trends that defined fintech in 2021

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While 2020 was the year that propelled the use of fintech startups and led to wider acceptance in India, 2021 was the year the industry began to show signs of maturity.

While startups such as To grow, Upstox, Slice, CRED, Bharat Pe, ACKO Insurance and Five Star Finance crossed the billion dollar market valuation mark this year, with leaders such as Payment, and PoliticsBazaar made their way to the capital markets.

Fintech startups in India have attracted nearly $ 2.25 billion in financing in the third quarter, out of 70 transactions, according to Your story The data. It was well ahead of the total financing of the fintech sector in other APAC countries, according to S&P Global.

“Indian fintechs are at an inflection point to leverage user digital empowerment at levels comparable to China in five years time thanks to a strong stack of platforms and the increase in e-commerce and digital transactions, ”Jefferies said in a note.

“Over (the next five years) fintech markets in payments, loans, insurance, wealth tech and neobanks could grow 3 to 15 times,” the note added.

But even beyond enabling digital payments and helping people buy insurance online, the new generation of businesses that have taken over to disturb consumer and business finance over the past nine months is quite revealing of how digital users in India are not just actively avoid archaic financial practices and processes, but to flourish until using all the tools at its disposal to exercise its financial autonomy.

Here is an overview of some trends in the fintech space in 2021 that are emblematic of the ecosystem reaching maturity:

FinTech financing multiplied by 3.5 in fiscal year 21, on December 10

Fintech startups raised a total of $ 6.39 billion in financing in fiscal year 21, as of December 10, on 232 transactions, according to Your story To research data close 3.5X Following than they did in 2020, at $ 1.80 billion, out of 132 transactions.

The industry sent the most startups to the Unicorn Club this year. Digital insurance, CRED, Five Star Finance, Groww, Zeta, BharatPe, Mobikwik, Acko, Upstox and Slice – all raised funds during the year and were valued at over $ 1 billion.

Funding remained strong at all stages of the period.

While last year start-up funding has slowed down in the context of the COVID-19 crisis, the dynamic income This year. As much as 145 early-stage fintech startups raised a total of $ 735.3 million in funding through Dec. 10, 2021, up from 74 startups that raised $ 254.9 million in the comparable period last year.

“As the traditional sector catches up with the more agile and innovative startups in the FinTech sector, Indian FinTech companies have an opportunity to reshape the financial services landscape in the country,” wrote Pramod Lamba, Director of Experience customer at Valyu.ai. .

“Fintech has already changed the market forever and has shown immense potential to fill gaps in the provision of financial services to consumers and businesses. Ultimately, fintech became a disruptor, leading the next wave of technology and innovation, ”he added.

Fintech innovation is not only in subways or level II cities; Important startups that solve for India are springing up in places like Ludhiana, Chhattisgarh, Nashik, Nagpur, Patna and Palakkad.

Buy now Pay later has been an important component mainly for personal loans, as well as for business loan startups. Besides the multitude of ancillary services that they offer, such as cash back and rebates, BNPL has been an instant hit with consumers in India as it allows people to borrow small amounts of loans as needed, unlike a personal line of credit from the bank.

Credit cards can solve the bill size problem, but they have a low approval rate in India. Not everyone is entitled to a credit card, and even if they do, not everyone applies for one.

BNPL applications make credit available to people when they need it, without spending more than five to six minutes for KYC authentication. Even checking the baskets with BNPL is as easy as plugging in a Paytm wallet pay – and with users already accustomed to making these types of digital payments, it becomes easier to digest.

Image credit: YourStory

BNPL has definitely changed the relationship of Indians with credit. Like a nation with little debt, loans and credit cards are often seen as gateways to uncontrollable debt. But the BNPL models, their generous repayment policies and their credit limits have worked hard to change people’s perceptions of lending – and this has been reflected in the number of BNPL startups that have sprouted up over the past year.

According to industry tracker Tracxn, there were 33 BNPL-focused startups in India as of August 2021. More established players are also fully pivoting to or offering BNPL services on their platforms.

Startups leading the BNPL revolution in India include LazyPay, which has over 30 million users in India, Simpl, which saw a 40% increase in transactions for everyday essentials, ZestMoney, ePay Later, and Capital float

The BNPL payment ecosystem in India is expected to grow 65.5% on an annual basis to reach $ 11.57 billion in 2021, according to a report by ResearchAndMarkets.

Adoption of fintech solutions by MSMEs

“The recovery of COVID-19 will be digital”, says a McKinsey report from 2020 – a poignant phrase from the world we live in today. “Digital transformation” was the term used in 2021 for MSMEs, and the dogma has since been “digitize or die”.

Fintech has obviously become a priority, helping to bridge the gap between businesses and paying customers.

We went further in 2021

Take, for example, companies like Paytm or KhataBook, who are actively trying to expand their merchant base. Their merchant service offering – for Paytm, at least, primarily aimed at helping businesses accept digital payments – includes many ancillary, often complementary products such as digital accounting, inventory management, personnel and expense management, GST collection etc.

In an increasingly digital world, merchants have found these services, once ignored and barely used, valuable to tracking their finances, as well as identifying areas that could improve efficiency. So much so that merchants are actively starting to pay for these services and are asking for more solutions like business lines of credit based on their digital “khatabooks”.

Startups like Khatabook, Chqbook, OkCredit, and Vyapar application are leading this space, while international companies like Indonesia-based BukuWarung are taking inspiration from India’s playbook and providing similar services in Southeast Asia.

Increase in trading strategy platforms to serve the growth of retail investors

In fiscal year 2019, India added 3.4 million active mat accounts. In 2021, this number rose to 14.1 million, a jump of 4.7 times in the space of 12 months.

In fact, data from the NSDL and CDS shows that in the first quarter of fiscal 22, nearly 7.1 million demat accounts have been opened, putting us on the right track to add 28.4 million new accounts if the current average rate holds.

COVID-19 has been a big spark in this sudden rush for online trading platforms – but now we are seeing Act II of this story that is played out in the fintech space: the dawn of trading strategy platforms.

All is said and done, stock markets are difficult to assess, even for the most seasoned trader, and retail investors are several notches below in terms of expertise. Trading strategy platforms solve this problem.

“You opened a demat account, invested in safe, blue-chip blue chip stocks, but now what? How to keep making money in the stock market? This is where trading strategy platforms come in, ”says Anand Desai, a 24-year-old computer scientist who opened an account with Zerodha last year and signed up for strategy services on platforms similar to Small business, Stratzy, WealthDesk etc.

For the multitude of new-age investors like Anand, who signed up for online trading during the lockdowns last year, trading strategy platforms not only help them decide where to invest their money, but also take the hassle out of them. linked to the constant monitoring of daily stock movements. and the reorganization of portfolios.

“Investing in mutual funds adds value to people who have millions of rupees and earn tens of thousands of dollars. Retail investors with a corpus of Rs 1 lakh to Rs 10 lakh will not really see substantial added value by investing in mutual funds, even if they stay invested for the longer term… the returns they earn make a very marginal difference to their net worth ”, Harsh Agarwal, asset manager and hedge fund operator, who recently co-founded the trading platform algo RAIN Technologies YourStory said in an interview.

These mini versions of a traditional investment banking where fancy college men in bespoke suits call the shots, provide services that were previously out of reach, financially, for the common man. they are economical, expert-guided, easy to understand, and seek only to maximize profits for investors – all without margin commissions, technical market details, and confusing language.

Startups in this space include Smallcase, WealthDesk, RAIN, Stratzy, Scripbox, Pickright, among others.

Edited by Teja Lele Desai

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