India's Fintech in Promising Place But Needs to Prepare For Decade Ahead: GFF & BCG Report The report states that Generative AI and API-based open architecture are key drivers of future growth with applications ranging from customer service automation to fraud detection, fintech is exploring strategic international expansion.

Boston Consulting Group (BCG) and Global Fintech Fest together have released a report named 'Building Bridges for the Next Decade of Finance' on the back of the fintech conference jointly organized by the National Payments Corporation of India (NPCI), the Payments Council of India (PCI), and the Fintech Convergence Council (FCC)

Key Takeaways

The report states that Generative AI and API-based open architecture are key drivers of future growth with applications ranging from customer service automation to fraud detection, fintech is exploring strategic international expansion. Approximately 25 per cent of Indian Finteche get more than one-quarter of their revenues from international markets, while the Middle East and Southeast Asia have been top choices for international expansion among Indian CXOs.

Kris Gopalakrishnan, Chairman, Axilor Ventures, Co-founder, Infosys, and Chairman, Advisory Board, GFF 2024, said "Artificial intelligence is at an inflection point. Harnessing AI responsibly and blending it with human insight can create the next-gen Financial InfraTech to drive ethical, innovative solutions for complex, real-world challenges. We envisage the next decade to be more equitable, inclusive, and "resilient by design", to be able to recover quickly from future black swans."

According to Data, UPI has amassed a user base of over 400 million active users and in July 2024 alone, it facilitated approximately 14 billion transactions worth INR 20 lakh crores.

"UPI has revolutionized the payment landscape, solidifying India's position as a global leader in fintech innovation showcasing its robust and ever-growing presence," Dilip Asbe, Managing Director & CEO of National Payments Corporation of India (NPCI).

6 Bridges for the next decade of finance

India now ranks third in terms of the number of Fintech startups and unicorns. The combined report opines that the sector has demonstrated a remarkable trajectory in revenues, achieving a 50 per cent growth rate last year.

While the growth is expected to continue, fintech revenues are projected to reach US$ 190 billion by 2030 and contribute over 20 per cent of all banking revenues. All this can be attributed to a robust ecosystem laid out by the digital public infrastructure 1.0 including (Aadhaar, UPI), and in the future DPI 2.0 and 3.0 are said to bring ONDC, National Health Stack, and AI-driven Digital Public Intelligence.

The report however also states that currently, we are experiencing an 'inflection point' in the global financial journey context, and to navigate the challenges the sector needs to construct six bridges.

1. Bridge to Future Ready Technology: Building the future on strong foundations is essential with an estimated US$1 billion in investments required to modernize Indian Financial services over the next five years.
2. Bridge between Incumbents and Fintechs: As the lines between traditional financial institutions and Fintechs merge, there is a need to capture the digital native opportunity, foster collaboration, and maintain healthy competition.
3. Bridge to Internationalization: Indian BFSI SaaS players now have a great opportunity to set foot internationally and are expected to capitalize on the chance to increase their market share in the BFSI SaaS market by five times.
   
   "Though the US is the largest market for BFSI SaaS, the market characteristics vary a great deal by states, products, and banks. Differentiated opportunity exists across segments."
   
   "National players have large IT budgets and onboarding one marquee client can drive large revenues, regional players are looking to leapfrog in digitization looking for cost-effective partners given a limited budget and tech capabilities," Sreyssha George, Managing Director & Partner, BCG.
4. Bridge to Capital Access: India's vibrant Fintech ecosystem with its 20 unicorns and 17 soonicorns, is a testament to the country's access to funding.
   
   "Funding will continue to remain selective and prudent in the short-medium term. Founders should also explore alternate sources of capital like Private Capital and Venture Debt," said Neetu Chitkara, India Leader – Fintech, Managing Director & Partner, BCG.
5. Bridge to Regulation, Compliance, and Risk Management: Financial institutions need to combat 3 risks – financial, non-financial, and strategic and need to significantly ramp up their cyber-defense.
6. Bridge to Brighter and Greener Future: Large headroom available for India's Fintech to improve the quality of fundamental research in technologies such as AI.