Indian fintech firms looking overseas: BCG-FICCI survey

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A large number of Indian financial technology or fintech firms were looking at overseas expansion, a recent survey conducted by the global management consulting firm Boston Consulting Group (BCG) and the industry chamber Federation of Indian Chambers of Commerce and Industry (FICCI) has said.

Among the firms covered by the study, 39% had a presence outside India, with 73% actively considering international expansion opportunities. Southeast Asia was the most sought-after destination for international expansion, followed by North America.

The report, India FinTech: A USD 100 Billion Opportunity, detailed the findings from the joint study undertaken by BCG and FICCI to assess the value creation potential and identify imperatives for growth of the sector.

The report recommended that fintech firms with portable business models could expand their reach across geographies. These include B2B fintechs including software as a service (SaaS) providers and payment platforms that could leverage international expansion as a natural corollary to their existing proposition.

?Launching a multi-country effort is challenging, and fintechs need to identify their pilot markets carefully to test success before they scale up. Products are seldom directly portable, and a pilot-based approach would help fintechs create the capabilities required for adapting to local market nuances. Also, once fintechs have cracked the code in one geography, they can easily replicate their learnings in other markets,? the report said.

Several Indian fintechs were well-positioned to establish a global footprint owing to their transplantable business models and proven track record. To ensure that Indian fintechs achieved their potential, all stakeholders including fintechs, financial institutions and policymakers had a role to play.

A $100 Billion Growth Potential

Prateek Roongta, Managing Director & Partner, Boston Consulting Group India, said, ?We believe India?s fintechs are at the precipice of significant value-creation of $100 billion over the next five years. To actualise this potential, the industry would require investments to the tune of $20-25 billion till 2025. Consequently, the number of Indian fintech unicorns will more than double over the next few years.?

Ruchin Goyal, Managing Director & Senior Partner, Boston Consulting Group India, observed, ?Tomorrow?s fintech winners are expected to master the core by innovating on a product, user-experience or through deep-tech capabilities. India will also see the emergence of ecosystem orchestrators and multinational fintechs, as it evolves into a global fintech powerhouse.?

Dilip Chenoy, Secretary-General, FICCI, averred, ?The fintech industry in India has been growing at a fast clip. Fintech players are redefining the business models across different segments of the financial services industry, helping improve service delivery and contributing to digital financial inclusion.?

The sector has over 2,100 fintechs, of which 67% were formed in the last five years alone. The total valuation of the industry is estimated between $50-60 billion. Even the Covid-19 pandemic had failed to hamper growth, with three new unicorns ($1 billion valuation) and five new soonicorns ($500 million valuation) emerging since January 2020.

The country?s deep-rooted customer demand, diverse capital flows, strong tech talent and enabling policy frameworks had contributed to the sector?s robust growth. Over the next five years, India?s Fintech industry is expected to continue its strong upward trajectory, the report predicted.

The report also makes three key recommendations to policymakers to sustain the growth momentum. Firstly, it called for an enabling environment for collaboration, with policymakers evaluating enhancements to existing frameworks. These included a regulatory sandbox and an increase in thresholds for investments in fintechs to enable a higher degree of collaboration between financial institutions and fintech companies.

Secondly, fuelling innovation through regulation, where the country looked at evaluating and green-lighting new leapfrog initiatives like virtual bank licenses and blockchain infrastructure.

Finally, it sought the development of comprehensive international connectivity programmes by policymakers to enable new market access for fintechs. These also involved supporting fintechs through regulatory referrals and providing proof-of-concept grants for startup fintechs.

- Report by Manish Pant