The Fintech Infra Revolution: India’s Emerging $10Bn Revenue Opportunity

It is now easier for users to obtain financial services products than it is to shop online. Account opening, credit approval, and insurance purchase are all 5-minute processes, thanks to the robust infrastructure that powers financial institutions. Fintech infrastructure is the hidden scaffolding that supports the wide range of financial services we can access with a single tap or click. This crucial infrastructure is the beating heart of the fintech revolution, enabling banks and many tech platforms to innovate and bring their products to life. 

While fintech infrastructure is already widespread in our financial ecosystem, we believe that we are now at a real inflexion point, where several significant outcomes will emerge from India, addressing not only the Indian market but also global financial markets.

There are multiple tailwinds driving this inflexion point: large consumer distribution platforms, regulatory clarity, the success of large-scale public infrastructure, and financial institution adoption of technology have all combined to create the ingredients for a perfect storm.

This opportunity has the potential to grow to a $10 Bn revenue opportunity in 2030. As founders build infra companies, they will need to start with highly specialised and verticalized use cases or customer personas, have a maniacally high bar on product fidelity and build the muscle to sell to large financial institutions.

Fintech Infra Is At An Inflexion Point, Driven By Multiple Tailwinds

The ecosystem has seen the evolution of the tech, regulatory and financial services landscape in India from a unique vantage point. As we look back at this evolution and where we are today, multiple drivers become apparent that will accelerate the demand for financial infrastructure.

Emergence Of Large Distribution Platforms

By 2030, over 700 Mn new users are expected to transact online and spend more than $500 Bn. Users will transact across ecommerce, food delivery, ride-hailing, local services and other online retail platforms. 

Infrastructure that embeds financial products in purchase journeys can increase access to currently underserved customers, increase efficiency by unlocking new revenue streams from financial products and making the existing platform more affordable, and improve customer transaction experience.

Regulatory Measures Driving Clarity 

India has one of the most measured yet progressive regulatory bodies (RBI, SEBI, IRDAI), which has taken a balanced approach to consumer protection while promoting measures to drive financial product penetration. 

We believe that regulations will increase clarity in how financial institutions collaborate with technology partners, accelerating the need for infrastructure and plumbing plays. 

Rising Competition 

As markets get more competitive, financial institutions will need to offer world-class products and experiences to customers. This will require core systems and other customer-facing products of banks, NBFCs and insurers to be cloud native and built on modern stacks, making them agile and ready for faster product launches and integrations.

Increased Adoption Of Public Infra 

India has built public infrastructure at an unprecedented rate. The rise and adoption of public infrastructure such as Aadhar, Digilocker, AA, and OCEN, among others, facilitate data access and customer acquisition. 

This public infrastructure’s enablers and wrappers can help financial institutions drive deeper customer analytics, faster time to market, lower operating expenses and improve retention and customer NPS. 

World-Class Talent In India Creates An Unfair Advantage

World-class talent is growing across organisations in India. This talented pool of operators will be future founders who can build products and services to compete globally.

These driving forces of change, such as the emergence of large distribution platforms, regulatory measures, rising competition, increased adoption of public infrastructure, and the presence of world-class talent, continue to shape the fintech industry in India, leading to the belief that there is an $8-10 Bn revenue opportunity in fintech infrastructure by 2030. 

Key Themes That Will Capture This Revenue Pool Disproportionately

Banking As A Service & Payments Infrastructure

Payments is a rapidly growing market across channels and form factors, and this growth and innovation will be unlocked by the rapid development of infrastructure. Key themes with significant potential are:

• Credit Card Issues Processors:  Infrastructure for banks to issue co-branded cards
• Payment orchestrators to improve merchant conversion by orchestrating new payment methods and improving the payment experience
• Verticalized Payments Infra to support vertical software that will require embedding contextual payment flows. For instance, cross-border payments and SMB payments, among others

Lending & Insurance Infra

• Distribution of lending and insurance products: Growth in online B2C and B2B commerce creates enormous potential for embedded financial services. By seamlessly integrating financial services into the transaction journey, platforms can improve conversion rates, increase average revenue per user (ARPU) and offer contextual insurance products
• Manufacturing of lending and insurance products: There is a growing need for enterprise BFSI (Banking, Financial Services, and Insurance) to increase the velocity of new product development while also providing superior products and experiences to their customers. 

In the coming decade, Indian institutions are expected to increase their technology spend and investments, and infrastructure products that enable the upgrade or overhaul of core systems, credit stacks, and insurance policy administration stacks will play a critical role in meeting these demands.

Onboarding & Fraud

Increased velocity in the availability of financial services products will result in value creation in orchestrators (who assist companies with multiple onboarding, fraud providers, and risk strategy design) and challenger companies (who use new regulations and the availability of new data as a wedge to create products). 

Furthermore, given the depth of the Indian talent pool and the advent of alternative data sources and AI, there are global opportunities for Indian founders to capitalise on (such as new forms of behavioural fraud detection). 

Data Aggregation & Analytics 

As new segments of India apply for formal financial products, BFSI entities will need better access to data and analytics to underwrite and personalise products for customers. 

Enablers of public infrastructure (such as Aadhar, Digilocker, AA, OCEN) will gain value by providing data aggregation, enrichment, analytics and insights to BFSI companies.

Learnings For Founders Building For Fintech Infra

There are a few tenets that are critical for founders building fintech infrastructure to succeed. 

• Founders need to start with deep products that build for a specific customer segment or use cases. This builds stickiness and the ability to expand to broader offerings and customer segments over time. Product fidelity (even in proofs-of-concept) is essential for driving customer success and reference-ability
• Companies must build muscle in order to sell to enterprise BFSI or find fintech sectors/players with enormous growth potential. Also, the ability to price by the transaction will be a critical component of value creation, ensuring that businesses can grow non-linearly with their customers
• India is a country where world-class public infrastructure has been and will continue to be built. Leveraging and building on top of public infrastructure will be a key unlock for businesses

The article was penned by Vaas Bhaskar, Principal at Elevation Capital, Vasudha Wadhera, Vice President at Elevation Capital and Kshitij Jayakrishnan, Associate Vice President at Elevation Capital.