India Fintech Report 2022:

Sailing Through Turbulent Tides

Capitalising on strong demographics, increasing

digital adoption, maturing data ecosystem, and
product expansion will help fintech accelerate
financial inclusion within the regulatory guardrails.

Credit insights partner – Experian

Authors and acknowledgements

Saurabh Trehan is a Partner in Bain & Company’s Mumbai office and leads Bain’s Financial Services
practice in India.

Rakesh Pozhath is a Partner in Bain & Company’s Bengaluru office and is a leading member in the
Financial Services practice in India.

Misha Pratap is a Partner in Bain & Company’s New Delhi office and is a leading member in the
Financial Services practice in India.

The authors are grateful to Experian, including Madhumitha Prema Ramanathan, Abhinav Thakur,
and Shashank Lachake for the valuable data, in-depth analytics support, and research insights.

The authors deeply thank the Bain India team, including Rohan Wahane, Deepesh Goel, Nidhi Vyas,
Ayush Maiti, Rahul Arora, and Vinayak Bhagat. They also extend their gratitude to senior bankers
and founders from the Financial Services space for their counsel and thoughtful partnership. They
also wish to thank Shelza Khan and Pavitra Mattoo for their editorial support.

Key contacts at Bain & Company India

Saurabh Trehan in Mumbai (saurabh.trehan@bain.com)

Rakesh Pozhath in Bengaluru (rakesh.pozhath@bain.com)
Misha Pratap in New Delhi (misha.pratap@bain.com)

For media queries

Sitara Achreja in Mumbai (sitara.achreja@bain.com)

Copyright © 2022 Bain & Company, Inc. All rights reserved.

 India Fintech Report 2022: Sailing Through Turbulent Tides

Contents

Executive summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Indian economy and customer outlook. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Evolution of fintechs in India. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

Voice of industry: Insights from C-suite executives (CXO) survey . . . . . . . . . . . . . 16

Unsecured retail lending and rise of consumption finance . . . . . . . . . . . . . . . . . . . 23

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Executive summary

India’s consumption story is back on track in 2022, driven by a favourable demographic dividend,
increasing digitisation, improving public infrastructure, and continued technological innovation.
As Covid-19 concerns recede and demand rebounds, the country’s population will resume its shift
from an income pyramid to a diamond-shaped economy as lower-income households ascend to
middle-income levels. Across income levels, consumption is expected to grow from $1.8–$1.9 trillion
in FY21 to about $3 trillion by FY26 due to increased demand from an added 4 million affluent and
33 million mass affluent households. Along with households, micro, small, and medium enterprises
(MSMEs) will be key to the economy, contributing an expected $1.3 trillion in gross value added by FY26.

Despite this expected growth, both household consumption and MSMEs remain underserved by
formal credit. Credit penetration in most living expenditure categories is less than 5% for households.
MSMEs also lack access to formal credit, with more than 60% relying on costly informal sources
of credit. This funding gap is expected to provide strategic opportunities for fintechs.

Digital financial services (FS) are accelerating financial inclusion, democratising access, and
spurring personalisation of products and customer journeys. With a strong foundation provided
by the Jan Dhan-Aadhaar-Mobile (JAM) trinity, Unified Payments Interface (UPI) rails, and other positive
regulatory frameworks, the pandemic has aided acceleration in digital adoption and provided
a fillip to digital FS solutions by incumbents (banks, traditional NBFCs, insurers, etc.) and insurgents
(fintechs). With expected growth in smartphone users to approximately 1.1 billion by FY26, up from
about 750 million today, and more than 850 million Internet users in FY26, up from about 650 million
today, India is shifting towards a mobile-first economy, especially in FS.

Emergence of fintech

Enabled by UPI, Indian fintechs have made rapid gains in the payments space over the past few years.
Digital payments have soared, with UPI monthly transactions reaching a value of approximately
$135 billion (as of June’22), a remarkable nine times that of credit cards (CCs), which have been
around for more than four decades in India.

Fintechs are expected to play a vital role in increasing financial inclusion and digital adoption. India
has seen a significant rise in fintech investment, with about $35 billion invested across segments
thus far, more than doubling India’s share of global fintech funding since 2016. The years 2021 and
2022 saw more than $19 billion of fintech funding and the addition of 18 fintech unicorns.

It is estimated that Indian fintechs currently contribute about $100 billion of enterprise value (EV),
compared to an overall FS EV of $1.4 trillion, in 2021. We expect Indian fintechs to follow a similar
trajectory to Brazilian fintechs, considering India has similar macro fundamentals and lower penetration
of most financial products and services. The Brazilian fintechs grew from a 2% share of FS market
capitalisation in 2017 to a greater than 35% share in 2021, reflecting tremendous gains in retail banking

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 India Fintech Report 2022: Sailing Through Turbulent Tides

by Brazilian fintechs and neobanks. Similarly, we expect Indian fintechs to capture nearly $350 billion
in EV by FY26, contributing more than 15% of India FS EV. While both incumbents and insurgents
will benefit from this growth, customer engagement and retention will remain a critical strategic
priority, creating potential for collaboration and consolidation between the two.

While payment service providers (PSPs) have established leadership in domestic payments, several
emerging trends will shape the future of fintechs in India:

Payments. Continued growth in real-time account-to-account (A2A) payments driving out cash,
payment gateways (PG)/payment aggregators (PA) and point of sale (POS) providers expanding
from payment acceptance to providing full-stack merchant solutions, emergence of faster
cross-border payment solutions

Lending. Proliferation of embedded lending options for consumption financing, digitisation

of asset-backed lending, experimentation with decentralised finance (DeFi)

Wealthtech. Direct distribution converging with discount broking; convergence of robo-advisory

services with personal finance management and manufacturing of standardised model portfolios;
growth of investment in alternate asset classes, especially crypto

Insurtech. Expansion of digital non-life insurers and bite-sized insurance, rise of digital platforms
for insurance distribution

Fintech infrastructure. Rise of banking as a service (BaaS) providers, commercialisation of

Distributed Ledger Technology (DLT)/blockchain-based use cases in corporate banking, emergence
of open banking service providers (e.g., account aggregators, Open Credit Enablement Network
enablers), launch of retail/wholesale Central Bank Digital Currency (CBDC)

Neobanking. Expansion of millennial, MSME-focused neobanks, and incumbent- launched

digital attackers

The fintech sector has seen tremendous growth till now and has driven digital adoption across
diverse use cases in FS. However, going forward we see it facing increased regulatory and compliance
scrutiny, evident from the recent notifications released by the Reserve Bank of India (RBI). This,
coupled with a tightening funding environment, is expected to drive increased collaboration with
the incumbents and potential consolidation in the sector.

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Digital financial
services are
accelerating
financial inclusion,
democratising
access, and spurring
personalisation
of products and
customer journeys.
4
Indian economy and
customer outlook
Addition of approximately 4 million affluent and about 33 million mass affluent households by
FY26 is expected to drive 2–2.5 times higher spending on essential products and 3–4 times more
spending on well-being services, such as education, healthcare, and entertainment, along with
higher consumer durables (CDs) penetration.

MSMEs are expected to grow at 11% compound annual growth rate (CAGR) by FY26, uplifting
the economy, as this sector directly employs more than 120 million Indians (about 20% of the
workforce), contributes 49% of merchandise exports, and constitutes 6% and 25% of
manufacturing and service sector GDP, respectively.

More than 40% of consumers are expected to transition to online channels for banking
transactions, travel, and lifestyle purchases due to a favourable digital ecosystem and changing
consumer behaviour.

Offline consumption is expected to grow at about 12% while online consumption is expected
to grow at about 27%, facilitated largely through a growing share of digital payment modes,
such as UPI, which is likely to make India a 50% non-cash economy by FY26.

UPI monthly transaction value, which has grown to nine times that of CCs in the past four years,
has demonstrated promising growth due to declining share of digital wallet, increasing merchant
adoption due to low/zero merchant discount rate (MDR), and increasing smartphone penetration
in Tier 2–4 regions, with new technology on feature phones enabling UPI without internet
connectivity.

Apart from payments, other financial themes have also seen exponential growth such as wealthtech
(discount brokers have seen their active user base grow by seven times in the past two years)
and alternate assets (digital asset unique users have grown by four times in the past two years).

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 1: Amid rapid economic growth, a favourable shift towards more affluent and mass affluent
households (HHs) is expected to drive consumption growth in India to $2.7T+ by FY26
By FY26, affluent & mass affluent will contribute to 60%+ consumption, due to transformation from bottom-of-pyramid
to middle-class-led economy

# of households by income group Consumption by income group ($T)

~300M ~325M $1.8T–$1.9T $2.7T–$2.8T
100% 100%
Low (~10%)
Low (~24%) (~17%)
80 (~34%) 80 (~24%)
Mass
Impact of Covid-19–increase
(~30%)
60 in no. of low-income HHs 60
(~36%)
Mass
(~35%) (~44%)
40 40
Mass affluent
(~39%)

20 Mass affluent (~35%) 20

(~27%)
(~22%)
Affluent (~13%)
Affluent (4%) (5%)
0 0
FY22 FY26 FY22 FY26

Notes: Low income: <$4k; Lower-mid: $4–8.5K; Upper-mid: $8.5–36K; High income: >$36K income per HH in real term
Sources: Nielsen; Euromonitor; Bain analysis

Figure 2: However, consumption financing across discretionary spending remains low with <5%
credit penetration for many spend categories, such as travel, lifestyle, health, etc.
Overall level of financing low in living expenditure (single digits), with durables being the highest credit-penetrated
category

India consumption spend by basket ($B), FY22

HH capital expenditure HH living expenditure

2,000 $1.8T–$1.9T 160–180

40–50
750–800
1,500 Higher penetration driven by a) optimal ticket size purchase
(high enough to need credit, low enough to be addressed
by in-store credit) & b) availability of interest-free EMI with
1,000 180–200 OEM/merchant-bearing interest to drive sales
160–170
140–150
500 160–170
90–100
20–30 75–85
0
Total Home Personal Grocery/ Travel & Education Fashion Health Durables Home Others
vehicle dining conveyance & lifestyle (incl. mobiles) improvement
Financing 40%–50% 70%–75% <1% 1%–3% 5%–7% 1%–2% 3%–5% 25%–30% 3%–5% ~0%
penetration
Predominantly served Lower credit penetration driven by
via auto loans low-ticket-size & high-frequency purchase

Notes: HH: Household; Grocery/Dining incl. grocery, dining out and food delivery; Travel & conveyance incl. spend on airfare, taxi, train, etc.; Health incl. only out-of-
programme-experience (OOPE) expenditure by HHs; Home Improvement incl. home, furniture; 70%+ in car financing and 50%+ in two-wheeler; Lifestyle incl. apparel,
books and general merchandise (BGM); Others incl. HH services (e.g., domestic help), rent, water, entertainment, barber, etc.; OEM: Original Equipment Manufacturers
Sources: Nielsen; Euromonitor; Reserve Bank of India (RBI); CEIC data, Bain analysis

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 3: The MSME segment is also projected to grow at a healthy rate and contribute $1.3T to
India’s GDP by FY26

GVA by MSMEs in India (in $B) CAGR

FY21–26

~$1,300B

~$770B ~$790B

~$600B 11%
~$490B

FY15 FY17 FY19 FY21 FY26E

MSME/India’s
32% 32% 34% 34% 37%
GVA share

Note: GVA: Gross value added

Sources: 2016 Ministry of Statistics and Programme Implementation (MOSPI) survey of MSMEs (N=300K, National Sample Survey Round 73); International
Finance Corporation (IFC) report on MSMEs (November 2018); World Bank; Annual Report of the Ministry of MSME, Indian budget estimates; Bain analysis

Figure 4: MSMEs, however, lack access to formal credit and rely on costly informal sources; share of
formal credit in overall debt demand remains low (~<40%) across categories, most notably in micro
and small enterprises
Split of debt demand (FY22)

Total=
~$335B ~$618B ~$94B ~$1,100B
100%

80 (40%) ~$700B

(60%)
60 (80%)

40
(60%) ~$400B
20 (40%)
(20%)
0
Micro Small Medium

Formal credit Informal

Note: Assumed exchange rate of 1USD = 75 INR

Sources: IFC report on MSMEs (November 2018); RBI Trends & Progress report; Annual Report of the Ministry of MSME; Indian budget estimates; Bain analysis

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 5: The digital ecosystem is primed to support the growth of fintech; customer purchasing
behaviour is shifting towards more online buying

High digital proliferation due to access to smartphones/ …which is supported by change in consumer behaviour
Internet to expand service & product transactors… towards online across categories

User base User base Percentage online Percentage online

(FY21) (FY26E) (FY21) (FY26E)

Smartphone users 725M–775M 1150M–1200M Banking 31% 40%

Internet users 625M–675M 850M–900M Travel 39% 43%

Social media
users 400M–450M 725M–775M Health 1% 7%

Service
200M–250M 500M–550M Education 2% 5%
transactors

Product Fashion
~140M 350M–400M 30% 56%
transactors & durables

Notes: Indexed to pre-Covid-19 users; % online for rent and utilities assumed basis payments made online for respective categories (rent would fall within the P2P
payment landscape)
Sources: Forrester; Omdia; Nokia MBiT Report 2021; Telecom Regulatory Authority of India (TRAI); Similarweb; Industry participant interviews; Euromonitor; RBI;
India Brand Equity Foundation (IBEF); Forrester; Statista; Bain analysis

Figure 6: While traditional players will remain key beneficiaries of formal credit growth, fintechs will
increase market share over the next five years
Consumer credit to grow at ~13% CAGR, partially NBFCs* & fintechs^ to play role in increasing share of
contributed by growth in fintechs formal credit across MSME segments

Consumer credit—split by lender type ($B) CAGR MSME credit —split by lender type ($B) CAGR
21–26E 21–26E
$1,050B–$1,100B $750B–$800B
(6%) ~50%–60% (10%) ~50%–60%
(10%) ~15%–20%

(32%) ~20%–25%
(1%)
(3%)
(2%) $550B–$580B
(9%) $300B–$350B
$460B–$490B (1%)
(84%) ~11%–14% (25%)
(20%) $200B–$250B
(20%) (58%) ~10%–12%
(90%)
(79%) (79%) (73%)

FY19 FY21 FY26E FY18 FY21 FY26E

Banks Traditional NBFCs* Fintech players

*Non-Banking Financial Company

^Fintech NBFC lenders such as LendingKart
Sources: RBI; Ministry of MSME India; Accord; CRIF; Market participant interviews; Bain analysis

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 7: Fintechs have established a strong foundation in the payments space thanks to UPI, which
has transformed digital payments and contributed to transaction values ~9x that of CCs over four years
Monthly transaction value through UPI has grown to ~$135B compared to ~$14.5B for CCs

Monthly transaction values ($B) CAGR

(Jun'19–Jun'22)
150
90%
100 Dip in transactions due
to Covid-19 lockdowns P2M is ~21% of total
50 UPI transaction value*

24%
0
Jan'18 Apr'18 Jul'18 Oct'18 Jan'19 Apr'19 Jul'19 Oct'19 Jan'20 Apr'20 Jul'20 Oct'20 Jan'21 Apr'21 Jul'21 Oct'21 Jan'22 Apr'22 Jun'22

Monthly transaction volume through UPI has grown to ~5.9B, compared to ~228M for CCs

Monthly transaction volume (M) CAGR

(Jun'19–Jun'22)
UPI transaction volume has surpassed
6,000 98%
its pre-Covid-19 levels unlike volumes
of CC transactions
4,000
P2M is ~44% of total
2,000 UPI transaction volume*

0 12%
Jan'18 Apr'18 Jul'18 Oct'18 Jan'19 Apr'19 Jul'19 Oct'19 Jan'20 Apr'20 Jul'20 Oct'20 Jan'21 Apr'21 Jul'21 Oct'21 Jan'22 Apr'22 Jun'22

UPI CCs

*P2M share in the UPI transactions volume and value is for the month of June 2022; this excludes P2M payments masked as P2P (especially for micro merchants)
Note: Assumed exchange rate of 1USD = 75 INR
Source: National Payments Corporation of India; RBI; Bain analysis

Figure 8: While fintechs have taken a lead in digital payments, their presence in other financial services
categories is gradually expanding
New-age discount brokers to rapidly Unique users on digital assets trading Digitally* sourced health insurance
grow customer base at ~20% CAGR platforms** to grow at ~16% CAGR policies to grow at 23% CAGR

Number of active users (M) CAGR Digital assets—number of unique CAGR No.of digitally sourced health CAGR
FY 21–26 users (M) FY 21–26 insurance policies (M) FY 21–26

30M–35M
28M–32M ~4
13%–17% 6%

20%–23% 12%

8%–10% 10%
15M–20M
15M–20M 16% 23%
20%–25%
~2
8M–10M 22%–25%
10%–12% 50%–55% 19%
45%–50% 3M–5M ~1
23%–27% 40%–45%
10%–15%
12%–14%
FY19 FY21 FY26E FY19 FY21 FY26E FY19 FY21 FY26E

Fintech players Large traditional

Bank-based Other traditional

*Via Online website of insurer and Web aggregators

**Digital assets trading platform is primarily crypto trading however, the future growth is dependent on crypto bill and regulatory policies
Sources: Analyst reports; IRDAI; Bain analysis

9
Evolution of fintechs in India

Currently accounting for about 7% of India’s $1.4 trillion FS EV, the fintech sector is expected
to grow to $350 billion in EV by 2026, representing nearly 15% of FS market cap.

– The Brazilian market, with similar macro fundamentals and demographics to India, saw
fintech’s share in FS market capitalisation grow from 2% in 2017 to 35% in 2021.

Covid-19 led to transformational shifts in consumer behaviour and accelerated digital adoption:

– Non-cash payments soared, with more than 75% year-over-year (YoY) growth in UPI transactions
between FY20–21.

– Digital lending apps (DLAs) accounted for more than 60% of loans disbursed by nonbank
financial companies (NBFCs) in FY21.

– Over 35 million demat accounts were added in FY22 (till Nov’21), thereby increasing the tally
of demat accounts by 63%, from 55 million in FY21 to nearly 90 million in FY22.

Indian fintechs witnessed record investment and deal activity, receiving approximately $10 billion
in funding across more than 580 deals in FY21, which was three times the $3.5 billion received
in 2020. The first half of 2022, has seen conservative funding of $4.2 billion, which is lower than
H1 FY21, but twice the funding received in H1 FY20. While payments and lending continue to
attract the bulk of funding (60%), other segments, including financial infrastructure, wealthtech,
and neobanks, are now catching up.

Amassing a sizeable customer base through their core offerings, fintechs are now seeking to boost
customer retention and engagement by introducing new revenue streams and cross-selling
related services and products.

Several winning elements underpin the success of India’s leading fintech unicorns, including:

– Relentless focus on customer needs within the identified target segment(s) to continuously
innovate on value propositions (after the initial “hook” product) with superior customer
experiences/journeys as table stakes.

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 India Fintech Report 2022: Sailing Through Turbulent Tides

– Focus on scaling customer acquisition through significant investments in marketing before

driving efforts on monetisation.

– Initiatives for deeper customer engagement and higher retention, including activation
campaigns, gamification, expert-moderated social communities, and education forums
(e.g., educational courses and discussion forums for new investors).

– Long-term view on customer lifetime value (CLTV)/customer acquisition cost (CAC) from day
one, translating to focus on organic acquisition and stitching together a value proposition that
drives higher average revenue per user (ARPU).

– Gradual expansion into full-service ecosystems and super-apps across broader FS categories
for greater engagement and monetisation (especially by UPI players and business-to-business
[B2B] fintechs).

– Inorganic growth strategies, such as mergers and acquisitions (M&A) for product/market
expansion, to add revenue synergies and enhance capabilities and carve-outs where needed for
growth without impact on valuation multiples (e.g., carving out NBFC from core tech business).

– Partnerships with incumbents to obtain access to requisite licences, low-cost capital, risk
management know-how, and access to bank platform for scaling up (BaaS) especially for
neobanks and alternative lenders.

Leading fintech decacorns and unicorns have managed to stitch together coherent ecosystems
by expanding their core value proposition to drive higher engagement and ARPU.

– In payments, UPI players, such as PhonePe, gained scale and user growth by incentivising platform
usage through rewards, creating an app-in-app ecosystem, and driving hyperlocal commerce
with their merchant ecosystem and are now leveraging their scale to cross-sell other FS products.

– Wealthtech players such as Zerodha and Groww banked on their unique low-brokerage
proposition to attract new investors while increasing activation through community
engagement forums and educational resources.

– CC bill payment player CRED prioritised building a prime-plus customer base on its plat-
form and driving engagement through its store, gamified rewards, etc. over early moneti-
sation, eventually monetising its customer base by venturing into lending.

– Merchant-focused payment players, such as Pine Labs and Razorpay, are building one-stop
solutions for merchants. They started with payment acceptance; expanded to consumer
lending at POS, merchant working capital financing, and business management solutions
for merchants; and are now expanding from online to offline and vice versa and into new
segments like neobanking.

– Neobanks such as Jupiter, NiyoX, and Fi have started with a hook product for millennials
or MSMEs that is either credit-led, deposit-led, or software-led (for MSMEs) and are now
expanding into other FS segments after acquiring scale.

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 9: Home to more than 7,000 fintech start-ups and the highest number of unicorns in the
region, India has emerged as the front runner in the fintech landscape in Asia

Total funding received* ($B)

80
$71.5B

60

40 $35.0B

$18.3B
20
$9.6B
$5.3B
$0.6B
0
China India Singapore Indonesia Hong Kong Thailand

Population (M) 1,426 1,412 6 272 8 70

Total fintechs 2,532 7,441 1,847 1,069 706 306

Fintech unicorns 24 25 4 3 5 2

*Cumulative funding as of Aug'22 (since 2000)

Sources: Tracxn; Crunchbase; World Bank; UN's World Population Prospects 2022 report; CB Insights; S&P Capital IQ; Bain analysis

Figure 10: With favourable demographics and increasing digital adoption, this sector is expected
to disrupt the $1.4T financial services sector in India and capture $350B in EV by FY26E

Indian financial conglomerates (Overall FS EV,

($B, EV) Fintech EV)

(~$2,300B, $300B–$350B)
Fintech

(~$1,400B, ~$100B)
(~$1,250B, ~$50B) Banks

Insurance
providers

NBFCs

2018 2019 2020 2021 2022E 2023E 2024E 2025E 2026E

Digital 4% +$50B 7% +$250B 15%

(% Share of overall FS
EV/Quantum increase in EV)

Traditional 96% +$100B 93% +$650B 85%

(% Share of overall FS
EV/Quantum increase in EV)

Sources: S&P Capital IQ; Tracxn; PitchBook; Accord; Bain Analysis

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 11: The pandemic accelerated digital adoption across multiple segments, building consumer
acceptance of fintech-based digital solutions

Covid-19 led to the rise of digital In Insurtech/Wealthtech, Covid-19

Covid-19 fast-tracked the shift lending by NBFCs & proliferation led to improved market participation
from cash to non-cash payments of innovative credit products and product innovation

78% ~60% 63%

YoY growth in UPI transaction volume Loans disbursed by NBFCs were YoY increase in demat accounts in FY22,
between FY20–21 through DLAs in 2020, up from 23% bringing the number of accounts up from
in 2019 ~55M in FY21 to ~90M in FY22

40% ~$25B–$30B ~50%

YoY growth in RBI’s Digital Payments Credit disbursed to 15M Average YoY increase in health insurance
Index (DPI)* buy-now-pay-later users in FY21, as policies sourced through digital
BNPL emerged as a preferred credit channels** between FY19 and FY21
offering in the wake of Covid-19

98%
YoY increase in number of QR codes Increased product innovation—launch
deployed in Sep’20 of products such as sachet insurance
(e.g., Corona Kavach, Corona Rakshak)

*Reserve Bank of India's digital payments index (DPI) indicates the extent of digitisation of payments
**Includes web aggregator and online website
Source: Analyst reports; RBI statistics; Bain analysis

Figure 12: Fintech funding in India has increased impressively in recent years; while payments and
lending have garnered the majority share of funding, other segments such as wealthtech, insurtech,
and neobanking are fast catching up
Total fintech funding received in India Top funded sub-sectors (by deal size, % of total)

12.5 583
Healthy pick-up in funding
witnessed for wealthtech,
neobanking, fintech infra
10.0 and insurtech segments
405 454
364
7.5 342
368 3 3 9
276 14 15
$10.7B 3 9
5.0 202
$8.4B
$2.5B 18 $8.4B
97 42
2.5 $4.4B $4.4B
$3.5B 36
$2.8B $2.5B 40
$0.4B 6
$1.0B
0.0 1
1
2014 2015 2016 2017 2018 2019 2020 2021 2022E*
Cumulative 2018 2022E*
Funding $0.4B $2.8B $3.8B $8.1B $10.6B $15.1B $18.5B $29.2B $37.6B
Fin Infra Insurtech Lending Neobanking
($B)
Funding # Rounds Others Payments SaaS Wealthtech

*Annualised based on data for H1 2022

Notes- Fin Infra – Financial services infrastructure providers; SaaS – Software as a Service
Source: Tracxn; Bain analysis

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 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 13: In 2021 and 2022, India witnessed the addition of 15 fintech unicorns in segments be-
yond payments

2021–22
Total funding ($) Valuation ($) Segment

2020 CRED
OfBusiness
1B
892M
6.4B
5B
Payments
Lending
Zerodha Digit 544M 4B Insurtech
Razorpay Upstox 512M 3.5B Wealthtech
Chargebee 470M 3.5B Fintech Infra
Pine Labs Groww 394M 3B Wealthtech
2019 BharatPe
CoinDCX
617M
247M
2.7B Payments
2B Wealthtech
BillDesk CoinSwitch Kuber 302M 1.9B Wealthtech
Zeta 350M 1.5B Fintech Infra
PhonePe
Five Star 500M 1.4B Lending
<=2018 Slice
Yubi
349M
227M
1.4B
1.3B
Lending
Lending
Policybazaar OneCard 227M 1.3B Lending
Acko 541M 1.1B Insurtech
Paytm
MobiKwik 256M 1B Payments
Oxyzo 200M 1B Lending
Open 187M 1B Neobank

2 2 3 18
Total number of fintech unicorns

Note: Funding and valuation data as of Aug-22

Sources: Tracxn; Crunchbase; Bain analysis

Figure 14: Indian unicorns adopted a variety of strategies to achieve scale, user growth, and
market expansion

ILLUSTRATIVE

Razor-sharp focus on Targeted Gen Y users (ages 25–40) with

Focused on catering to the needs of small and
target segment and 750+ credit score through its unique
Cred Razorpay medium enterprises (SME) customers through
superior customer customer-centric proposition and a
customised products and value-added services
experience user-friendly platform
Strengthening Started off as a mutual fund investment
Started off as a payment gateway, and
customer proposition platform, and expanded its offering to provide
Razorpay launched a variety of value-added services Groww
by expanding into direct investment in equity, gold, Exchange Traded
to evolve into a full-stack solution
core adjacencies Funds (ETFs), etc.

Adopted measures such as building expert-

Initiatives to boost
customer engagement
and activation
Organic expansion
into new segments OfBusiness FS segments such as lending and neo-
to build Razorpay a variety of finance-related needs of small
FS ecosystems
Strategic M&A for
business or
product expansion
moderated communities and financial literacy
Groww
courses to drive customer activation among
its new-to-investing user base
Razorpay and OfBusiness forayed into new
banking to build ecosystems that can cater to
and medium businesses (SMBs)
Acquired HR Tech companies, such as ZingHR
Zeta and PeopleStrong, to capitalise on their
mutual synergies for cross-selling products
Incentivised platform use through reward points
Cred on CC bill payments, prioritising achieving scale
over early monetisation
Started off as CC management platform;
expanded into segments such as lending,
Cred
e-commerce and payments to monetise its
user base
Acquired Opfin (payroll management company)
and Thirdwatch (fraud-prevention platform) to
Razorpay
expand product offering. Also acquired Malaysian
payments company Curlec to expand in Southeast
Asia (SEA)

Partnerships with Its long-standing partnership with industry Razorpay launched its neobanking offering
incumbents to benefit Jupiter incumbent Federal Bank provided it with ability Razorpay (Razorpay X current accounts) in partnership
from mutual synergies to offer deposit products and helped it expand with RBL Bank
into mutual funds

Note: Examples listed are illustrative

Source: Bain analysis

14
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 15: Diverse themes have emerged in the past across financial services segments and have
disrupted the industry
Payments
Growth in real-time Account-to-
Account (A2A) payments
GPay, Paytm, PhonePe
Payment gateways and PoS
players providing full-stack
merchant solutions
Razorpay, PayU, Mswipe, Pine Labs
Cross-border payments
PayPal, Stripe, Hop
Lending
Retail consumption financing
MoneyTap, KreditBee, Simpl, Slice, UNI
Digitisation of asset-backed lending
Rupeek, CarDekho, CARS24
Unsecured MSME lending
Lendingkart, Indifi, KredX, Progcap,
BharatPe
Proliferation of loan aggregators
BankBazaar, IndiaLends, Paisabazaar
Adoption of decentralised finance
(DeFi)
Instadapp, UniLend
Wealthtech
Direct distribution platforms
expanding into discount broking
Zerodha, Upstox, Groww
Convergence of robo-advisory,
personal finance management
tools, and manufacturing of
standardized model portfolios
Kuvera, Scripbox, smallcase,
ArthaYantra
Investments in alternative assets
CoinSwitch Kuber, WazirX,
CoinDCX, NFTICALLY, Grip, Tyke
Insurtech
Expansion of digital non-life
insurers and bite-sized insurance
Digit, ACKO
Rise of digital platforms for
insurance distribution
Policybazaar, RenewBuy, Coverfox,
Toffee, Plum, Turtlemint, Loop
Proliferation of insurance enablers
Aureus Analytics, SureClaim,
Riskcovry

Emergence of digital lending

infrastructure enablers
Perfios, Crediwatch, CreditVidya

Banking-as-a-Service Commercialisation of Launch of retail/ Proliferation of digital Expansion of business

providers Distributed Ledger wholesale Central Bank identity and open management solutions
Fintech Technology/ Blockchain- Digital Currency (CBDC) banking enablers
Zeta, Setu, M2P ClearTax, Darwinbox,
Infra based use cases Signzy, ThirdWatch, Khatabook, Zoho,
Hyperledger, Ripple, R3 Corda IDfy, Jocata Happay, Vyapar

Digital/Neo Advent and expansion of neo-banks Launch of digital attackers by incumbents

banks Jupiter, Niyo, Walrus, Fi, Open, Razorpay, Tide Kotak 811, SBI Yono, Digibank by DBS

Note: Examples listed above are illustrative and non-exhaustive

Source: Bain analysis

15
Voice of industry: Insights from
C-suite executives (CXO) survey
Industry leaders across incumbents, insurgents, and private equity/venture capital firms believe
that favourable macro fundamentals, such as low financial services penetration and increasing
digital adoption, along with strong consumer demand for better product propositions and
customer journeys are driving fintech and digital adoption in India FS.

Consumption financing, neobanking, and fintech infrastructure (for Banking as a Service) have
emerged as the top three fintech themes that industry leaders are most bullish on for the short
to medium term. Apart from the top three themes, incumbents also consider the emergence of
full-service ecosystems as a vital theme, while insurgents believe that insurtech will be disruptive.

96% of leaders at incumbent banks, NBFCs, and insurers have clearly highlighted redesigning
existing customer journeys as one of their top three strategic priorities. 61% of incumbents also
highlighted providing embedded finance by partnering with fintechs and about 57% of incumbents
believe reimagining distribution models by shifting from physical to digital as the key areas of
focus for the next five years.

68% of fintech leaders believe that customer engagement and retention is their biggest strategic
priority. Nearly 60% believe that obtaining appropriate licences and core capabilities will be
essential for driving long-term relevance and sustainable growth. Monetisation and profitability
have also emerged as key strategic priorities for fintech leaders.

About 75% of incumbents have highlighted collaboration with fintechs as the most critical
enabler for maintaining leadership in digital FS. Acquiring and retaining the right talent (data
scientists, product owners, developers, designers, enterprise architects, etc.) has emerged
as a critical enabler for both incumbents (65%) and insurgents (79%).

More than 65% of incumbents stated that they are partnering with insurgents to improve customer
acquisition and enable superior customer experience, while most fintechs seek partnerships with
incumbents for regulatory expertise, requisite licences and access to low-cost capital.

16
 India Fintech Report 2022: Sailing Through Turbulent Tides

83% of incumbents believe that risk management will be the biggest challenge while partnering
with insurgents, while 79% of insurgents believe that tech agility and digital ways of working
between insurgents and incumbents will be a key challenge while collaborating. While both
parties are looking for increased collaboration, misalignment in expectations is evident in a few
key areas, specifically organisational culture/ways of working, risk management practices,
commercial models, and tech agility.

88% of the surveyed investors view the Indian fintech sector as an attractive opportunity due
to the existence of a large, addressable market. Investors also cite fintechs’ ability to deploy
a differentiated value proposition at scale as the second-biggest critical factor driving
investments.

Looking ahead, about 80% of respondents expect increased collaboration between incumbents
and insurgents across use cases. Most respondents are also predicting consolidation through
M&A amongst fintechs, and between incumbents and fintechs, along with the emergence of
clear winners and “also-rans” within each sub-sector/fintech theme, based on clear differenti-
ation in value proposition.

17
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 16: Strong macro fundamentals and increasing consumer expectations are making C-suite executives
bullish on emerging fintech themes, such as consumption financing, fintech infra, and neobanking

Insurgency drivers like macro fundamentals and …optimism around themes like consumption
customer demands are giving way to… finance, fintech infra, and digital/neo-banks

Factors driving insurgency in FS (mean of relevance score) % of respondents stating themes (up to 3)
that they are most bullish on
Consumption
Strong macro finance 44% 44% 11% 51%
4.4
fundamentals
Digital/neobanks 40% 44% 16% 47%

Fintech infra 32%) 44% 24% 47%

Consumer demanding
4.1
better experience Unsecured 29% 41% 29% 32%
MSME lending
Super apps/ 23% 69% 8% 25%
Better understanding and focus ecosystem
3.8
on tech stack & using data Crypto/DeFi 62% 15% 23% 25%

Wealthtech 38% 54% 8% 25%

Regulatory push on
3.8
digitisation and fintech infra Insurtech 80% 10% 10% 19%

Others 25% 75% 8%

Better monetisation
3.4
strategy killing bad profits
Insurgents Incumbents Investor

Source: Bain India CXO survey, (n=51)

Figure 17: Redesigning the customer journey remains a top priority for incumbents, while insurgents
are focused on improving customer engagement and retention

Incumbents Insurgents Industry voices

What are key strategic initiatives for What are key strategic initiatives for your Providing exceptional customer experience
your organisation in the next five years? organisation in the next five years? and glitch-free service are key to build
trust and retain clients. [The] first 6 months
% of respondents stating reason as top 3 % of respondents stating reason as top 3 focused on building trust, which has now
resulted in vintage customers having
Customer almost 4x relationship.”
Redesigning 96% engagement & 68%
customer journeys Jitendra Gupta, Founder, Jupiter
retention
Embedded Drive long-term Nobody plans a bank visit anymore—it is
finance through 61% relevance 58% while transacting that they realise the need
partnerships (licence, core) for a bank and institutions to be available
in a seamless/accessible manner whenever
Reimagining Customer the customer needs the service in the
distribution models 57% 47% journey.”
acquisition
Anjani Rathor, CDO, HDFC Bank
Launching 35% Monetisation 47%
digital attacker Now high-traffic marketplace has moved to
the internet, it is no longer about larger sq.
BaaS/application ft bank branches at these locations. Ground
programming 13% Profitability 42% for competition has changed—lines blurring
interface (API) between services available at a branch in
connectivity
comparison to app as fintechs focus on
BaaS/API customer experience and engagement.”
Others 13% connectivity 11%
Kunal Shah, Founder, Cred

Source: Bain India CXO survey, (n=51)

18
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 18: Industry leaders believe that a digital-first operating model, with adequate investment
in talent and technology, will be a critical enabler for maintaining or achieving leadership

Incumbents Insurgents Industry voices

What are key enablers to succeed and What are key enablers to succeed and Startup becomes a large corporate when the
maintain leadership? achieve leadership? ratio of risk-averse people increases in a
company. Also, the unique thing about
% of respondents stating reason as top 3 % of respondents stating reason as top 3 tech-based companies is that revenue growth
is not linearly linked with employee addition.”
Kunal Shah, Founder, Cred
Collaborate with 74% Invest/hire right 79%
fintechs talent
Right talent is heavily in demand across geos
& sectors. Uphill task to convince people to
Systems op. work for traditional organisations and will
Hire right talent 65% model 63% require some disruption within the bank itself.”
Anjani Rathor, CDO, HDFC Bank
Redefine op. Drive favourable
model to 52% regulatory 42% Actively engaged with regulator—very open
digital-first environment and easy communication channel to explain
business proposition, making submissions and
Invest/upgrade Collaborate understanding the markets/regulations better.”
tech stack 43% with 37% Founder, Leading Fintech Player
incumbents

BaaS/API BaaS/API Fintech partnerships have led to ~3.5x surge

connectivity 26% 32% in volume of savings accounts opened. We
connectivity expect this trend to continue and therefore,
we are constantly working on upgrading tech
infra to be prepared.”
Others 4% Adequate 26%
capital Shalini Warrier, ED, Federal Bank

Source: Bain India CXO survey, (n=51)

Figure 19: Incumbents prefer to partner with insurgents for superior customer experience while
insurgents prefer to partner with incumbents for their regulatory expertise

Q: Incumbents’ view on where they expect to Q: Insurgents’ view on where they expect to
achieve highest value creation by partnering achieve highest value creation by partnering
with insurgents with incumbents

% of respondents stating reason as top 3 % of respondents stating reason as top 3

Offer superior Regulatory expertise and

70% 84%
customer acquisition licence for product launch

Improve customer
experience through 65% Access to capital 58%
tech
Leverage alternate Increase customer
data for acquisition 57% conversion due to brand 42%
and underwriting recognition
Co-develop Underwriting capabilities
innovative 57% and risk management 21%
propositions expertise

BaaS/API Leverage physical

43% 16%
connectivity distribution

Leverage core banking

Others 4% solution (CBS) due to 11%
higher reliability at scale

Source: Bain India CXO survey, (n=51)

19
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 20: Incumbents believe risk management will be a top challenge for such partnerships, while
digital ways of working and agility are top concerns for insurgents

% of respondents stating reason as top 3

13% Nobody is falling short on market

Culture/ways of working
Risk mgmt. culture
and practices
Service delivery issues 9%
Alignment on commercials
(expectation v. delivery) 11%
Tech agility between
incumbents and insurgents
Scalability issues of
tech infra
63% understanding, go to market strategy,
customer/merchant requirements—
83% what it really comes down to is the
37% tech architecture in place to partner
seamlessly.”
Amrish Rau, CEO, Pine Labs
53%
Fintechs are driving growth, but
52% controls can go off balance—one thing
to give loans to all pin-codes but
another on how you manage
39% delinquencies and get them back.
79% These will become big differentiators
of the future.”
22%
16% Anjani Rathor, CDO, HDFC Bank

Knowledge and skillsets 13% Banks have to focus on safeguarding

mismatch 0% the interest of depositors, while
fintechs are more opportunity-oriented
Others (limited value 13% which sometimes leads to mismatch
through partnership) 0% of priorities.”
Sameer Shetty, Head of Digital
Insurgents Incumbents Business & Transformation, Axis Bank

Source: Bain India CXO survey, (n=51)

Figure 21: Investors see the Indian fintech market as an attractive space for investment due to a large,
addressable market and conducive investment environment

What are key factors for increasing investments How would you rank the factors below while
taking place in the fintech space? considering investing in a fintech startup?

% of respondents stating as top 3 Factors driving investment (mean of relevance score)

Market potential—total
Strong/addressable addressable market 4.9
88%
market (TAM), growth drivers

Ability to deploy unique

4.8
Buoyant investment value prop. at scale
63%
market
Quality of leadership,
4.6
vision, and talent pool
BaaS/API
63%
connectivity
Long-term view of path to
4.3
profitability

Stable macro factors 38%

Competitive landscape 3.8

Positive regulatory Clear objective to deploy

25% capital for growth/ 3.6
environment
scalability

Source: Bain India CXO survey, (n=51)

20

Figure 22: Future play—CXOs believe collaboration is the way forward, with coexistence as the larger
theme to play out
% of respondents selecting
all that apply
Increased collaboration between
incumbents and insurgents to
seamlessly embed FS in
customer ecosystem
Consolidation through M&A
amongst fintech players and/or
between incumbents &
insurgents
Emergence of clear winners and
also-rans in each sector/theme
based on clear differentiation in
value proposition
Continued influx of private
capital but chasing fewer,
differentiated companies
Fintechs/digital FS companies to
contribute significant (>20%)
portion of market cap of
India’s FS
Others
Source: Bain India CXO survey, (n=51)
India Fintech Report 2022: Sailing Through Turbulent Tides
Wherever there is market gap in terms of supply, process or product proposition, the key
78% strategy going forward would be to co-create products.”
Naveen Kukreja, Cofounder & CEO, Paisabazaar
The industry will see collaboration as there is a need for entities to be within regulatory
63% purview, consolidation due to fewer credible models & expansion given promising Indian
FS market.”
Charu Mathur, Head of Bus. Strategy, IndusInd Bank
61%
Think of all the work you do like a pizza – One slice I am good at, for another I partner for
ingredients. Partner has view of the slice, but I have the view of the entire pizza.”
KV Dipu, Head of Ops & Cust. Service, Bajaj Alliance
49%
We have carved out an independent Business Department devoted to fintech partnerships.
We have co-opted team members from risk, compliance, operations, technology etc. into
this unit and this has helped us to scale up partnerships and become the perfect banking
partner to them”
37%
Shalini Warrier, ED, Federal Bank
Insurgents are likely to start with high frequency products to build trust and touch points and
2% then expand their business into low-frequency products.”
Rajan Bajaj, Founder, Slice
21
 India Fintech Report 2022: Sailing Through Turbulent Tides

There is a clear
trend in favour
of bite-sized
consumption
financing solutions,
especially driven
by millennials and
Gen Z.

22
Unsecured retail lending and
rise of consumption finance
Despite the Covid-19 pandemic, unsecured retail financing has steadily grown at about 25% over
the past three years (FY19–FY22):

– Credit cards (CCs) showed resilience with a 19% CAGR

– Personal loans (PLs) grew at an impressive 29% CAGR

– Consumer durable (CD) loans recovered to pre-pandemic levels and grew at 13% CAGR

Semi-urban markets have been the primary source of growth for unsecured retail lending
products, with about 32% CAGR in Tier 4 regions v. approximately 18% CAGR in Tier 1 regions
over the past three years.

Average ticket sizes for various lending products, especially PLs and CDs, are declining due
to an increased focus on small-ticket-size lending led by fintech and NBFC lenders. The average
ticket size of NBFCs in the PL category decreased by 70% over the past two years.

CCs have shown impressive growth of 12% CAGR over the past three years in the small-ticket-
size segment (less than $650), with no real impact on asset quality and expansion primarily driv-
en by semi-urban regions.

PLs have shown robust growth of 120% CAGR in the small-ticket-size (<$650) segment, with 85%
of disbursements in small ticket size (<$650) to consumers less than 35 years old. A similar
theme is visible in PLs as witnessed in CCs, where the primary driver of growth have been the
semi-urban regions.

Small-ticket CD loans have also recovered to pre-pandemic levels, with an 11% CAGR over the past
three years. Over 70% of disbursements have been to the <40 years age group with 36% to the
30–40 years age group and 37% to the <30 years age group, highlighting significant demand for
consumption financing by millennials and members of Gen Z. New-to-Credit (NTC) customers
have shown best credit behavior in CCs, but performance challenged in PLs and CD loans.

23
 India Fintech Report 2022: Sailing Through Turbulent Tides

The above factors highlight a clear trend in favour of bite-sized consumption financing solutions,
especially driven by millennials and Gen Z. Growth in semi-urban regions and in the NTC segment
also shows that lenders are beginning to successfully increase their reach through digital channels
and leverage alternate data for underwriting.

Short-term, small-ticket consumer loan products, which offer convenience and a better customer
experience, grew rapidly as a preferred mode of consumption financing. Additionally, equated
monthly instalment (EMI)-based CC propositions are gaining traction in the small-ticket-size
segments. From a fintech perspective, we saw the emergence and scale-up of convenience Buy
Now Pay Later (BNPL) such as Simpl and LazyPay, affordability BNPL (e.g., ZestMoney), and
card-based lending products.

However, recent regulations restricting Prepaid Payment Instruments (PPIs) from offering
credit lines and the new digital lending guidelines will adversely impact the current business
models of these players, especially card-based lending and BNPL players providing a revolving
line of credit.

While tightening of the regulatory environment will result in conservative growth of fintechs
in the short-term consumption financing market, the fundamentals for consumption financing
still remain strong. We expect the form factors to change to adhere to regulatory guidelines
with greater collaboration between fintechs and banks expected on consumption financing
(e.g., co-branded cards), expansion of low-limit credit cards with innovative and flexible repayment
options, increasing traction for end use-specific financing facilitated at point of sale by POS
providers and payment aggregators, etc. Additionally, regulatory oversight on consumption
financing specifically led by fintechs as DLAs or loan service providers (LSPs) and on fintechs
more generally is expected to increase going forward, with RBI expected to set up a fintech division.

24
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 23: India’s unsecured retail lending market has grown at an impressive 25% CAGR over the
past three years, with increasing focus on the semi-urban regions of India

Unsecured retail lending has grown at a robust Lending from Tier 4* regions grew at CAGR of 32%
25% CAGR over the past 3 years during FY19–FY22, compared to 22%–24% for Tier 2
& Tier 3 and 18% for Tier 1

Sanctioned amount ($B) CAGR Sanctioned amount ($B)— CAGR

(FY19–FY22) Unsecured retail lending (PL, CD, CC) (FY19–FY22)
125 125
101 25% 25%
100 100
15% 19%
75 12% 13% 75 32%
64
52 16%
50 17% 12% 50 24%
16% 74% 29% 22%
25 72% 25
67%
18%
0 0
FY19 FY21 FY22 FY19 FY21 FY22

PL CD CC Tier 1 Tier 2 Tier 3 Tier 4

Notes: USD 1=INR 75; PL stands for Personal Loans; CC stands for Credit Cards; CD stands for Consumer Durable Loans; sanctioned amount for PL and CD
refers to the amount sanctioned for disbursal and not the amount disbursed; sanctioned amount for CC signifies the total credit limit sanctioned and not the actual
spend/credit used; *Tier definition as per Experian include Tier 1 – 23 districts consisting of metropolitan/highly urbanised cities (such as Mumbai, Delhi, Bangalore,
Chennai, Pune, etc.); Tier 2 – 52 districts consisting of medium-density urban centers (such as Ahmedabad, Dehradun, Jaipur, Jabalpur, Jammu, Lucknow, etc.);
Tier 3 – 51 districts consisting of urban administrative and trade centers (such as Meerut, Ludhiana, Ajmer, Agra, Vadodara, etc.); Tier 4 – 495 districts consisting
of semi-urban towns and districts (such as Bareilly, Bijnor, Chittorgarh, Haridwar, Ujjain, etc.)
Sources: Experian; Bain analysis

Figure 24: Over the past 3 years, private sector banks continued to lead the CC market, public sector
banks expanded aggressively into PLs, and NBFCs continued to dominate CDs

CC: Private sector banks* PL: PLs grew rapidly through CD: Private sector banks
continue to dominate the Covid-19, driven mainly by expanding in CD as NBFCs
CC market public sector banks continue to dominate

Sanctioned amount ($B) CAGR Sanctioned amount ($B) CAGR Sanctioned amount ($B) CAGR
(FY19–FY22) (FY19–FY22) (FY19–FY22)
6% 4%
19% 4%
15 15 80 13 12 10%
–11% 75 29%
5% 64% 40% 65%
4% 18% 26% 10 5% 13% 26%
2% 4%
10 3% 9
10 9 8
7% 46 8
3% 9%
15% 40 16% 41% 35% 14%
35
89% 22% 5 83% 12%
5 19%
89% 52% 84%
83% 20 36% 81%
37% 24% 3
42% 30%
0 0 0
FY19 FY21 FY22 FY19 FY21 FY22 FY19 FY21 FY22

Pvt. Sector Banks Pub. Sector Banks NBFCs Others**

*Private sector banks also includes State Bank of India (SBI) cards and Bank of Baroda (BoB) cards
**Others include foreign banks and corporation banks
Notes: USD 1=INR 75; Sanctioned amount for PL and CD refers to the amount sanctioned for disbursal and not the amount disbursed; sanctioned amount
for CC signifies the total credit limit sanctioned and not the actual spend/credit used
Sources: Experian; Bain analysis

25
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 25: NBFCs continue to drive down the overall average ticket size for PLs and CD loans, indicating
consumer preference towards bite-sized lending products that offer ease of use

CC: 40% increase in average PL: ~70% reduction in ATS for CD: Sharp fall in ATS (~33%) for
ticket size (ATS) for private NBFCs over past 3 years private sector banks over the
sector banks over past 3 years past year

Average ticket size ($) Average ticket size ($) Average ticket size ($)
Driven by selective
issuance of loans
1,500 8,000 600 with higher ticket
568 size during
$1,382
(₹104K) Covid-19 period
6,532 6,389
(₹479K)
1,012 6,000 5,031
991 $981 $5,545 380
1,000 (₹74K) (₹416K) 400
(₹28K)
$958 379
730 (₹72K) 291
848 4,000 4,616 4,561 289 268 (₹22K)
281
612 2,864 264 (₹21K)
500 200 233
Public sector banks significantly 1,833
reduced new card issuances in 2,000 1,272
FY21 while being selective in FY22, 1,046 (₹95K)
thereby, driving sudden change in
avg. ticket size 417 282
0 (₹21K) 0
0
FY19 FY21 FY22 FY19 FY21 FY22 FY19 FY21 FY22

Pvt. Sector Banks Pub. Sector Banks NBFCs Overall

Notes: USD 1=INR 75; NBFCs do not issue credit cards for regulatory reasons
Sources: Experian; Bain analysis

Figure 26: CC issuances in smaller ticket sizes (credit limit <$ 650 or ₹ 50K) grew at a 12% CAGR
with no significant impact on asset quality, primarily through expansion of small-ticket loans in
semi-urban regions
Credit sanctioned to cards with ...driven primarily by semi-urban …while delinquencies have
<$650 (₹50K) limit has grown at markets... remained broadly in line with
a CAGR of 12%... higher ticket sizes

Sanctioned amount ($B) CAGR Sanctioned amount CAGR Net 90+ days past due (DPD)
Ticket size: <$650 (₹50K) (FY19–FY22) (% share) by tier (FY19–FY22) Ticket size: for private sector banks
Ticket size: <$650 (₹50K)

3 $2.7B 12% 100%

(~₹20K Cr.) 3%
80 32% 33% 35% 16%
2 $1.9B $1.9B 2
60 16% 17% 18% 16% 1.6%
40 18% 18% 1.3%
18% 12%
1 1
20
34% 31% 29% 6%
0 0 0
FY19 FY21 FY22 FY19 FY21 FY22 FY19 FY22
$1,333–$2,667 (₹1L–2L)
$667–$1,333 (₹50K–1L)
Tier 1 Tier 2 Tier 3 Tier 4 <$667 (₹50K)

Notes: Tier definition as per Experian include Tier 1 – 23 districts consisting of metropolitan/highly urbanised cities (such as Mumbai, Delhi, Bangalore, Chennai,
Pune, etc.); Tier 2 – 52 districts consisting of medium-density urban centers (such as Ahmedabad, Dehradun, Jaipur, Jabalpur, Jammu, Lucknow, etc.); Tier 3 – 51
districts consisting of urban administrative and trade centers (such as Meerut, Ludhiana, Ajmer, Agra, Vadodara, etc.); Tier 4 – 495 districts consisting of
semi-urban towns and districts (such as Bareilly, Bijnor, Chittorgarh, Haridwar, Ujjain, etc.)
Sources: Experian; Bain analysis

26
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 27: PLs within the small-ticket-size segment (credit limit <$650 or ₹50K) grew at 120% CAGR
over the past three years, primarily driven by NBFCs

Small-ticket PLs <$650 (<₹50K) Growth in the small-ticket ...and increased traction among
are gaining volume share, with segment is driven by expansion prime, super-prime and
volume growing at ~120% over in semi-urban markets... NTC customers
past 3 years

Sourcing volume (in M) CAGR Share of tiers in CAGR Share of bureau score in sourcing volume;
3% (FY19–FY22) sourcing volume; (FY19–FY22) Ticket size: <$650 (₹50K)
2% 2% 2% Ticket size: <$650 (₹50K)
12 25 57 68% 4 16 44
100% 78% 100% 100%
9% 6% 8% 18% 19% 19%
80 22% 10% 10% 80 31% 80 30%
20% 44%
18% 12% 49% 157%
25% 27%
60 60 20% 60
33% 120% 17% 38%
40 40 17% 16% 102% 40 24%
77% NBFCs dominate 36%
63% the <$650 (₹50k) 15% 14% 107%
20 20 20
34% segment, 32% 33% 24%
accounting 24% 21% 91% 18%
0 for ~97% of the 0 0 8%
FY19 FY21 FY22 sourcing volume FY19 FY21 FY22 FY19 FY21 FY22
NTC 1% 3% 18%
$2.65–6.65K (₹2L–5L) $13.35K+ (₹10L+) Tier 1 Tier 2 Sub-prime Near-prime
$650–2.65K (₹50K–2L) $6.65–13.35K Tier 3 Tier 4 (300–600) (600–700)
(₹5L-10L) Prime Super-prime
<$650 (₹50K) (700–800) (800+)
Notes: Tier definition as per Experian include Tier 1 – 23 districts consisting of metropolitan/highly urbanized cities (such as Mumbai, Delhi, Bangalore, Chennai,
Pune, etc.); Tier 2 – 52 districts consisting of medium density urban centers (such as Ahmedabad, Dehradun, Jaipur, Jabalpur, Jammu, Lucknow, etc.); Tier 3 – 51
districts consisting of urban administrative and trade centers (such as Meerut, Ludhiana, Ajmer, Agra, Vadodara, etc.); Tier 4 – 495 districts consisting of semi urban-
towns and districts (such as Bareilly, Bijnor Chittorgarh, Haridwar, Ujjain, etc.)
Sources: Experian; Bain analysis

Figure 28: While small-ticket (<$650) PLs have shown growth, ~85% of disbursements within <$650
have been to <35 years age group, demonstrating millennial and Gen Z preference for bite-sized
consumption financing
Customers <35 years of age constitute 80%–85% Delinquencies in small-ticket-size segment have
share in disbursals of small-ticket (<$650) PLs increased across all age-group categories
post-Covid-19

Share of age groups in sanction volume Net 90+ DPD by age group
Ticket size: <$650 (₹50K) Ticket size: <$650 (₹50K)

3% 4% 3%
100% 8%

18% 13% 14%

80 6.4%
6

60
~50% of total 4.3%
sourcing volume 4 3.9%
40 79% 84% 83% contributed by
customers
<30 years 2
20

0 0
FY19 FY21 FY22 FY19 FY22

<35 years 35–50 years 50+ years <35 years 35–50 years 50+ years

Sources: Experian; Bain analysis

27
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 29: Small-ticket CDs have exceeded pre-pandemic levels, primarily driven by growth in
Tier 4, with customers <40 years dominating the volumes that have shown sharp improvement
in asset quality

Strong growth witnessed in Small-ticket CD volumes are Sharp improvement observed in

semi-urban within small-ticket-size dominated by customers asset quality of loans sanctioned
(<$650/₹50K) segment <40 years (~35% market share to customers <40 years in the
held by customers <35 years) past 3 years

Sourcing count (in M) CAGR Sourcing count (in M) by age group; Net 90+ DPD by age group;
by age group; (FY19–FY22) Ticket size: <$650 (₹50K) Ticket size: <$650 (₹50K)
Ticket size: <$650 (₹50K)
28 27 38 11% 4% 4% 4%
100% 100% 3%

80 31% 39% 80 27% 26% 23%

42% 22%
2
60 21% 60
19% 36% 36% 36%
18% 6%
40 20% 40
18% 16% 5% 1
0.7%
20 20 34% 37% 0.5%
28% 24% 5% 33% 0.4%
24%
0 0 0.3%
0
FY19 FY21 FY22 FY19 FY21 FY22 FY19 FY22
Tier 1 Tier 2 <30 years 30–40 years <30 years 30–40 years
Tier 3 Tier 4 40–55 years >=55 years 40–55 years >=55 years

Notes: Tier definition as per Experian include Tier 1 – 23 districts consisting of metropolitan/highly urbanized cities (such as Mumbai, Delhi, Bangalore, Chennai,
Pune, etc.); Tier 2 – 52 districts consisting of medium density urban centers (such as Ahmedabad, Dehradun, Jaipur, Jabalpur, Jammu, Lucknow, etc.); Tier 3 – 51
districts consisting of urban administrative and trade centers (such as Meerut, Ludhiana, Ajmer, Agra, Vadodara, etc.); Tier 4 – 495 districts consisting of semi urban-
towns and districts (such as Bareilly, Bijnor Chittorgarh, Haridwar, Ujjain, etc.)
Sources: Experian; Bain analysis

Figure 30: NTC customers have shown best credit behaviour in CCs, but performance challenged
in PL and CD loans

CC: Sharp improvement in PL: NTC customers have shown CD: Performance of NTC
delinquency performance of NTC highest days past due in this customers has been better
customers in the past 3 years segment relative to sub/near prime
customer segments

Net 30+ DPD at Months on Book (MOB) 6 Net 30+ DPD at MOB 6 Net 30+ DPD at MOB 6
Ticket size: <$650 (₹50K) Ticket size: <$650 (₹50K) Ticket size: <$650 (₹50K)

20% 30% 8%
19%

25
15 6 5.9%
22% 5.5%
20
10 18% 4
15 3.0%
13% 2.7%
5 5% 11% 2
4% 10 1.6%
9%
2%
0 5 0
FY19 FY22 FY19 FY22 FY19 FY22

NTC Super-prime (800+) Prime (700–800) Sub/near-prime (<700) Overall

Sources: Experian; Bain analysis

28
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 31: Short-term, small-ticket consumption financing solutions increasingly finding traction
among customers and going forward will see further innovation from lenders

Millennials and
Gen Z showing Rise in short-term
Rise in small-ticket- Performance in line credit behaviour Increased presence consumption
size loans with industry in line with industry in semi-urban financing solutions

Rise in small-ticket-
size lending across
unsecured retail
segment indicates a
shift in customer
preference towards
consumption financing
through formal
channels
While customer <40 age group and Strong growth in These trends highlight
preference has NTC customers are digital, unsecured that customers are
increased for small- showing impressive retail lending across increasingly adopting
ticket-size financing credit behaviour in CC, semi-urban regions, online and offline
solutions, the asset comparable credit as highlighted short-term consumption
quality performance behaviour in CD with through the data financing solutions for
of these loans has other age groups, their affordability and
been in line with hence digital lending ease of use
industry and, in some platforms are targeting
cases better, this segment for growth
compared to higher- and expansion of their
ticket-size loans user base

Sources: Experian; Bain analysis

Figure 32: As digital lending models gain momentum, short term loans have emerged as a key credit
product focused on providing consumption financing to NTC, millennial, and Gen Z customers

In recent years, NBFCs have 46% of these loans disbursed For NBFCs, nearly half of the
witnessed an increase in loans through digital channel were disbursed amount had a tenure
disbursed through digital consumption finance loans of under 90 days
channels
NBFCs: Loans (Volume) through NBFCs: Product split of loans through
digital channels digital channels
80% NBFCs accounted 100% <1%
for ~30% of the overall 1%
loan amount disbursed 61% 80 ~12% of the total

48%
60 through digital 46%
loans disbursed
channels in FY20 through digital
60
channels were
40 short-term loans
40
23%
20 53%
20
5%
0 0 Of the loan amount disbursed by NBFCs
FY18 FY19 FY20 NBFCs in FY20 was for a tenure of <90 days

Consumption finance loans Others1

PL SME

1. Others include gold loans and auto loans

Source: Report of the Working Group on Digital Lending—RBI analysis based on representative data collected from banks and NBFCs

29
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 33: Short-term credit products are finding buyers in the Indian market due to their ease of
use and lower costs due to their credit-free period; 80% of credit card users are also likely to use
pay later products in the future

Q: What are the top reasons for Q: How many times per month Q: How likely do you see
using short-term credit products? did you use a short-term credit yourself using a short-term
[N=total borrowers, 760] product to make purchases? credit product in the future?

Top 3 reasons (%)

>15 times 3%
2%
Ease and 197 563 197 563
100 100
convenience 44% 5% Unlikely 9%
of use 10–15 times 8%
18%
17%
Access to 80 5–10 times 80
45-day interest- 39% 19%
Likely
free period 42%
24%
60 60
Rewards/
35% 1–5 times
loyalty points
45%
40 40 80%
Hassle-free
42%
checkout with 27% Very likely
‘one click’ 20 49%
20
Only once
Limit approved 25%
26% 12%
immediately
0 0
0 10 20 30 40 50 Only short-term Short-term loans Only short-term Short-term loans
loans and CC both loans and CC both

Sources: Consumer survey; Bain analysis

Figure 34: While short-term credit is finding interest among consumers, BNPL products loading
credit lines on PPI have seen headwinds and will have an impact due to the new RBI circular

20th June: RBI notification to 10th August: RBI notification on Potential implications
non-bank PPI issuers digital lending

“PPIs shall be permitted to be loaded/reloaded by
cash, debit to a bank account, credit and debit
cards, PPIs (as permitted from time to time) and
other payment instruments issued by regulated
entities in India and shall be in INR only.”
“PPI-Master Direction (MD) does not permit
loading of PPIs from credit lines. Such practice,
if followed, should be stopped immediately.”
Rationale: The spirit of the circular is to:
• Prohibit non-banking lenders to issue
revolving line of credit without RBI’s
explicit approval
• Restrict usage of PPI as a credit line
instrument
• Improve governance and compliance
of all financial entities,
• RBI having a clear view on the lending
practices, asset quality and overall
financial stability of the market
RBI mandated key implementation guidelines
1. All loan repayments and servicing to be
through Regulated Entities (RE) bank a/c,
without any pass-through/pool a/c.
Disbursements only to the bank a/c
of borrower
2. REs to provide Key Fact Statement upfront,
transparently covering fees, charges, etc.
3. DLAs/Loan Service providers (LSPs) can
collect only need-based borrower data
that is required for their operations with
explicit prior consent of borrower
4. All loans sourced through DLAs to be
reported to Credit Information Companies
(CICs) by REs irrespective of their tenor
Rationale: The spirit of the circular is to:
• Mandate clear supervisory and lead role
of regulated entities over DLAs and loan
service providers
• Protect customers from unregulated entities,
avoid data overreach and protect customers
from miss-selling
• Clear reporting by DLAs, and LSPs through
regulated entities to Credit Information
Companies
• Fintech players: Consumer financing players
(BNPL, card-based lending product, etc.) may
not be able to offer credit line via PPIs;
potential pivots to alternate mechanisms include
– Banking partner can open bank accounts for
all users post due KYC and transfer money in
PPI through these accounts – may lead to
customer drop-offs
– Partnering with traditional banks for
co-branded credit card issuance
– Acquiring an NBFC licence and obtaining
RBI approval for undertaking credit card
business
– Offer other lending products such as PLs,
consumer financing (non-card based)
• NBFCs: Might see impact on interest income
earned on funds routed through ‘rented’ PPIs
• Traditional banks: New PPI regulation could
potentially reduce competition for traditional
banks in the consumption finance, credit card
and pay later spaces
• Payment Aggregators (PA): The Digital
Lending guidelines mandate that loan
disbursement, repayment, and servicing
should only happen between the RE and
borrower’s bank a/c, thus potentially
eliminating the role of PAs that used to provide
nodal accounts to lenders for disbursements
and repayments.

Sources: RBI; secondary research

30
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 35: The Indian market saw emergence of three different types of BNPL products (cards or
wallet-based), that will now undergo changes due to recent RBI guidance on PPI regulations

Convenience BNPL Affordability BNPL Card-based lending products

Description Short-term lending (interest-free) Medium–long-term lending (int.-bearing or int.-free) Short–medium-term lending (int.-bearing or int.-free)
for open purchases (not specific) for specific purchases, to be paid back in EMIs for open purchases through cards issued by fintech
startups

Repayment tenure Short-term: 15 to 45 days Med. to long term: 3 to 9 months Short to med. term: 15 days to 3 months

ATS Small ticket size: $10–$30 Large ticket size: $500+ Med. ticket size: $200–$300

Maximum credit limit Up to $300–$400 Up to $5K–$7K Up to $8K–$13K

Channel focus Mostly online Primarily offline (led by trad. players) Mostly used for online purchases (accepted at
offline merchants also)

Customer need Ease of checkout Cater to credit need—primarily for NTC, new-to-credit Cater to both credit need & convenience with
(one-click checkout without card (NTCC), and existing-to-credit card (ETCC) more user-friendly, digitally driven experiences
any authentication) customers with additional credit needs

Customer focus LazyPay: Tech-savvy millennials ZestMoney: Tier 2 & Tier 3 city customers Primary focus towards 18-30 years age group with near
Paytm post-paid: Existing Paytm Pine Labs: Collaboration with fintechs and trade to prime/NTC customers. Few players also focus on
users looking for a line of credit lenders customers with steady income & established credit history

Key players LazyPay, Amazon Pay, Paytm, BNPL offered as BNPL offered as PL: BNPL offered as credit on PPI App-based or
MobiKwik, PhonePe revolving credit (credit ZestMoney, Money View, cards—Players have already physical co-branded
line): LazyPay Bajaj Finserv moved away from this model cards with banks

Implications of Each provider will now need to
new PPI guidance* tweak their model to convert each
transaction into a separate loan,
potentially impacting customer
experience and bureau scores
Providers will have to pivot
towards bank account-
based model to load PPIs,
or treat each transaction
finance as separate loan
No impact to current Players have either moved to a Limited impact as
model as each pay later co-branded model with bank or this is a co-branded
disbursement is currently have started to create separate model with banks
offered as separate loan loans for individual transaction
with bureau checks financing or they will need to create
a bank account to load PPI

*RBI prohibited non-bank-based PPIs from loading wallets with credit lines
Source: Bain analysis

Figure 36: BNPL players have witnessed robust growth over the past two years; however, RBI’s
recent guidance around PPI is showing signs of impact on the current form factors going forward
Monthly active users (M)* CAGR Key implications of PPI-credit ban
(’19–’22)
12 Slice Simpl LazyPay on BNPL players in India
216%
11.6 379% • Due to the convenience offered by
10
(’20–’22) pay later products, there was a high
8 adoption of PPI wallet and card-
based products in the recent past
6 • However, with the issuance of new
PPI guidelines from RBI, the
4 issuances for non-bank PPI wallets
3.5 200% and cards has significantly dropped
3.2 92% post-May’22
2
• Prior to RBI’s guidelines, the fintech
0 industry collectively had 206 M
Jun’19 Sep’19 Dec’19 Mar’20 Jun’20 Sep’20 Dec’20 Mar’21 Jun’21 Sep’21 Dec’21 Mar’22 Jun’22 prepaid cards in circulation until
May’22, which has now dropped by
Outstanding pre-paid wallets (non-banks in M) Outstanding pre-paid cards (non-banks in M) 5 Mn to 201Mn in July’22,
2,000 210 Uni and LazyPay stopped onboarding highlighting reduction in issuances
new customers; Slice changed its and cards being discontinued by
1,711 1,742 1,760 208 business model to offer separate loans non-banks
1,500
206 for each transaction. • SBM, one of the leaders in PPI
206 partnerships, has temporarily stopped
1,000 679 204 203 onboarding new customers for credit
Sharp drop in PPI outstanding post RBI’s 202 201 on PPI, impacting card-based
500 directive barring non-bank PPI issuers lending solution providers
from loading PPIs with credit lines 200

0 0
Mar’22 Apr’22 May’22 Jun’22 Mar’22 Apr’22 May’22 Jun’22

*An active user is defined as any user that has had at least one session in a specific time period
Note: Data shown here is preliminary and for India only
Sources: Similarweb; RBI; Bain analysis

31
 India Fintech Report 2022: Sailing Through Turbulent Tides

Figure 37: The consumption finance story remains strong; while the recent regulations will have
a medium-term impact, it will further create opportunities for emergence of new form factors and
closer collaboration with banks
Consumption financing • Fundamentals for consumption financing are still strong because of under-penetration of credit,
to maintain the the overall credit demand and the presence of slew of providers have highlighted the abundant
growth momentum opportunities for growth
• We expect consumption financing to continue to increase its salience in unsecured retail credit,
especially in semi-urban regions with higher adoption by millennials, Gen Z, and NTC customers

Emergence of multiple • The form factors might undergo changes due to headwinds for convenience BNPL, wallets with
forms of consumption revolving lines of credit by NBFCs and card-based lending products
financing products
• However, the need should get served by low-limit credit cards with innovative and affordable
repayment options and transaction financing solutions at point of sale expanding to new
categories, ticket sizes, and payment modes (e.g., credit on UPI)

Greater collaboration • Competitive dynamics may change with greater collaboration between fintechs and banks, and
between insurgents potential consolidation in the BNPL fintech space
and incumbents
• BNPL fintech players may also diversify credit offerings to new lending products and,
potentially, non-credit offerings

Increased regulatory • Regulatory scrutiny is expected to increase, especially on pay-later products and overall
scrutiny of fintech governance and compliance of fintech NBFCs, especially with RBI establishing their
fintech division

Source: Bain analysis

32
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