Blog

The FinTech startup scenario in India

FinTech stands for Financial Technology. It has been around with us as a financial services industry virtually. You are using FinTech every now and then, just you are not realizing it. For example, when we are doing a transaction through or credit card or debit card or Paytm or any other wallet, the idea behind the transaction is nothing but FinTech. When you are simply researching on Google to find the best interest rate for any type of loan from any financial service, you are actually using FinTech.

Yes, it is true that FinTech is applied in any financial service. Starting from managing the financial aspect of a business to process a business model or including a new software, application or process in the business involves the use of FinTech. FinTech is an emerging technology of 21st century that are applied to back end of every established trade and financial organization.

It is true that without knowing the past of anything you cannot define its future. So, before going further let’s check out the history of FinTech.

History of FinTech

FinTech is not a new concept. In fact, the concept of FinTech has been revolving around us virtually since the inception of the financial services. FinTech is a broad sector which has a very long history. Perhaps the evolution of FinTech had taken place when the first cash machine was invented in 1934. Technology always had played a great role in the financial sector and the world has seen the rapid development of FinTech in the last 6 decades. If we go back to the history of the development phase of FinTech we will find the following innovation and evolution that created today’s FinTech infrastructure:

In the 1950s the world has seen the introduction of credit/debit card which indeed lessen the burden of carrying cash.
In 1960s ATM was introduced which exactly works like the tellers of a bank.
In the 1970s, electronic stock trading was started.
In the 1980s, the first online banking system was founded.
In the 1990s, the first mobile payment was introduced.

These above-mentioned developments have actually created the infrastructure of the present FinTech industry and throughout these five decades, FinTech industry was trying to create more sophisticated methods of risk and treasury management, trade processing as well as data analysis tool for banks or other financial companies.

The following infographic will provide you a better view of the evolution of FinTech:

Category of FinTech Companies

There are some major categories of FinTech companies in the world and understand these categories is essential to analyze the present situation of FinTech industry. These categories are as follows:

Lending: There are many FinTech companies in the market which have changed the lending and borrowing process. These companies allow the customers to get loans with minimum documentation and securities. People now do not need to rely on banks or any credit unions to receive or borrow money. Some of the leading FinTech companies in this category are Kabbage, Borrowell, etc. They offer personal loans, business loans to the customers having a good credit score at a reduced rate of interest. Apart from that, they have come up with some noteworthy features for the customers such as the flexible use of funds, flexible payment options, transparent transaction, simple process, etc.
Consumer banking: The FinTech company of this category is the best alternative of banks. Since the traditional bank charge a huge amount of fee for their product, this category takes the advantage of the situation and reach the underbanked customers and offer them a credit card or prepaid card. It allows the customers to handle their money in their own way and also provides an automatic, insightful and stress-free way to keep track of their money. Green Dot, Netspend, Moven, etc. are some leading name in this category.
Payments: The next major category of FinTech companies is payments. This category of FinTech company allows the person to send and receive money conveniently without turning to bank and standing in queues. While banks have exorbitant charges for simple peer-to-peer transfers, this category of FinTech company allows customers to transfer money quickly and conveniently at a minimal cost. Paytm is one big name in this category.
International Money Transfer: Earlier it is very expensive to transfer money from one country to another. Banks and other traditional money transfer companies use to charge up to eight percent of the money as its fees. Moreover, the operation of these companies was very slow. Now the thing has completely changed with the advent of this category of FinTech companies. The FinTech company of this category allows international money transfer at a very less expense and at a faster speed. Ripple is a giant company in this category which allows their customers to send money to any country in eight seconds.
Insurance: This category of FinTech companies has branched out into the insurance sector and mainly focus on the distribution of insurance products. They use new technologies and apps to reach the customers who are undeserved by insurance and offer then more flexible, cheaper and convenient insurance product.
Personal Financial advice: Gone are the days when people used to take advice from the financial adviser of the bank to get personal financial advice. FinTech company of this category helps the customers to get any kind of personal financial advice anytime and anywhere. These companies help their customers to prepare a budget as well as they provide various retirement and investment advice. Mint.com is a leading name in this category.
Equity Financing: FinTech companies of this category helps the customer to raise money for their business by transforming equity financing. They can also simplify the fundraising process for the business of the customers.

List of FinTech companies with the business they are doing

FinTech is the amalgamation of both finances as well as technology. It has been providing a path for our better future. In order to analyze which FinTech company is doing well in the market we have come out with a list of some topmost FinTech companies in the world along with their functions and progress in their business:

Adyen: It is Netherland based FinTech company that provides payments services. It was founded in 2006 and till now it has served more than 45000 business. Many premier companies like Facebook, L’Oreal, Burberry, Uber, Microsoft, etc. uses the services of Adyen online to process their payment. It has a total revenue of $365 million in 2015 which raised to $700 million in 2016.
Qudian: It is a China-based company that provides lending services to its customers. It was founded by Luo Min in 2014. It is a leading online small consumer credit provider in China. It provides millions of young consumers small finance for immediate requirements for discretionary spending. It has partnered with many e-commerce, digital services, financial service company and merchandise supplier which helps it to attract customers. It is expected to raise $ 1 billion revenue from $800 million at the end of 2018.
Ant Financial: It is a China-based company which is a subsidiary of the giant Alibaba Group. It is considered as the most valuable FinTech company all over the world. World’s largest and online mobile platform AliPay and world’s largest money market fund is operated by Ant Financial. It has an annual revenue of $75 billion in the year 2016.
Xero: It was founded in the year 2006 in New Zealand. It provides SasS service to its customers. It provides user-friendly online accounting software that can connect people from anywhere in the world and at any time. Starting in 2016, it already has served 1 million subscribers worldwide. It helps the small enterprise business with easy-to-use online accounting software. It has recorded a revenue of NZ $1.4 trillion in 2016 and recognized as World’s Most Innovative Growth company in both 2014 and 2015 for its remarkable achievements.
Avant: It is a U.S based company founded in 2012. It provides lending services to its customers. It helps the customer to get loans easily with a lower rate of interest. It is known to create innovative and practical financial products for which customers prefer to use its service. It has over 500,000 customers worldwide.
Klarna: It is a Swedish based company which was founded in 2005 in Stockholm, Sweden. It makes the online shopping easy and hassle-free. In last 17 years, it has now become the largest bank in Europe that provides payments solutions to 89000 merchants and 60 million consumers across 14 countries. It has an estimated valuation of $2.25 billion.
ZhongAn: It is another Chinese based company founded in 2013. It is the first online insurance providing company in China. It was founded by three supreme businessman of China - Jack Ma, the Executive Chairman of Alibaba, Pony Ma, the Chairman of Tencent along with Ma Mingzhe, the Chairman of An Insurance Group Co of China Ltd.
Lufax: It is another Chinese base FinTech company which offers financial services to its customers. It was founded in 2011. It is considered as the second largest peer-to-peer lending company in China. It has its B-round financing which was of $1,200 million. It has an estimated valuation of $18,500 million.
SoFi: It is a US based company was founded in 2011 and its headquarter is in San Francisco. It is an online personal financial based company. It was founded by four students of Stanford Graduate School of Business - Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady. The main business of this company is to provide student loans refinancing, personal loans, mortgage loans as well as insurance for life and wealth management. It has already served over 300,000 customers and has a turnover of $19 billion within a few spans of time.
Oscar: Another prominent FinTech startup which has rapidly brought its name in the list of top ten FinTech company is Oscar. It is a US based company founded in 2013. It provides an innovative way to improve the healthcare system by bringing the insurance and technology together. It has certainly made the health care system in US simple, efficient and cost-effective

These above-listed FinTech companies have shown a rapid progress in the world of finance and insurance. There are many FinTech startups, established in last one or two decades who are doing well in their related field, but still have to go a long way to make a worldwide impact. Table 1 shows a list of 200 FinTech companies:

Factors behind the success of FinTech companies

The following are some essential factors for which the FinTech companies have successes:

The constant focus on the customer: Today, some FinTech companies have seen great success in the world of finance and technology. The main reason behind this success their constant focus on the customer. Since their inception, they are constantly trying to improvise and innovate the customer’s experience and they tried to learn from their every interaction with the customer. This constant tree helps the startup FinTech company to reach the greatest height of success.
Digitization: FinTech company has brought a revolution in the market by encouraging digitization and bring new technology to the market. The newly growing FinTech companies are not relying on traditional concepts like banks and traditional financial companies, instead, they are bringing new technology and digitization every now and then in their products.
Great management of talent: The FinTech companies are hiring employees from various nations. They encourage hiring right talent irrespective of their nationality, language, and religion. They understand that hiring skilled candidates and changing internal staffing process is utmost important for the success of an organization.
Highly motivating work environment: These startup companies understand it is very important to have a good working environment so that skilled employees do not leave the job. Unlike a bank, they bring better HR policies in their company from time to time. They also benefit their employees on the basis of their performance. This helps them to increase the productivity, collaboration, and mind-shift of their employees

Figure 2: Static Chart for the Evolution of Online Payment in India

(Source: https://www.foundingfuel.com/slideshow/indian-ecommerce-in-10-charts/)

The prospect of startup FinTech companies in India

It is foretasted that Indian FinTech company will touch the annual revenue of $2.4 billion by 2020. Especially the lending and payments are two sectors in FinTech company in India that will surely pave the way for unprecedented growth.

Along with China, India also have one of the most active FinTech markets in the whole world. It was determined in Harvard Business Review (HBR) that India will become the greatest market potential in all over the world by 2020. After the ban of Rs. 500 and Rs. 1000 currencies during demonetization, the digital transaction was increased by 22% in India. Soon after the Prime Minister Narendra Modi announced about the demonetization, the largest FinTech company in India saw an overwhelming 435% increase in the overall traffic. The same impact is seen on the other digital wallet, such as there as 80%jump in the transactions in PayU India whereas FreeCharge said that their average wallet balances on their platform had increased 12 times. Mobiwik was also not an exception, they reported a 40 % increase in their apps download within the 18 hrs. f Modi’s announcement.

One should not forget the contribution of big players like Amazon, Google, PayPal, Uber, etc. in India’s digital payment which has morphed into $500 billion in the Indian market. Thus, it can be said that there is a huge prospect of FinTech companies in India. Some startup FinTech companies have already established themselves in the Indian market and the rest have a lot to do to find a better place in the market.

Figure 3 shows a chart that will provide you a detail view of new FinTech companies in India:

Figure 3. FinTech companies launched in 2015

(Source: https://www.livemint.com/Money/qFe98IF7j5NR5sKXXrrJRK/FinTech-redefining-money-transactions.html)

Figure 4 shows the main three segments of FinTech companies launched in India:

Which Startup FinTech Company in India will survive, and which one will die?

It is very difficult to say which startup FinTech company will survive and which will die in the long run. But some of the Indian FinTech startup companies which are doing well in the market and created an impact on the mind of the users are listed as follows:

Shiksha Finance: It is a FinTech organization which offers financial assistance and educational loan for the students having low-income. It provides loans for various purposes such as for asset creation, working capital as well as for assisting the parents to pay the school or college fees of their children. It offers a short-term loan which can be used for paying tuition, buying books and uniforms and for any living arrangement and these leans must be returned back within 6 to 10 months. This FinTech company has already established themselves in the market and have created a great impact on the mind of the people.
Profitbooks: It is another growing FinTech company which offers cloud-based accounting software for creating invoices, track inventory, calculates taxes and GST, record business expenses, etc. It already has served over 6000 companies and expanding its business to other countries like Middle East, Singapore, South Africa and Srilanka.
Catalyst Labs: Another remarkable FinTech company that is doing excellent business in Indian market is Catalyst Lab. It mainly targets the farmers of India and helps them to connect to the bulk buyers. It provides a platform for the farmer to negotiate directly with the bulk buyers.
Kyash: It is another emerging FinTech company in India that provides a gateway for e-commerce providers. It is highly used in the business transaction and it allows the businessman to collect cash up front from the client before delivering the product.
Gandhian: One significant name in the list of rapidly growing FinTech companies is GyanDhan. It is considered as the first education loan marketplace in India. It provides an educational loan to students for pursuing higher studies and make sure that no obstacle stands in fulfilling the educational dreams of anyone.

The above-listed startup FinTech companies are rapidly progressing in India and have got a bright future. Some other start-up FinTech companies which have a very impressive in the last few years and made a major impact in the Indian market are StoreKey, HummingBill, ft cash, FineTrain, AirtimeUp, etc.

But there are some startup FinTech companies in India, which still could not make any huge impact in the Indian market and needs to watch out for some more time to predict whether they will survive in the highly competitive market or not. Some of these companies are given as follows:

Faircent: It is a Gurugram-based company established in 2014. This start-up FinTech company provides lending services and connects lenders with borrowers. Though it has attracted many substantial investors still it will be interesting to watch how this company performs in the next few years.
Kissht: It is another Mumbai-based start-up FinTech company, that was established in 2015. It provides instant credit service to the customers for both online and offline platform, enabling the customer to make a purchase at the digital point of sale. Though the company made $10 million last year, yet it is necessary to watch out for some time to tell anything about it.
Simpl: It is another Mumbai-based FinTech company that was established in 2015 and providing online payment services to the customers. Though Simpl has some big names behind it like BookMyShow, Freshmen, Faasos, etc., which concurrently works with it, it will be important to observe how long it can survive in the market.
EarlySalary: It is a Pune-based startup FinTech company and was established in 2015. It helps its customer to get their salary in advance and provides instant cash as a loan. It is currently doing well and has set up its branch in eleven cities in India that includes Mumbai, Pune, Chennai, New Delhi, Hyderabad, Bengaluru, Jaipur, and some other major cities in India. It is a new concept and is growing rapidly, but still, you can never be sure of the future. We have to watch out and see what performance it achieves in the near future.

There are some other start-up FinTech companies in India such as FTCash, Rubique, Money Tap, Innoviti, Instamojo, etc., which is doing well in the market, but it will be too early to tell anything about these companies. It is still uncertain whether they will survive in the competitive market of India and will create an impact in the mind of people.

Fill out the following form and one of our recruiters will contact you shortly.