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In a recent discussion at the Global FinTech Festival, Shailendra Singh MD of Peak XV Ventures offered a comprehensive take on the dynamic world of FinTech, setting the stage for a broader conversation on the sector’s future. Singh categorises the FinTech industry into four primary areas; flow-based businesses (like payment services), stock-based businesses (such as banks and lending institutions), software-based businesses (providing essential infrastructure), and workflow-driven businesses that tie everything together. He emphasises that India is a particularly fertile ground for FinTech innovation, thanks to the foundational work done by regulators like the National Payments Corporation of India (NPCI). This regulatory environment has created a robust digital infrastructure that startups can leverage to scale rapidly and innovate effectively.
Dilip Asbe, MD & CEO of NPCI, echoed Singh’s sentiments, highlighting how India’s digital public infrastructure has transformed the financial landscape. He pointed out that India has a unique opportunity to lead in decentralised finance, potentially powered by technologies like Central Bank Digital Currency (CBDC). This, he suggests, could enable the digitization of assets beyond money, such as land records and fixed deposits, creating new efficiencies across the financial system.
Amrish Rau, CEO of Pine Labs, contributed to the conversation by underscoring the importance of the digital infrastructure provided by NPCI. He mentioned how Pine Labs has built on this infrastructure to innovate in the payments space, significantly impacting the merchant ecosystem. Rau also praised the broader FinTech community in India, citing the success of companies like PhonePe, which have leveraged NPCI’s infrastructure to build scalable businesses.
Looking ahead, Singh expressed optimism about India’s FinTech landscape. He noted that while it might be challenging for founders today, the long-term potential is immense. He illustrated this with a simple exercise; if companies continue to grow at a modest rate of 20 per cent annually, they could reach significant scales, contributing billions in revenue within 15 to 20 years. This growth trajectory, Singh believes, is facilitated by India’s world-class digital infrastructure, which positions the country to produce not just large companies but global leaders in FinTech innovation.
Dilip Asbe discussed the future of UPI (Unified Payments Interface) over the next five years. “We have already got into 14-15 billion transactions a month, but we still have a lot of Indians that have still to come on to UPI. We still have credit to take off on UPI as well. And we have all these new services that are getting different cohorts like kids coming in and other things kind of coming in. So how do you envision UPI five years from now, since we have kind of gotten to this scale? It’s probably because there are more transactions than most networks in the world already. How do we see this from here to next five years? So while a lot has been done, a lot more needs to be done. That’s the way NPCI at least looks at it,” he said.
Asbe outlined NPCI’s ambitious vision of reaching 100 billion transactions. He pointed out that this goal is within reach, given the potential for tripling both merchant and consumer engagement, which would exponentially increase the transaction volume. A critical component of this growth is integrating credit into UPI. NPCI has already taken steps in this direction with the recent launch of Credit Line, targeting small-ticket, high-frequency credit to drive adoption.
Asbe also highlighted the need for innovation in payment methods, particularly in recurring payments and mandate-based transactions. He sees significant potential in shifting from physical infrastructure to software-driven solutions, particularly in unorganised retail, where processes are currently tedious and manual. Companies like Pine Labs, known for their payment solutions, have a unique opportunity to lead this transformation by developing contextual, demand-driven, and real-time payment systems.
Another key area of focus is scaling the infrastructure to handle an ever-growing volume of transactions. Currently, UPI processes around a billion consumer-driven transactions daily, split between financial and non-financial activities. As the volume continues to grow, there is a pressing need to enhance the system’s efficiency.
In a related discussion, Shailendra Singh of Peak XV Ventures delved into the nuances of building FinTech businesses. Singh emphasised that FinTech is a “precision business,” contrasting it with the fast-paced, scale-at-all-costs approach typical of tech startups. He stated,
“Fintech should be built with a multi-decade horizon. Fintechs are not normally winner-takes-all. All regulators want multiple market participants. They want a healthy competing set and they want consumers or merchant stakeholders to be served well by competition. So these businesses have to be built thoughtfully and not be tried to build with blitz scaling or tech type DNA, but with a balanced DNA. Like I said, we always look for precision in fintech. We don’t look for speed and velocity and that type of mindset in the founders.”
Amrish Rau emphasised that the future of credit hinges on three key factors: the speed of credit delivery, the cost of credit delivery, and the trust in the credit system. These elements, according to Rau, are crucial for fintechs to tap into the significant yet underexplored opportunities within the merchant and consumer sectors.
He said, “If you look back into history and see how credit has grown, there are three main factors which have the maximum impact on credit. One, speed of credit delivery. Second is cost of credit delivery. And third is the trust in credit delivery. So if you don’t know enough about the consumer and if you can’t lend to the consumer, there’s a problem. If it’s taking too much time and cost to get the money back. credit will not flow and the similar thing is that if disbursal takes time. HDFC bank took 25 years to build a book of the size and scale that they have built. It has taken about 12 to 15 years for Bajaj Finance to build a business of that kind. I think a fintech which can deliver to all of these three areas, which is to deliver credit quickly, collections is becoming seamless and at the same time has a very high trust score when it comes to delivery of credit. I think you would have solved all of these things. And we are getting to see that in businesses.”
Rau observed that the Indian consumer has not yet fully embraced credit as a tool for personal and economic growth. He suggested that as more consumers start using credit to enhance their lives and boost consumption, the broader economy would benefit. However, he also cautioned that credit growth must be managed responsibly. Overextending credit can lead to financial pitfalls, as seen in other countries where irresponsible lending practices have led to economic instability.
Dilip Asbe, CEO of NPCI, agreed with Rau’s views and highlighted the importance of efficient credit collection processes in ensuring sustainable growth. He pointed out that innovations like UPI AutoPay and Credit Line on UPI represent complete end-to-end lifecycle products, enabling seamless credit disbursement and repayment. These innovations, Asbe argued, are critical for reaching millions of consumers who might not have access to traditional credit systems. He stressed that for credit to scale effectively in India, it must follow the same transformative path as digital payments, leveraging the country’s digital public infrastructure (DPI).
Shailendra Singh of Peak XV Ventures added another layer to the discussion by emphasising the importance of responsible credit growth. He expressed concern that the rapid expansion of credit could lead to overconsumption, particularly if not managed carefully. Singh pointed out that while India’s economy has traditionally been marked by a healthy savings rate, there is a risk that easy access to credit could undermine this financial prudence.
The conversation also touched on the role of AI in transforming the fintech landscape. Singh noted that despite AI’s potential, Indian fintechs have been slow to adopt it compared to their global counterparts. He stressed that AI could significantly enhance various aspects of fintech operations, from credit assessment to customer engagement. However, for this transformation to happen, Singh argued that CEOs and founders must take the lead in integrating AI into their business models.