State Of Indian Fintech Report Q4 2023, InFocus: Rural Fintech

TABLE OF CONTENTS

INDIA’S DIGITAL ECONOMY: AN OVERVIEW

FINTECH MARKET IN INDIA: A SNAPSHOT

INDIA’S FINTECH LANDSCAPE

FINTECH MARKET OPPORTUNITY

INDIAN FINTECH STARTUPS: FUNDING & M&A LANDSCAPE [Q4 2023]

INFOCUS: RURAL FINTECH INDIA

KEY SOCIO-ECONOMIC INDICATORS

QUANTIFYING RURAL INDIA’S DIGITAL TRANSFORMATION

KEY TECH DEVELOPMENT INDICATORS FROM RURAL INDIA

FINTECH OPPORTUNITIES IN RURAL INDIA

RURAL FINTECH STARTUP LANDSCAPE

ROLE OF AI IN INDIA’S RURAL FINTECH GROWTH

PUBLIC STOCK MARKET PERFORMANCE OF LISTED FINTECH STARTUPS

FINTECH TRENDS FOR 2024

India To Have 900 Mn+ Active Internet Users By 2025

By 2025, 56% of all new internet users will be from rural areas, and 65% of new internet users will be female

7K+

Fintech Market In India: A Snapshot

Market Opportunity (2030)

$2.1 Tn+ CAGR (2022 to 2030) 18% The Most Lucrative Segment (2030) Lending Tech

$208 Bn+ Market Opportunity For Rural Fintech (2030) Total Funding (2014 to 2023)

Source: Inc42

Bn+ Funding CAGR (2018 to 2023)

Bn+

Bn+ Combined Valuation Of Soonicorns

India’s Fintech Landscape: Key Players

India’s Fintech Startup Landscape: Who’s Who In Subsectors

Source: Inc42

Note: This is not an exhaustive list

Fintech Revolution In India: A $2.1 Tn Market By 2030

Lending Tech emerges as the most lucrative segment in the Indian fintech sector

Overall Fintech Market

Lending Tech

Insurtech Payments

Neobanking Investment Tech

SaaS

Source: Secondary Sources, Inc42

Note: The total addressable market (TAM) showed above is calculated using a bottom-up approach for the overall fintech market size and top-down for the fintech segments mentioned.

Source: Inc42

Big Money Moves: India's Top 10 Fintech Investments Of Q4 2023

Source: Inc42

Q1-2020 Q2-2020 Q3-2020 Q4-2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 Q1-2023 Q2-2023 Q3-2023 Q4-2023

Fintech Funding In India: Funding Stage Wise Analysis [Q4 2023]

Source: Inc42

Bengaluru Was The Most Funded Indian Startup Hub For Fintech Startups In Q4 2023

Source: Inc42

Fintech Startup M&As Stagnates

Active Indian Fintech Investors [Q4 2023]

Firm Name

VC/PE Firm

VC/PE Firm

VC/PE Firm

Accelerator/Incubator

Source: Inc42

Firm Name

Three State Capital

VC/PE Firm VC/PE Firm

VC/PE Firm

Note: This is not a ranking of any kind but a representation of select few investors.

VC/PE Firm

Debt VC/PE Firm

Accelerator/Incubator

Firm

Firm

INFOCUS: RURAL FINTECH IN INDIA

Key

Socio-Economic Indicators From Rural India

Population

Source: NFHS-5, Economic Survey of India, UNDP, Inc42 Analysis

Note: *Urban and rural GDP per capita is estimated.

From Fields To Fiber: Quantifying Rural India's Digital Transformation

Source: Multiple Secondary Sources, Inc42 Analysis

Key Technology Development Indicators From Rural India

Key Indicators

Total Internet Subscribers

Total Internet Subscribers (Rural)

Total Smartphones

Total Smartphones (Rural)

Total Social Media Users

Total Social Media Users (Rural)

Total Ecommerce Shoppers

Ecommerce Shoppers (Rural)

Source: TRAI, IAMAI, Multiple Secondary Sources, Inc42 Analysis

890 Mn+ Aadhaar Holders From Rural India Have The Potential To Be

Onboarded Using eKYC

Source: UIDAI, World Bank, Inc42 analysis

Note: The division between

1,390 MN+ TOTAL AADHAAR HOLDERS

India's Rural Hotspots: Top Five States With The Most Rural Population

Analysis

Fintech Opportunities In Rural India

Recurring Deposit Accounts (RDAs)

Source: Inc42

Vikas Patra (KVP)

Rural Fintech Startup Landscape: Startups Leveraging The Opportunity

Source: Inc42

Note: This is not an exhaustive list.

B2B

Stack

Fintech

Lending Tech Dominates Indian Rural Fintech Landscape

Source: Inc42 $1.3 BN+

Rural Fintech Funding: A Stagewise Outlook

Source: Inc42

The seed stage experienced the highest compounded annual growth rate in both funding amount and deal count, indicating improved business prospects for emerging enterprises in this sector in 2024.

Betting On Bharat: High-Profile Investors Fuel Fintech Innovations For Rural India Investor

Source: Inc42

Note: This is not a

CredRight, OneStack

Aye Finance, CredRight, Prayaan Capital, SMEcorner

Jai Kisan

Jai Kisan

Aviom, CredRight, Jai Kisan, Moneyboxx

Jai Kisan

Aye Finance

Samunnati Finance, SarvaGram

SarvaGram, Vridhi Home Finance

LoanKuber, Siply

Investor Name Type

Source: Inc42

Accelerator/Incubator

VC/PE

Venture Debt

VC/PE

VC/PE

Venture Debt

VC/PE

Accelerator/Incubator

VC/PE

VC/PE

Notable Funded Startups

LoanKuber, Nivesh, Siply

Avail Finance, ZipLoan

Aye Finance, Jai Kisan, Kinara Capital, Samunnati Finance, True Balance

DGV, GramCover

True Balance

GramCover, Jai Kisan, OneStack, ZipLoan

Aye Finance, Kinara Capital

Credright, Impact Guru, OneStack

ZipLoan

CredRight

Note: This is not a ranking of any kind or an exhaustive list of all investors backing fintech startups building products for rural India

Role Of Artificial Intelligence In India’s Rural Fintech Growth

Day-To-day Banking

From customer support to chat/voice-based digital banking operations, applied AI can enhance users' banking experience in multiple ways.

According to a survey, 94% of CXOs in India's financial sector believe that GenAI can play a crucial role in improving customer experience, while 74% of them see its potential in reducing costs.

Customer Onboarding

According to a survey, 49% of global banking decision-makers anticipate that GenAI adoption will notably influence new customer onboarding, ranking as the second most impacted front-office function.

Applied AI has the capacity to save over 29 Mn digital onboarding hours for banks worldwide. Furthermore, the utilization of AI could potentially reduce onboarding costs by 20% to 50% for banks and fintech companies.

Personalisation

68% of global retail and commercial banks are actively investing in advanced human-like chatbots, aiming to enhance personalised customer experiences on their platforms.

Additionally, 37% of these banks are in the process of developing personalised AI-based assistants for customer-facing banking operations.

Moreover, 48% of global retail banks are keen on prioritising personalized product recommendations using GenAI.

Source: MIT, Accenture, EY, Evalueserve, Juniper Research, Inc42 Analysis

Fraud Detection & Risk Management

By 2027, AI is projected to save over $10.4 Bn globally in financial fraud detection. Additionally, employing GenAI scenario simulations can enhance financial institutions' readiness for risks associated with products and services such as agricultural loans and crop insurance.

Furthermore, utilising GenAI to analyze satellite-based Earth observation data can offer enhanced insights into future weather and soil conditions, thereby better predicting their impact on crop yields.

Digital Lending

Utilising GenAI enables financial institutions to offer personalised agricultural loans tailored to factors like annual income, crop cycle, and weather patterns.

It can also help analyse customer creditworthiness data in real-time for prompt loan decisions and enhances loan monitoring to reduce default rates in rural lending.

Digital Insurance

GenAI can slash claim processing time by up to 40% with AI's intelligent monitoring and settlement.

Adopting Ai/GenAI technology could impact working hours in the insurance industry by 48%.

GenAI-based chat bots in regional languages can strengthen insurers' ties with rural customers.

Source: MIT, Accenture, EY, Evalueserve, Juniper Research, Inc42 Analysis

Vernacular AI Startups Democratising Financial Technology For Bharat

2023 Growth Stage $42 Mn+

GenAI-based voice assistant for ecommerce apps, with the potential to increase the use of integrated fintech products among online shoppers from rural India.

LLM built on regional Indian languages can enable greater adoption of new age fintech products like payments, insurance, fixed deposits, and so on among the country's rural population.

2023 Growth Stage $42 Mn+

Ola Krutim offers a suite of hardware and software AI products trained for operations in regional Indian language. Their LLM model will enable fintech entrepreneurs in India to make more accessible products for rural India.

Source: Inc42

2013 Acquired $12 Mn+

Note: This list is not comprehensive, but rather a curated selection of startups operating within this domain

Haptik's GenAI-powered chatbot supports a wide range of regional Indian languages (Hindi, Kannada, Tamil, Marathi, etc.), allowing banks and fintech companies to develop chat-based financial products in regional languages.

Gnani AI's speech-to-text API supports more than ten Indian regional languages, including Hindi, Urdu, and Gujarati. This can enable vernacular chat-based fintech products for the rural Indian population.

Source: Inc42

Note: This list is not comprehensive, but rather a curated selection of startups operating within this domain

Avaamo provides conversational AI for banking, allowing traditional banks and payment banks to tailor banking experiences for rural Indians in the language of their choosing.

Public Stock Market Performance Of Listed Fintech Startups

Source: NSE, Inc42 Analysis

Infibeam Avenues had the most promising start to 2024 in terms of stock price growth.

Fintech In India — Key Trends To Watch Out In 2024

AI/GenAI Technology Integration

The integration of GenAI technology within the Indian financial services industry promises to contribute over $70 Bn, representing a 25% increase in gross value added by 2029. Moreover, the introduction of GenAI applications in regional languages will broaden the accessibility and adoption, reaching beyond urban areas.

Increased Regulatory Scrutiny

As fintech products gain broader acceptance among the Indian population, regulations governing these services are also expected to increase to protect consumer interests. The recent crackdown on prominent payment banks such as Paytm and payment gateway aggregator Instamojo serves as an early indication of the growing regulatory scrutiny on fintech products in India.

More Embedded Fintech

Increased Expenditure On Cybersecurity

From implementing contactless payments in retail stores to integrating new-age fintech products on ecommerce platforms, the blending of financial services with non-financial offerings is expected to grow alongside the usage and adoption of internet-based products by Indian consumers.

Blockchain Expected

To Make A Comeback

Despite concerns expressed by 64% of global CEOs in a survey by PwC regarding the potential escalation of cybersecurity risks with the adoption of AI/GenAI technology, fintech startups in India are expected to embrace this technology swiftly. This anticipation is fueled by the projected addition of over $70 Bn to the Gross Value Added of the financial services sector in India through the adoption of these technologies. Fintech startups are inherently more inclined towards tech advancements compared to their traditional counterparts.

Blockchain-based enterprise solutions have the potential to effectively address cybersecurity concerns, promote information transparency, and enhance trust in digital transactions. The Indian government's initiative to promote e-rupee (CBDC) adoption underscores its commitment to fostering digital payment alternatives. Additionally, the emergence of SingularityNET, a platform integrating AI and blockchain technologies, signals a promising resurgence of enterprise-grade products leveraging the synergy between blockchain and AI.

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