Fintech’s reach is limited to the rich 23% of Indians, says report

Fintech companies have succeeded to cater to only 23 per cent of the elite/affluent section of the Indian economy while a huge portion still remains untapped. The lower and middle income segment, which comprises 47 per cent of the population, remains a potential market, states a study supported by JP Morgan.

Fintechs have the opportunity to cater to the lower middle income (LMI) segment with an income ranging from $2 to $10 a day and constitute roughly 600 million people. Of this, 347 million can be successfully tapped. Individuals in this segment are mostly urban, smartphone and internet savvy, financially independent, prefer convenience and willing to pay for the services, the study said.

Currently, most fintechs serve the affluent, tech-literate customers in tier-I geographies, leaving over 80 per cent of the addressable LMI group untapped. “While the LMI segment offers sizeable opportunities for different stakeholders like fintechs, investors, donors and incumbents, there exists a significant disconnect between fintech and investors, and fintech and incumbents,” the study stated.

The LMI segment prefers convenience over affordability and struggles to adopt and use digital platforms to avail financial services. These financial services include payments and transfers, credit or loan products, insurance and savings and investments.

The study highlights the skewed nature of the fintech business in the country. There are 1,500 fintechs in India and 82 per cent of them are located in the three metros –– Delhi, Mumbai and Bengluru. Payments and credit have attracted the most attention, while savings and insurance remain far behind. About 75 per cent of investments are made in 10 fintechs and 74 per cent of the investments are made in credit and payments fintechs.

An RBI panel, comprising members from other regulatory bodies such as IRDAI and Sebi, has stated in a paper submitted recently that “India has a large untapped market for financial service technology startups as 40 per cent of the population are currently not connected to banks and 87 per cent of payments are made in cash. With mobile usage expected to increase to 64 per cent in 2018 from 53 per cent currently, and internet penetration steadily climbing, the growth potential for Fintech in India cannot be overstated.”

The study points to the fact that $11 billion was mobilised in Pradhan Mantri Jan Dhan Yojana and $2.5 billion by self help groups in 2017to indicate the potential for fintech companies in the LMI segment.