accessed through the Paytm QR code.

One 97 Communications, the parent company of Paytm, is all set to raise its capital
target of over ₹16,600 crores ($2.2 billion) through an IPO that it had filed earlier in
July 2021. Paytm is seeking to raise $25 billion to $30 billion valuation post this IPO.

According to the organization, more than 7 million traders crosswise over India utilize
its QR code to acknowledge instalments straightforwardly into their bank account. The
organization uses commercials and pays a special substance to produce income. Let's
look at this detailed case study on Paytm to know more about its growth and future
plans.

Business Model of Paytm

Paytm or "Payment through Mobile" is India's biggest installment, trade, and e-wallet
undertaking. It began in 2010 and is a brand of the parent organization One97
Communications, established by Vijay Shekhar Sharma. It was propelled as an online
portable energize site and proceeded to change its plan of action to a virtual and
commercial centre bank model.

The organization stands today as one of India's biggest online portable administrations
that incorporate banking administrations, commercial centres, versatile installments,

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charge installments, and energize. It has so far given administrations to more than 100
million clients.

Paytm's enhancement has built a solid reputation and has turned out to be praiseworthy
for some in the online installment industry. One of its increasingly vital
accomplishments is in its joint effort with the Chinese web-based business
Goliath, Alibaba for immense measures of subsidizing.

Aside from being a pioneer of the cashback plan of action, the organization has been
commended for its introduction as a new business able to build huge partnerships in a
limited time period.

Revenue Model of Paytm

The Paytm revenue models come in two structures. Paytm makes commissions
from the client exchanges through their utilization of its foundation. Escrow
Accounts are the accounts from where it creates their income. Inferable from
the non-appearance of its hidden capital, it offers clients no intrigue. Starting in
2018 Paytm has aggregated 3314.8 crore INR in income.

Paytm Wallet

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Paytm wallet is one of Paytm's best benefits that structure a connection between the
bank and the retailers. This semi-shut wallet empowers you to take care of your tabs,
pay for your tickets, or pay anyone concerned.

Paytm wallet separated from its profit, as approved by the RBI, has the advantage of
accepting enthusiasm for a purchaser store, much the same as some other Payment
Gateways.

When you store a specific measure of cash in your Paytm wallet, it will at that point set
aside that cash in another bank from which it will win enthusiasm eventually.It is the
Paytm wallet's fundamental capacity. For instance, suppose you make an installment of
Rs. 1000 to a merchant and the vendor makes 10 exchanges to increase Rs. 10,000. If
the installment of that sum is made through the Paytm wallet, the Paytm wallet will take
a portion of about 1% of the aggregate sum. So the merchant will get around Rs. 9715.

Mobile Recharge Business

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Since its origin in 2010, Paytm's underlying intention was to give online portable
energizing administrations. Its capacity to create income was constantly shortsighted.
Paytm's administration guidelines are as praiseworthy and proficient as those of other
telecom specialist co-ops running from Vodafone to Telecom.

The administrations are without shortcomings and give solace to their clients. As of
now, Paytm increases a commission of 2-3% per energize. It is because Paytm,
attributable to its support to its client to keep reviving through its foundation, has more
grounded power in dealing than different merchants. That is the reason the commission
it obtains is so high. This commission from it’s revive administration fills in as its
income.

These administrations have supported the organization essentially in extending its base
and thus, developing exponentially. When the client is fulfilled by the administration or
item, he makes an arrival to a similar undertaking in this manner. This way Paytm does
client maintenance and produces more traffic. Paytm has used this methodology to
further its potential benefit and keeps on reaping positive results.

Paytm Digital GoldPaytm Digital Gold

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Inferable from its organization with MMTC-PAMP, the outstanding gold purifier,
Paytm has propelled "Computerized Gold". This model enables clients to sell,
purchase, or store gold in an advanced stage. Presently, clients need to pay at
a rate just to get their gold conveyed to their families.

Paytm is very much aware of how much gold is put as a resource in India and is
completely arranged to develop from this chance. The organization has made
eminent arrangements to urge its clients to get their own Gold Bank Accounts
individually. This record separated from empowering clients to purchase their
gold will likewise furnish clients with simple access to other Paytm
administrations.

Paytm Mall
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In February 2017, Paytm propelled its Paytm Mall application which enables purchasers
to shop from 1.4 lakh enrolled sellers. Paytm Mall is a B2C model enlivened by the
model of China's biggest B2C retail stage, TMall. For 1.4 lakh merchants enlisted,
items need to go through Paytm-guaranteed stockrooms and channels to guarantee
buyer trust.

Paytm Mall has set up 17 satisfaction focuses crosswise over India and joined forces
with 40+ messengers. Paytm Mall raised $200 million from Alibaba Cluster and SAIF
Partners in March 2018. In May 2018, it posted losses of roughly Rs 1,800 crore with
an income of Rs 774 crore for money related to the year 2018. Moreover, the piece of
the pie in Paytm Mall dropped to 3% in 2018 from 5.6% in 2017.

Bibliogragphy
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Books

Yojna magazine (April edition)

Websites

www.finflux.com

www.blog.cfte.education

www.caspian.in

www.statista.com

www.startuptalky.com

www.masterbusinessidea.com

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