5 must read fintech report 2024: Uncover insights about the Fintech sector

Our financial systems have always been on a journey of co-evolution with society and technology. Just like a bicycle needs pedals to move and pedals need a bicycle to be useful, money and society have thrived by pushing each other forward. New societal needs, thanks to changes in technology, spark changes in money, and those changes unlock new economic possibilities, leading to the next phase of growth.

And that is exactly what we will try exploring gin this edition of the Fintech Chronicler, as we look at some of the must read Fintech reports that have been forecasting the Fintech sector globally to reach a market cap of anything between $600 Billion to $950 Billion by 2029. That is just in the next 5 years. If you’re wondering where we are at today it ranges from a market cap of $219 Billion to $380 Billion depending on whom you ask.

P.S.: I have also started my Substack newsletter . Love to connect there as well.

Before we start here is a TL;DR for those of you who wish to revist this later:

Or watch the full episode here .

1. F-Prime Fintech Index was up 116% from a year ago, but still at 60% of 2021 peak, indicating a return in investor and consumer confidence
2. We are moving towards a cardless future - and no its not just because of the rise of BNPL or UPI
3. Biggest headroom for growth isn't payments or lending but rather Personal financial management, with over 29% of consumer unaware of options, and the low financial security across all generation (lowest for Gen X at 19%)
4. Autonomous in financial services scores lower in confidence than self driving vehicles with a person behind the wheel
5. Rise of open finance leading to newer fintech products?
6. Fintech is now regulatory and compliance first, leading to the rise in RegTech
7. If you are an IIT delhi grad, previously owrked at Flipkart, the odds of your fintech venture being funded are 1.715x than others
8. Enterprise wealth management is the next frontier of fintech growth in India
9. India has 11,119 Fintechs. The next 5 years will see several of them consolidate, acquired or simply go bust. Also, Mumbai leads the race with 1711 Fintechs registered, followed closely by Bangalore at 1651 fintech companies
10. Case study: Where Incumbents are beating Disruptors at their game - RoboAdvisory
11. Case Study: Bank Fintech partnership the Axis way

So, what has the state of fintech been like in 2024?

State of Fintech in 2024: The story so far

Global Fintech Sector

FIntech has become pretty much mainstream, with 2 out of three people using their phone for some form of financial transactions.

the 2024 state of fintech report also forewarns that 30% of bank jobs will be automated with machine learning!

Good news for Fintech, as this could be another arena they explore, with 500+ startup being added every year.?

Fintech industry in India

Just how many fintech startup do you think are there in India? I would've guess 1000+.?

Turns out I am off by a 91%, because there are in fact 11,119 fintech companies in India, with Mumbai leading the charge with 1,711startups registered

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But Bangalore happens to be the Funded Fintech capital, with 520 funded Fintech startups that it houses.

Fintech Index rebounds: Investor Sentiments on the rise?

F Prime tracks something called the FinTech Index. This is a composite score of investments, deal sizes, consolidations, consumer trust, new companies being lauched, reception in public market, regulatory landscape etc.?

After the plummet after 2021, in 2023, the Fintech Index rose 115%, but is still at 60% of the 2021 peak.

So does that mean we'll see more deals going forward?

I think Not.

While it does seem like the fintech funding scene is warming up again, drawing it against the 2021 paints a better picture.?

Forexample:

?- 819 companies in the US that raised series A in 2021, 357 of them are yet to announce a series B,

?- 88 of them announced bridge rounds (meaning, cut in valuations to get the money to stay afloat),

?- 10 were acquired,

?- while 114 shut down.

I chose US markets as a poxy, because most of the funding to the fintech market still goes to the US.?

Fintech India Funding report 2024

But when it comes to India, are there pockets wheree investors feel more confident to invest in? Yes, If you are an IIT D alum who happened to have worked at Flipkart!

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New wave for Digital Payments: Go Cardless?

But, before you rush in to build your buy now, pay later startup, it isn't what is riding the next wave.

?

Although, I'll admit, BNPL has been eating into the share of newly issue credit cards, with more Gen Z and Millenials preferring BNPL to credit cards issued by traditional banks. (Also, a factor of most of them have a low/no credit score, making them ineligible for most high end credit cards which come packed heavy with rewards).

But rather, due to voice based payments systems, that are increasingly becoming integrated with our every day devices, be it the friendly Alexa in our Living rooms, or Siri on our iPhones.

Consumer Financial Security at its historical Low

While Financial institutions and Fintech startups do a good job of disbursing financial services to the top of the pyramid, like embedded financing options for that high ticket value aspirational item, what that has resulted in, is falling financial security.

P.S. Something we have been building at lXME , so if you haven't yet heard of us, well, You should take us for a spin. And let me know what you think of the new features which yours truly spent a lot of time and sweat building.

A 2023 BankRate survey showed that most adults don't feel like they have a financial safety net.

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Psst: yet another product line I've built at LXME, that's gonna be launched real soon.

Open Finance finds it business model?

Be it India or the rest of the globe. Open Finance is finally having its moment.

?

In India, the consumer trust in Open Finance, or Account aggregator as we like to call it, has shot up. Of the 72 Million unique accounts on the platform, 34 million were added just at the start of this calendar year alone. That is 47% of the accounts were just added in the last 4 months alone! This snowball has reached its tipping point I would say.? And having been a part of the system building this digital public infrastructure, I couldn't have felt prouder.?

Open Finance adoption in the rest of the world

Some of the use cases which are coming up for Open Finance world over are:

1. Personal Financial management by aggregating all your different accounts into one place
2. Managing subscription payments across platforms (Like what Visa and Mastercard have been building)
3. Real-time payment system, at lower costs by cutting out the middle man?
4. Cross border transactions
5. Risk management for Lenders and other underwriters

AI In Financial Technology?

Product recommendation, underwriting, fraud and AML are some of the top areas where both traditional and upstarts are looking to use AI in their processes. Also, the number of times Generative AI was mentioned in earning calls of these public fintech companies, in the last 2 years, has only been growing.

Financial Market: M&A, booms and busts

At the peak, Fintech market cap was at $1.3T. And while a lot of people feel we have come out of the bottom at $573B, this is VC funding finding financial stability.

?

And of course the pace of acquisitions too are slowing down.

?

The story in India is no different, with investors, VCs and PEs, both erring on the side of caution.

Case Study: How Incumbents beat Disruptors in their game - RoboAdvisory

Vanguard saw the potential in RoboAdvisry after the business models of Betterment and wealthfront. And before these upstarts could gain market share, Vanguard was able to deliver and use their existing resources to capture a new market for their robo-advisory

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When it comes to welath management, market share is proxy for assets under management which is proxy for the profits the company rakes in.?

And given vanguard's success, the fintech sector expects more of incumbents to disrupt from within. Or to see more of "strategic acquisitions" occur, and streamline product offerings to end consumers.?

Regulatory Action

While the decades from 2000 to 2020, Fintech was all about tech innovating, and regulators trying hard at playing catch.?

Since 2022, all that has now changed.

Regulatory SandBox

Almost all central bankers now have a sandbox environment for new age companies to experiment with emerging technologies, arrive at suitable minimum viable product, check for compliance and regualtory guardrails before releasing it out to the public.?

Like take RBI for example. here is who are eligible for their sandbox programs :

Use of Distributed Ledger technology

Central banks who were previously even dead against blockchain and its primary se - Crypto currencies, today are seen adopting the same in their realm of operations

.

Starting with building cross border payments, and central bank digital currencies.

In fact, I think apart from the US, almost every other nation is in some form or fashion experimenting if not live with it already.?

Tokenisation of central bank assets

And finally, we come to what is going to be the focal point for the? next decadde.

Tokenisation of central bank's assets and liabilities, and using smart contract based money market execution!?

Which by the way, is going to be what my next edition of the newsletter is all about. And it is called Finternet, by the BIS, the bank for Central Bank. Which was what Nandan Nilekeni teased about in a tweet.

More about in the next edition.?