Against this sharp decline, funding to the sector grew 157% year-on-year in 2021 to $8 billion. Most of the funding went to payments of $2.7 billion, followed by loans of $2.6 billion, said global consultancy BCG. in the report on Thursday.
However, that is going to change as the lending segment is saddled with low margins as everyone tries to outpace each other for the amount of market share, the report said, adding that by 2025, the valuation of lending fintechs will increase almost three times. In 2021 from 13 percent to 35 percent, while for payment companies it will be more than half to 22% from 50%.
credit quality remains a key priority for fintech, given that industry-wide gross NPAs currently stand at 20%.
success of digital payment The story is evidenced by a gross value of over Rs 320 lakh crore in FY2011. And going forward, lending is likely to become even more valuable given the democratization of data, and the valuation profile of fintechs is expected to shift from payments to lending, according to the report.
On the other hand, the amount of dry powder held by institutional investors (PE/VCs) has increased by $3.2 billion over the past six months, reflecting a potential inflow of capital with improving macroeconomic fundamentals.
According to BCG, the P2M (merchant-to-person) payments market is expected to reach $2.5-2.7 trillion by 2026, driven by rapid deployment of QR codes, activation and adoption of an already acquired merchant base, while credit cards is set to be UPI-enabled. To further turbo-charge the ubiquity of its applications in the digital payments ecosystem.
Buy Now – Pay Later The report said that market disbursements will increase to Rs 7,00,000 crore by 2026 and digital payments and credit penetration in the country is expected to increase with the rise of embedded finance.
The agency lists large addressable demand on the back of an expanding middle class (from 37% in 2018 to 46% of all households by 2025) and increasing urbanization (urban areas account for 36 percent of the population in 2022, up from 33% in 2017). , Unprecedented growth in data access with increasing smartphone penetration (from 1,130 million by 2025, to 600 million in 2020); Increasing Internet penetration (900 million users by 2025) and declining data costs are the main growth drivers of the sector.
However, the pandemic was the biggest growth driver for the sector, with UPI transaction volume growing 2.6x from 1 billion transactions to 2.6 billion transactions between April 2020 and April 2021.
UPI accounted for over 60 per cent of the total non-cash transactions in FY22. The increase in the proportion of UPI-powered digital payments has created more digital data that enables stronger underwriting for lending.