India's Fintech Sector Estimation to Reach $150-160Bn by 2025

India is certain to realise that the fintech sector valuation of $150-160 billion by 2025, has escalating to an incremental value-creation potential of about $100 billion, says a report released by Boston Consulting Group (BCG) and Ficci.

The report, titled ‘India FinTech: A $100 Bn opportunity’, has observed that in the past five years, Indian fintech companies have raised around $10 billion from investors all over the world, catapulting the sector’s total valuation to be estimated to $50-60 billion.

“Additionally, it is estimated that to meet this ambition, India’s fintech sector would need investments of $ 20-25 billion over the next five years,” it added.

The report also revealed that India has seen a sharp rise in the number of financial technology (fintech) firms. Of the over 2,100 fintech firms existing in India currently, about 67 percent have been set up in the past five years.
While Indian fintechs have cumulatively risen more than $10 billion since 2016, eight fintech companies have reached the ‘billion-dollar-valuation’ milestone (unicorns) and an additional 44 are valued at over $100 million as of date, it added.

The report also states COVID-19 has escalated the pace of digitisation across categories. While certain fintech segments such as lending could witness a blip in the near term, there is a large sustainable behaviour change towards digital offerings in financial services.

Between March 2020 and January 2021, UPI payments (by value) have rose threefolds of their pre-pandemic value, while other payment modes have declined. Similar acceleration has also been seen in online broking, where the share of active clients with fintech discount brokers (Zerodha, Upstox, 5paisa) grew from 43 percent to 57 per cent in the same timeframe.

India has seen a significant surge in fintech valuations over the last 12-14 months, with three new unicorns (Pine Labs, Razorpay and Digit Insurance) and five new ‘Soonicorns’ (about to become unicorns) being created since January 2020, the report said.

Prateek Roongta, BCG Managing Director and Partner says, “To actualise this potential, the industry would require additional investments to the tune of USD 20-25 billion.”

He further adds, “The fintechs that will achieve these milestones will be the ones that ‘master the core’ by building deep, differentiative capabilities on their primary offerings. India will also see the emergence of ecosystem orchestrators and multinational fintechs, making it a global fintech powerhouse.”