Indian fintech startups roped in nearly $1.7 billion in funding in the first six months of 2020, doubling from last year’s $726.6 million, despite the ongoing coronavirus pandemic, a KPMG report showed.
In a tell-tale sign of even more exciting and promising things to come from the burgeoning fintech ecosystem, Indian startups saw VC financing at a time global fintechs saw a stark slowdown, falling almost to 2017 levels.
Sunrise segments such as neobanking and platforms that cater specifically to underserved sections of the population - whether it’s small and medium businesses or Tier III and beyond - have seen significant traction and accelerated growth amidst the pandemic. Even online brokerage platforms grew this year, despite general liquidity constraints caused by layoffs and salary cuts.
Experts agree that while fintechs have been organically growing in India ever since demonetisaton, COVID-19 expedited adoption by a number of years.
With 2020 almost coming to a close, we take a look at some exciting developments that happened in fintech this year:
Paytm’s insurance buy, and launch of stock-trading and ETF investing services on Paytm Money
In July, Paytm announced the purchase of general insurer Raheja QBE - a move that takes the Vijay Shekhar Sharma-led startup one step closer to becoming a financial powerhouse and also India’s first super-app. It also ties in with Paytm’s mission of driving financial inclusion for underserved populations and bringing them into the fold of the mainstream economy.
In September, the startup launched stockbroking services on its wealth management platform, Paytm Money, allowing retail investors to trade buy and sell equities.
While platforms such as Zerodha and Groww had beaten Paytm to the punch, the Noida-based startup’s reach and extent - especially in lower tier cities – give it a leg-up over its competitors.
The 10 lakh investors the startup hopes to onboard by the end of this fiscal year are expected to be first-time users from small cities and towns.
In October, the fintech giant launched ETFs on its platform, targeting nearly one lakh users in the next 12-18 months. ETF investments on Paytm Money start at Rs 16 in equity, Rs 44 in gold, and Rs 120 for NIFTY, the company said in a statement.
ETFs aren’t as mainstream an investment tool in India as they are in the US or Europe, despite there being around 69 different kinds of ETFs across index, gold, equity, and debt categories.
PhonePe crosses 250 million registered user milestone
The Flipkart-owned platform said it hit the 250 million registered user milestone in November and added that it expected to cross 500 million users by December 2022.
In October, the company said it had processed a record 925 million transactions worth $277 billion, and processed 835 million UPI transactions, capturing more than 40 percent of the total market share.
Recently, after the Indian festive season, PhonePe said it had emerged as the “largest platform” in terms of digital gold purchase, capturing nearly 35 percent of the total market share. In fact, sales rose more than six-fold in terms of volume this year, versus 2019, the company said.
First-time investors flock to online trading platforms Zerodha, Groww, and Upstox
Retail investors from across the country took to equities trading platforms as low interest rates from FDs and savings, as well as a dip in stock markets during the onset of the pandemic, presented several profit-making opportunities.
Zerodha, India’s largest online discount broker, said the number of demat accounts opened on its platform between January to May far exceeded overall client growth last year. The average age of Robinhood traders on its platform also dropped to 30, and the average ticket size to about Rs 80,000.
The rise of online trading platforms that charge minimal transaction fees have helped warm people up to the idea of stock trading, which earlier was done by brokerage firms at hefty costs. Platforms such as Zerodha give users complete control over their financial transactions, and allow them to work within their risk appetites.
In fact, mutual fund SIPs declined in June, indicating that new-age investors wanted more say in where their money was invested and were more interested in direct investing versus buying funds that were managed by investment bankers.
A SEBI report said 4.9 million new demat accounts were opened in FY20, the highest in at least a decade.
While exact figures on where most of this demand is coming from aren’t available, private players have said they were seeing increased participation from users in Tier II and III cities.
Razorpay turns unicorn in the middle of COVID-19 pandemic
Harshil and Shashank, Founders of Razorpay
After raising $100 million in a Series D funding round co-led by GIC and Sequoia Capital India, Razorpay gained a seat at the country’s unicorn table. The startup said it expected to use the funds to grow its neobanking platform and its lending arm, as well as onboard around 500 additional employees.
The startup also said it would look closely at making some strategic acquisitions, and invest in startups in the B2B fintech space.
Razorpay, which powers payments for over five million businesses, including the likes of Airtel, BookMyShow, Facebook, Ola, Zomato, Swiggy, Cred, and ICICI Prudential, among others, is set to double its user base to 10 million by the end of this year.
UPI transactions hit fresh record highs every month
NPCI’s flagship product Unified Payments Interface (UPI) has witnessed a steady increase in volumes and value of transactions throughout the year, surpassing even card transactions at one point.
Dilip Asbe, Managing Director and CEO of NPCI, said at YourStory’s flagship TechSparks event last month that India would hit a billion transactions a day over the next four years, powered by UPI. The biggest deterrents to UPI’s growth in India are small-ticket transactions that drive most of the cash in circulation today.
Asbe said he aimed to reduce the dependency on cash, and help more and more payments and transactions happen online.
NPCI recently also said that it planned to diversify its shareholding by onboarding 131 new partners and raising Rs 81.64 crore in equity share capital. The move is significant for the organisation since only banks have owned NPCI’s shares since its inception.
The proposed move will enable retail payments companies that have built services based on NPCI’s platforms and banking giants to acquire stakes in NPCI.
Zerodha bootstraps its way into the unicorn club
Nithin Kamath-led online brokerage platform - India’s largest - joined the unicorn club in the first half of the year after conservatively valuing itself at $1 billion.
A rare feat for a bootstrapped company that has never raised external funding and has been profitable, Zerodha’s brother-founders have eschewed the ‘growth-at-any-cost’ approach adopted by many Indian startups, choosing instead to focus on building a sustainable business model backed by a solid tech product.
Zerodha also joined several other Indian startups in announcing a hefty ESOP buyback plan - Rs 65 crore - to create liquidity for its employees.
Edited by Teja Lele Desai
Link : https://yourstory.com/2020/11/top-fintech-trends-2020-upi-unicorns-online-trading
Author :- Aparajita Saxena ( )
November 25, 2020 at 05:15AM
YourStory