Rich Indians a big catch for fintechs, says report

As economic growth widens the pool of wealthy people in India, an opportunity is opening up for fintech companies to serve this base, a report by venture capital firm Elevation Capital and McKinsey India suggests.

The report, shared with ET, estimates that by FY30, the number of affluent Indians will grow to around 30 million from around 10 million now, in turn doubling the revenue pool in this space to $80-100 billion.

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Serving the mass market through formal credit will open up revenue pools of $25-30 billion by 2030, while wealth offerings will open up another $30-40 billion revenue opportunity, the report says.

According to the report, the affluent segment in India corners 70% of retail deposits and conducts 50-60% of the overall online spends.

Startups such as Cred, Uni, OneCard, IndMoney and Giraffe operate in this segment. The major competition here is from premium offerings of large banks like HDFC Bank and ICICI Bank.

The report says that around 65% of this population is concerned about the digital banking experience from their primary bank, and 57% want more personalised services. This is the opportunity that fintechs can tap into with their superior user experience and tailored services, according to the report.

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Credit card bill payment app Cred has built a user base of 16 million by offering curated services and products, while Dezerv has amassed an asset under management (AUM) of $400 million through curated investment portfolios.

The report says that while premium Indian consumers are an emerging opportunity for Indian fintechs, addressing the credit needs of the next 200 million Indians is a market that will be a $25-30 billion revenue opportunity by 2030.

Around 320-340 million Indians deserve to be offered formal credit. Around 120-140 million customers are getting formal credit, which leaves a base of around 200 million who are still underserved.

These customers earn $1,000-6,000 per annum and are in smaller towns and cities, according to the report. They might be conducting their business in cash or might be employed in smaller companies, factors which keep them from being served by the premium financial services players.

As more and more people start using smartphones, adopting digital payments, and open up to accessing credit digitally, this base will expand and the market will be up for grabs for fintechs, the report says. Startups like Fibe (previously EarlySalary), which has disbursed around $1.8 billion in credit, and Kreditbee with around $3.6 billion loan disbursement, are building their business in this space, the report says.

Credit is not the only field where opportunity is opening up. Insurtechs and wealth techs are the other enterprise segments that are going after a market that will have around 250 million Indians by 2030 and an annual revenue opportunity of about $40 billion.

The report estimates that considering the middle layer of consumers that is not adequately served with wealth management options, around $160 billion can be invested in mutual funds and approximately $50 billion can be invested in life and health insurance.

Players like Navi, Zerodha, Groww, IndMoney, PhonePe and Paytm operate in this space with their wealth and insurance offerings. But challenges remain in terms of explaining the right products to the right set of customers, creating price-sensitive products and building trust, says the report.

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Roy Walsh

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