A journey from inclusion to holistic financial wellbeing
THE
INFRATECH’
Preview
‘FINANCIAL
OPPORTUNITY 2023
~75X
growth in online banking transactions2 (Mar ‘17-’23) from 0.1Bn to ~9Bn per month
~6X
growth in demat accounts from 20Mn to 114Mn (Mar ‘12-’23)
233%
CAGR in UPI transactions (Mar ‘17-’23)– from 6Mn to 8,600Mn+ per month
~2X
growth in outstanding credit for Emerging India3 (Mar ‘17-23) from INR~14Tn to INR~30Tn
2 The ‘Financial InfraTech’ Opportunity: A journey from inclusion to holistic financial wellbeing
India has leap-frogged financial inclusion driven by the transformative power of technology, including the Government’s Digital Public Infrastructure
1. Analysis from BIS 2019 Report 2. Includes mobile banking and internet banking transactions 3. Includes outstanding loan amount for Rural and Sub-Urban India Source: RBI, NPCI, BSE, BCG Analysis
GDP per capita (USD) What India did for financial inclusion in 9 years would have taken 47 years by traditional means Positive relation between GDP per capita and adults with a bank account1 in 2011 100 80 60 40 20 0 0 10,000 20,000 30,000 40,000 INDIA 2017 2008 47 years Adults with a bank account (%) Circles represent countries
This technology is enabled by a class of B2B FinTechs– Financial InfraTechs (F-ITs)-that enhance the FIs
Financial Institutions (FI)
Banks
Financial InfraTechs (F-ITs)
NBFCs
Deepen access and scale
Build deeper customer understanding
Customer Segments
Focus on: Next Half Billion(NHB)
500 million first-time internet users that have come online via mobile phones from 2018 to 2022
Insurers
Create efficiencies
Enhance customer experience and engagement
Next Half Billion (NHB)
retail consumer
Asset Managers (MF, Pension Fund, etc.)
Digital Public Infrastructure (DPI): “India Stack”
Data-layer (DigiLocker, AA, Consent Artefact)
Source: BCG Analysis
Identity-layer (e-KYC, eSign, Aadhaar)
Open Networks (OCEN, ONDC)
Next Half Billion (NHB) MSMEs
Payments-layer (UPI, AePS)
Direct interface Potential interface
3 The ‘Financial InfraTech’ Opportunity: A journey from inclusion to holistic financial wellbeing
connect with its own customers
Deepen access and scale
Launch new products e-invoice discounting
Open new markets
MSME credit disbursements by value and volume (FY19-22)
Create efficiencies
Build deeper customer understanding
Reduce CAC2 and Break-even AMB3 Savings account
Customer experience & engagement
Faster credit decisioning
Improve onboarding time Dairy Loan (INR 2L)
Role of F-ITs
• E2E digitization (integration across corporate ERP, TReDS, FIs trade finance system)
• Electronic fund transfer (NPCI)
• Fit for use offerings (e.g., low ticket sizes, better repayment terms)
• Reduction in cost of servicing (CAC & Opex)
• Alternate data to underwrite risk
• Digital lead sourcing and engagement
• Digital processing (e.g., automated scanning, eSigning)
• Aadhaar based e-KYC
• Alternative data APIs from 20+ sources (e.g., ITR, salary, GST, retail bureau, and more)
• Analytics-driven automated risk flags
• Aadhar e-KYC, biometric KYC
• Digital document scanning
• Better underwriting (e.g., ERP integration, digital state records)
1. Value of invoices financed in the 4 years (since launch) 2. Customer acquisition cost 3. Average monthly balance (3-years break-even) 4. Turn-around time
Source: RBI report on TReDS, Expert interviews, BCG Analysis
4 The ‘Financial InfraTech’
A
to holistic financial wellbeing
Opportunity:
journey from inclusion
F-ITs have helped FIs by opening up new markets, creating efficiencies, improving customer experience and more
INR 5.8K Cr INR 40.3K Cr 6.8x business growth1 Value: INR 6.7Tn INR 10.3Tn Volume: 2.4Mn 3.6Mn 1.5x increase 30-40% decrease in
time for underwriting 4-6 weeks & 5 visits < 1 day 99%+ TAT4 reduction CAC INR 2K-4K INR 1K-2.5K Break-even AMB INR 30K INR 10-20K 50% reduction
decisioning
F-IT Case Study I FIs partner with DGV1 to simplify credit for dairy farmers via an E2E digital process, alternate data, and integrated ecosystem
Challenges: 50%+ dairy farmers rely on informal credit
High travel & process cost for farmer (up to 5-6% of an INR 1L loan)
DGV Solution Landscape2
Multiple documents, physical verification required Long turnaround time (TAT) of 4-6 weeks
Limited visibility for lenders into usage of funds
Base process
• Submit physical loan application form
• Manual submission (e.g., financials, collateral document)
• Physical verification
• Manual decisioning
• Physical sign
• Loan disbursed via branches
• Limited visibility into fund usage
• Repayment and collections through bank branches
Key F-IT impact Impact
• Built option for E2E digital or assisted loan journey with digital footprints
• Enabled Aadhaar e-KYC
• Built integration into dairy ERP for verifiable, digital underwriting Composed proprietary decisioning algorithm built in partnership with bank
Lower cost to farmer (12-14% vs. 19-25%, informally)
• eSign; mATM3 withdrawals
• Integrated bovine marketplace (loan enduse check)
• Embedded value-adds (e.g., insurance provision)
• Facilitated repayment via deduction from milk procurement payments at source or digital options
FI has visibility into fund usage on integrated marketplace
Digital repayments (linked SA), field collection for 30-90 DPD4
Key breakthrough feature
5 The ‘Financial InfraTech’ Opportunity: A journey from inclusion to holistic financial wellbeing
1. Digivriddhi; India’s First Integrated Dairy FinTech & Marketplace Platform 2. Based on DGV money solution 3. Micro ATM 4. Days Past Due Source: Stakeholder discussions, Company website, BCG Analysis
Collections Origination Verification Disbursement TAT reduced to <1 day
metrics
6 The ‘Financial InfraTech’ Opportunity: A journey from inclusion to holistic financial wellbeing
F-ITs operate across a wide range of business processes
Node Customer sourcing Customer onboarding
Underwriting Core operations
Data exchange, analytics, reporting
Risk and Compliance
Lead management, distribution, marketing automation, mobile CRM and more
Identity verification, document verification (e.g., GST, employer, utility), AML, CFT, and more
Alternate data underwriting (e.g., bank statement analysis, mobiledata based analysis and more)
LOS, LMS, collections, savings, investment
Banking Policy generation, renewal and development
Insurance Payments Description
Data intelligence and analytics to drive and transform the core processes
Risk monitoring for operations, security and privacy needs
7 The ‘Financial InfraTech’ Opportunity: A journey from inclusion to holistic financial wellbeing
$1.4Bn $0.6Bn $4.8Bn $4.8Bn $3.3Bn $0.6Bn $0.6Bn $0.5Bn 90-95 35-40 85-90 75-80 25-30 115-120 30-35 30-35 Zopper Razorpay DronaPay Spice Money Tartan Anumati Crediwatch Pennant Zeta Satsure Leadsquared Signzy Riskcovry Pinelabs FIntellix CAMSfinserv Finbox Lentra M2P 1. Captures total funding raised by companies; 2. Funding information available for 200 firms ($10Bn) assumed to be 80% of total funding Source: BCG Fintech Control Tower (FCT), Secondary research, BCG Analysis 400-450 F-ITs with ~$12Bn2 funding Funding1 Illustrative F-ITs Payment infrastructure, POS Turtlemint Mswipe Ensuredit IDfy Needl.AI Perfios DGV Yubi Analyze n control #F-ITs
The Indian B2B FinTech market is underpenetrated with significant headroom for expansion
Share of total FinTech funding2 by value ($Bn)
India B2B funding share growing…
Share4 of FinTech funding for Indian B2B FinTechs has grown from 39% to 49%
…but still under penetrated
Globally, similar B2B Fintechs capture up to 70% of the FinTech funding market
with headroom for sustainable growth
Globally, B2B models capture higher share of funding market vs. B2C, given more revenue resilience (stable FI IT budgets, long-term contracts, limited price sensitivity etc.)
1. B2B FinTechs defined as Tech Enablers or Partners for FIs per BCG FCT, similar to the definition of F-ITs; 2. Includes cumulative sum of FinTech funding since 2000; data extrapolated from BCG FCT funding dataset, presumed to cover 80% of total funding data 3. Global numbers exclude India 4. Share over time-period 2020-2023H1
Source: BCG FinTech Control Tower (FCT), Secondary research, BCG Analysis
8 The ‘Financial InfraTech’
wellbeing
Opportunity: A journey from inclusion to holistic financial
B2C B2B1 INDIA 22 40 2020 2023H1 61% 51% 39% 49% GLOBAL3 2020 2023H1 343 656 35% 29% 65% 71%
High friction in discovering partners
• Closed-loop buying behavior
• Non-standard partner evaluation
Establishing credibility is tough for F-ITs
• Build track record
• Need to establish longevity, scalability
Key challenges
“Procurement”
is complicated
• Multiple procurement frameworks, stakeholders
• Long-lead time
Project management is complex
• Limited businesstechnology coordination
• Short value delivery horizon
Voice of FIs
Integration complexity slows down launch
• Lack of agility (non-modular, limited documentation)
Effective management of risk & security a constant concern
• Limited F-IT understanding of systemic risk, data security
There is no structured discovery, mostly top-down referrals happen: a CTO will call up another CTO & ask ‘kya chal raha hai?
- Group Executive, Private Bank
Banks need to have capability to evaluate [F-ITs] … they have standard capabilities for legacy players…
- Banking Head, KYC F-IT
I don’t want to be the first mover… lets see if their offering works elsewhere. Ek offering hai band hojati hai, system mein bugs aajate hain
- CTO, Public Bank
Banks only want to partner with players that others are partnering with… very hard to get established with a bank
It takes time to onboard [F-ITs]… working with multiple teams within our bank for a CKYC solution… but ultimately compliance said no
- Technology Head, SFB
For the same digital enablement, bank is working with 5 different chatbot players, 4 for OCR…no one talks to one another
- Innovation Lead, Private Bank
Voice of F-ITs
23 months to close the bank after inprinciple alignment constant struggle to figure out who the buyer actually is
- CEO, U/W F-IT - Founder, U/W F-IT
Bankers are open [with tech]…org structure makes it hard. No senior product manager coordinating
- Banking Head, KYC F-IT
Legacy tech has a gap...it is not built to be agile or put the customer in the center
[F-ITs] don’t understand systemic risk…per the regulator, banks are answerable under outsourcing policy
- CEO, Payments Bank
Implementation is a challenge because of integration … we are still waiting to go live on a bid we won, a year ago
- Banking Head, Analytics F-IT
- CIO, Public Bank
[As an F-IT]… critical for us to build internal governance… …to be transparent, manage perception
- Corporate Development, API F-IT
It is critical for the broader ecosystem to foster FI and F-IT collaboration, by addressing key challenges in current partnership construct
Source: Stakeholder discussions, BCG Analysis
9 The
InfraTech’ Opportunity: A
holistic financial wellbeing
‘Financial
journey from inclusion to
An examination of effective partnerships reveals 5 key approaches used
FI Champion + Orchestrator = Strong value delivery
• Champion (typically, business) created, convinced via strong business case (e.g., market share, revenue growth)
• Accomplished internal navigator, to support champion, who can coordinate across BUs, unlock bottlenecks, ensure on-track delivery Need a champion to help accelerate [progress]….and a manager to help coordinate across business and technology
- Head of Banking Partnerships, Analytics F-IT
Domain + Tech Expertise = Foot in the door
• Tech providers need domain expertise-Leadership with FS expertise provides initial credibility
• Tech to be agile, scalable, and customizable for FI
We have decades of experience via co-founders … relationships come from there
– Co-Founder, InsurTech
Land & Expand journey for sustained credibility
• Ability to handle scale e.g., process large volumes, process integration Full stack of use cases: ability for solution to scale across products, relevant processes
Provide combination of services that meet our requirements … not give a cookie cutter solution
– CTO, NBFC
Show that they understand the scale that our bank works with – CIO, Public Bank
Regulatory understanding, impact on SLAs
• F-IT understanding of regulatory impact on product structuring, data handling
• Responsiveness in line with guardrails
Regulator holds Banks accountable…showcase [F-ITs]
understand compliance implications on API security protocols, product structuring, channel encryption and more
- CIO, Public Bank
High service levels, especially in integration
• Standardize, transform APIs
• One-stop shop for Banks: build ready integrations to key services (e.g., Bureau)
Don’t want a different FinTech for every small service…create the right onwards integrations
- Digital Banking Head, Private Bank
Source: Stakeholder discussions, BCG Analysis
10 The ‘Financial InfraTech’ Opportunity: A journey from inclusion to holistic financial wellbeing
Partnership cultivation requires addressing three gap areas: discoverability and credibility; technology and capability; and risk and governance
Industry panel to lead knowledge building on regulations amidst fast evolving technology and data; warehouse common minimum requirements for compliance and conduct audits; provide self
11 The ‘Financial InfraTech’ Opportunity: A journey from inclusion to holistic financial wellbeing Source: BCG Analysis
and technical
Industry level reports
F-IT
Trusted FI, F-IT platform for discovery, dry-runs, and deployment Data
protocols for utility services with widespread adoption
of
landscape and accreditation services
Establish integration protocols F-IT Marketplace and Sandbox Partnership as a KRA Third party quality reviews Building a vibrant Financial InfraTech ecosystem 1 2 3 4 Third party Advisory Panel & Audits
Empowered crossfunctional capability: assess supply-side, own bank partnering infra, build platform orientation
5 Bridging risk and governance gap Bridging discoverability and credibility gap Bridging technology and capability gap
assessment tools
Stay Tuned: Full report to be published shortly
Panel Discussion: The Financial InfraTech Opportunity
Discussion themes
Why are F-ITs important to India’s FS ecosystem?
What is driving success for the large and growing F-ITs?
How can FI and F-ITs create seamless partnerships and collaboration?
What future value can be unlocked by FI and F-IT partnerships in the next phase of India’s journey?
12 The ‘Financial InfraTech’ Opportunity: A journey from inclusion to holistic financial wellbeing
Join the discussion at our Global FinTech Fest panel on September 6, 3:20 PM in Jio World Centre, Hall 206 A&B
Vidya Krishnan
Deputy Managing Director, SBI
Mayank Jha Managing Director & Partner, BCG
Rakesh Ranjan CDO, RBI Innovation Hub
Madhusudan R Co Founder, M2P
Rajesh Bansal CEO, RBI Innovation Hub
Siddharth Nautiyal Partner, Omidyar Network India