Why fintech is on a roll in India?

Signs of maturity in the sector spells great news for investors, with more innovative companies on the horizon.

A three-year-old Mumbai-based rural fintech start-up raised $30 million through a combination of equity and debt in a Series A funding round last month.

The funding breakthrough for Jai Kisan came on the cusp of its journey to “empower the growth of rural Indians, especially farmers,” in a round that also saw participation from existing investors Blume Ventures, Arkam Ventures, NABVENTURES, Prophetic Ventures, Better, other global investors, and prominent HNIs.

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For the start-up, the funding will be invaluable to hire talent and enhance engineering and data science capabilities, expand into new geographies, and start building an on-book portfolio. It already works towards enabling the financial inclusion of rural individuals and businesses and empowers rural businesses through point-of-sale/purchase credit, thus creating scalability for rural businesses and helping to deploy low-cost formal credit to farmers and other rural individuals.

Financial inclusion

Jai Kisan has made financial inclusion a reality for rural people and businesses, providing financial services with credit for online and offline, income-generating, and rural commerce transactions. In a country where farming is not considered a business by most moneylenders, thus creating a lack of formalized credit for rural businesses, the efforts have been exemplary.

In Mumbai, banking start-up Zeta last month became India’s latest company to cross the $1 billion valuation mark, raising $250 million from the SoftBank Vision Fund amid signs that investment flows into the country’s FinTech sector are beginning to recover. Zeta, which is now valued at $1.45bn, is a platform for banks to operate credit and debit cards, daily transactions, loans and mobile banking through a cloud-based system. The platform acts as “a bank in a box” for an industry that still uses outdated software, says Bhavin Turakhia, a seasoned entrepreneur and the chief executive of Zeta.

The rapid growth of unicorns like Zeta and start-ups like Jai Kisan are a prime example of how India’s fintech industry has blossomed in the past few years.

Massive IPO plan

According to Bloomberg, Paytm, one of the biggest names in India’s fintech sector – backed by Alibaba and SoftBank – is working on plans to raise $3bn in what could be the country’s biggest initial public offering.

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Analysts say that the Covid-19 pandemic has massively boosted the potential of many such platforms in the country by speeding up the move towards digitalization. The rapid growth of internet use, expanding smartphone ownership and lower data costs have also been major factors in enabling the growth of the fintech industry.

Investor interest in the sector started to rebound at the end of last year “when people realised that the pandemic is here to stay and it has triggered tremendous momentum on many digital businesses,” Shishir Mankad, managing partner and head of financial services at Praxis Global Alliance, told news agencies last month.

The sign of maturity in the sector is great news for investors – and more innovative fintech companies are now clearly on the horizon in India.