The Future Of Fintech In India

India is probably the best place for startups to be in, for an entrepreneur to look at, because of the high growth. If we continue to grow at 6% to 8%, there will surely be no better place than India. I also believe that there is a possibility of collaboration or cooperation between established financial services entities or banks with the startups. Globally, one of the ways in which an established enterprise looks at innovation is to work with startups. And because they can wait till the startup goes up to a series B or C funding stage when most of the risk is reduced, they can also acquire them.

BANKS SHOULD TAKE THE LEAD

Our banks should explore this route. And it’s also a good option for a startup because the best possible exit for a startup is an acquisition. That’s the route most startups will take. Very few startups will go for an IPO. Some banks have already established incubators within their organization to support startups. We need to leverage this or to grow this collaboration.

While many startups will get acquired, others will become tomorrow’s large enterprises. That is also required for India to become a developed economy. We are talking about $5 Tn to 10 Tn here. I myself am talking about $20 Tn. I believe it is possible. We have grown five times in the last 25 years and if we grow five times we will be 15 Tn.

Many new fintechs will emerge from adjacent areas. When we look at inclusion very broadly, looking at things like unserved markets and segments of the population, at providing services in vernacular languages again, that’s something that we need to encourage. One of the reasons UPI took off was it provided a QR code, which doesn’t require knowledge of English. And, the responses in the local language that the money has been credited is an added advantage. So, we need such innovations in other segments.

CREATING A LARGE ENTERPRISE

Also, I see the rise of more entrepreneurs with long-term visions in the future. To create a large enterprise, one needs a long-term vision and sustainable profitable growth. This is because you will have to reinvest that profit back into growing the business rather than growth through the equity route or through funds. etc. So long-term vision is required. It’s a marathon, not a sprint. Most startups only think about the next round of funding or the short term, but some are thinking of establishing themselves over a 25-year horizon.

Another factor to consider when we look at the growth of fintech startups is emerging technologies, which will allow new leadership. It is in these transitions, that newer minds and new leadership come out. New companies and new opportunities will arise.

BUILDING DOMESTIC CAPITAL

A lot of the funding is coming from outside the country, especially beyond Series C. And hence, what you will find is that whenever there is a global slowdown, it impacts the funding in India, that is what we are seeing today. We will see ups and downs in the short term, including in funding, but in the medium to long term, there is no better place than India.

However, we need to build a pool of domestic capital and family offices need to be very active in the startup ecosystem. I believe as we transition to a middle-income country, the opportunities for many types of startups are only going to increase.