India's fintech assets likely to grow to $1 trillion by 2030

Representative image. (credit: Forbes.com)

India’s financial technology sector is expected to reach $1 trillion in assets under management (AUM) and $200 billion in revenue by 2030 as companies offer segment-specific solutions, fintech adoption gains momentum and greater penetration of the Unified Payments Interface (UPI), a report has said.

“The market has seen high valuations on the back of large untapped market opportunities…and historical fintech growth has been driven by an organic and collaborative ecosystem while being supported by key government initiatives,” venture capital firm Chiratae Ventures and Ernst & Young said in a report released on August 9.

The “$1 Trillion India Fintech Opportunity” report says fintechs’ AUM in 2021 was around $100 billion and revenue around $20 billion. The report has included payments, lending, neo-bank, insurtech and wealthtech in the fintech ecosystem.

“Every sector that is growing in a big way, fintech will be an integral part. Payments is going to be very big and monetisation is going to take place in other areas through other activities,” said TC Meenakshi Sundaram, cofounder and vice chairman of Chiratae Ventures, told Moneycontrol.

The report says more than $1 billion in investments were made in digital lending alone in 2021 and the market is expected to grow to $515 billion in book size by 2030.

“E-marketplaces are shaping customer behaviour by offering lending products,” it says.

In terms of regulation and norms around digital lending, Sundaram said that every time there has been a regulatory intervention, the adoption of fintech accelerated.

“Regulatory support, approval and oversight is necessary in this segment,” he added.

Buy Now Pay Later (BNPL) model is expected to gain more traction from the business-to-business (B2B) segments unlike its wider use today in the business-to-consumer (B2C) segment, the report says.

BNPL contributed to around 37 percent of retail digital lending by banks by volume in FY20.

“BNPL used as a payment product is something that looks attractive but in the medium term, it won’t be very attractive. Why would someone pay more than the merchant discount rates (MDR) unless it increases sales in a big way,” Sundaram added.

The much-awaited norms for the BNPL and digital lending ecosystem are expected soon. Reserve Bank of India governor Shaktikanta Das recently said on July 22 that digital lending norms were likely to be released in a few weeks.