While the pandemic, extended periods of lockdown, unemployment and Covid-19 numbers grabbed all the headlines, there was much to cheer and celebrate about the new milestones in the TechFin/Fintech/financial services sector in India, underlining the opportunity realisation that is now bearing fruit.
Snapshot
1. Launch of WhatsApp Pay/UPI hitting 2 billion transactions in November
2. Epic fundraisers by Jio/Reliance Retail by Big Tech (Google, Facebook) and $5.4B fintech funding in startups
3. India’s emergence as a leading FinTech hub
4. Biggest disruption of Indian Fintech: The government’s fintech policies
5. Digital Infrastructure and Platform Development to create new use cases
UPI: Flagship bearer of Digital India | Launch of WhatsApp Pay
UPI has been crossing new milestones (both in value and volume) since its launch. However, 2020 saw it touch 2 billion transactions in a month for the first time in its young four-year life as a real-time-payments platform.
With user experience, simplicity and a huge thrust provided by all x-Pays, powered by global tech giants, FAGMA and others (GooglePay, PhonePe, PayTm, and now WhatsAppPay), UPI has quickly become the crown jewel of digital payments in India with 105 per cent growth in transaction value and 70 per cent growth in transaction volume in the period December 2019-December 2020.
WhatsApp Pay eventually got the nod from the RBI, after conforming to all local data storage and other guidelines to be compliant with NPCI’s policies — although, it was in pilot mode for more than a couple of years.
While WhatsApp has lost the first mover advantage with GooglePay and PhonePe occupying pole positions with almost 80 per cent of all UPI transactions between them, there is still tremendous potential and opportunity for WhatsApp.
1. Expanding the base of the pie: If UPI enabled India to go beyond the 50 million users of digital payments, and expanding the base to 100 million, WhatsApp has the potential to take this number to 400 million (the number of WhatsApp users in India) and almost single-handedly at that.
We often hear this in fintech conferences: ‘No one wakes up in the morning expecting to make a payment’ but we do wake up to our phones and the first app we check is almost WhatsApp.
2. Make P2P payments in India a verb (like PayPal me, Venmo me), WhatsApp has the potential to make digital payments as easy as sending someone a WhatsApp message, causing a serious dent in the use of cash for low-value, everyday purchases. India may lead the WhatsApp me movement, a global first of epic proportions.
Epic fundraisers and continued investor focus in Fintech
Amidst the doom and gloom of the nationwide lockdowns, Jio fund-raised over Rs 1.18 lakh crore over the course of a few months (with the first few rounds happening at a weekly frequency) leading to a 25 per cent stake sold to Google and Facebook.
Google and Facebook have further consolidated India’s position as the next big space for all things digital, with the world’s second largest population rapidly going digital with the cheapest mobile internet (thanks to Jio) anywhere in the world.
The divested Reliance retail stake of 9 per cent, valued at $6.4 billion, paled in comparison to its parent company’s epicenes, but it isn’t lost on anyone that Reliance is best positioned to take on Amazon in India.
India’s emergence as a leading FinTech hub
India currently has around 2,174 FinTech startups, out of which Mumbai, Bangalore, New Delhi, Gurugram, and Hyderabad account for 42 per cent of their headquarters.
The rest of India accounts for 738 FinTech startups which spells well for innovation and the next wave of growth coming from non-Fintech centres.
India is the second largest Fintech hub in the world (not counting China in this analysis). Only US is ahead of India in this aspect, followed closely by UK.
India’s Union government is the largest force of disruption and innovation in Fintech/TechFin and Financial Services
This revolution started a few years back with the setting up and proliferation of a universal Digital Identity (to prove who you are) that created the backbone of financial services with the JAM trinity.
Scalable money movement platforms (IMPS, NEFT) and Access Platforms (Billers with BBPS, bank accounts with UPI) further created the digital railroads to provide uniform and universal access to all. This framework has led India to a FinTech revolution, where Fintechs have gone deep to capture niche use cases and work in co-operation with banks (their traditional and typical competition) to capture new green fields and further ease access to platforms and services.
The Central government, in 2019-2020, further generated the necessary tailwinds by
1. Localising data
2. Abolishing MDR on UPI and Rupay Cards — pushing digital payments agenda further
3. Banning cryptocurrency
While innovation always precedes regulation, in India, however, the regulator plays catch up. Some noteworthy instances are:
1. Use of video KYC for Digital Onboarding.
2. Regulatory sandbox: after the first successful run on ‘retail payments’, cross border payments is next, followed by MSME lending in the third cohort
3. Increasing the contactless limit from Rs 2,000 to Rs 5,000.
Digital Infrastructure and Platform Development to create new use cases
India Stack has been touted to be the world’s first public digital infrastructure, for societal good, with Open APIs and a structure to promote public-private cooperation to cater to India’s billion people.
This has been recognised and celebrated by global luminaries, which is a testament to it being the force of good.
There are two exciting platforms/frameworks ready to add more value and vibrancy to the India Stack Powered Digital Ecosystem: Account Aggregation Framework and OCEN (Open Credit Enablement Network).
OCEN is expected to democratise credit and combined with the consent-based framework of financial data offered by AA, this can be the game-changer to bring credit to all.
Traditionally getting credit in the formal economy has been difficult for smaller businesses owing to stringent norms which will now be challenged with these initiatives.