TRANSACTIONS ARE THE LIFE and blood of commerce. If one were to look for the epicentre of India’s digital revolution in India, the fintech sector will be the most likely answer. Without technology fuelling commercial relationships, a large chunk of mass consumer-focussed start-ups would remain a pipe dream.

A young and digitally savvy population armed with smartphones driven by low-priced data has propelled the fintech revolution in India. Furthermore, the financial inclusion policies of the government have brought in a large population of Indians under the ambit of banking institutions, which boosted the pace of fintech adoption. The digital public infrastructure for financial transactions in India is among the model cases for the world. Digital public goods such as the Unified Payments Interface (UPI), Aadhaar, and ONDC have powered this infrastructure, catapulting India to the world’s third-largest fintech market, behind the U.S. and China. The sector boasts of 26 unicorns and 120 potential soonicorns with a combined market cap of more than $120 billion, according to a 2024 report by JM Financial. On a global scale, the sector ranked third in terms of funding received, says the Tracxn Annual India Fintech Report 2024. After receiving $5.6 billion in 2022, the pace of funding slowed down, and in FY23 and FY24 the sector raised $2.8 billion and $1.9 billion, respectively.

The overall fintech market opportunity in India is estimated to reach $2.1 trillion by 2030, at a CAGR of 18%. The high growth potential of the sector, coupled with the large market size, has attracted investments worth over $30 billion from global venture funds between 2014 and 2024.

“By collaborating with fintechs, companies and established financial entities can improve their digital offerings, streamline operations, and provide better customer experiences,” says Pratik Shah, national leader, financial services, EY India.

According to the JM Financial report quoted above, over 1,400 domestic fintech companies have collectively raised more than $31 billion and about 65 companies amongst them are likely to go public over the next seven years, positioning India as one of the largest-listed fintech markets globally.

“People in India need financial services. It is a basic need like roti, kapda, makaan (food, clothing, shelter),” Groww CEO Lalit Keshre said during an interview to a television channel in 2022. Founded in 2016 by Keshre along with three other former Flipkart executives — Harsh Jain, Neeraj Singh, and Ishan Bansal, Groww helps users invest in stocks, mutual funds, exchange-traded funds, IPOs, futures and options, fixed deposits, and gold. The company has raised $393 million through multiple rounds of funding to date. In FY22, it clocked a revenue of ₹350 crore, but made a loss of ₹239 crore. It turned profitable next fiscal (PAT of ₹448 crore on a revenue of ₹1,277 crore). In FY24, it slipped back in the red with a loss of ₹799 crore due to a one-time tax payment, according to data from research agency Tracxn. Revenue, however, rose to ₹3,145 crore.

In an ecosystem where investment services have traditionally been sold through distributors, individual investors often lose out on returns due to commissions. Groww pivoted to offer only direct mutual funds at zero commissions in 2018, and soon became the platform of choice for new SIPs. Similarly, in case of stockbroking services, there are no charges for account opening and annual maintenance. Such measures have helped the firm garner over 13 million active customers.

Kunal Shah-led CRED, meanwhile, has positioned itself as one of the largest lending portfolios among fintechs. Acting as a loan service provider, CRED facilitates personal loans through partnerships with banks, financial institutions, and its affiliated NBFC, Newtap Finance.

The payments platform, which rewards its members for responsible financial behaviour, saw a 66% year-on-year rise in revenue to ₹2,473 crore in FY24, while operating loss narrowed to ₹609 crore, according to the company. CRED helps members earn coins for timely actions such as paying credit card bills, which can be redeemed for cashback, vouchers, lifestyle products, and exclusive experiences. The reward system spans multiple categories.

“Meaningful growth comes from a sharp focus on high-quality users and creating exceptional experiences for them. The commitment to putting members first and rewarding trustworthy behaviour has driven growth, engagement, and trust across our ecosystem — benefitting members, merchants, and financial institutions alike,” says Shah.

Founded in 2018, CRED’s core philosophy is to catalyse financial progress for the trustworthy. With over 14 million individuals on its platform, the company has significant market share in credit card bill payments and UPI payments. CRED Money, launched in July 2024, is a personal financial management platform designed to simplify money management for the affluent.

Meanwhile, after two-and-a-half years of legal troubles and leadership transitions, BharatPe seems to have got its mojo back. The digital payments company, which competes against the likes of PhonePe, Google Pay, and Paytm, focusses on providing digital payment solutions to SMEs and does not charge merchants any transaction fees, making it a preferred choice for small businesses. Its core business revolves around enabling merchants to accept UPI payments through QR codes. The company also offers a range of financial services, including BharatPeSwipe, a point-of-sale machine for card-based transactions, merchant loans to SMEs through NBFC partnerships, and PostPe — a Buy Now, Pay Later service that extends credit to users. Since its inception in 2018, BharatPe has onboarded over 10 million merchants across 400-plus cities. It has also ventured into banking by acquiring a stake in Unity Small Finance Bank.

“A big chunk of our growth strategy is tied to our consumer-facing business, which we kicked off in 2024. It’s a huge part of where we’re headed, and I’m genuinely excited about what’s coming — like our co-branded credit card and a UPI-based credit line,” says Nalin Negi, CEO, BharatPe.

Despite the gravy train rolling, experts see some red flags for India’s fintech firms. “With the rising number of instances of data leaks, financial frauds, etc., information and data security remain one of the biggest challenges for the sector in India,” says Kosturi Ghosh, partner, corporate practice, Trilegal.

But then, going by the rapid growth of the sector, a lot remains to be played out.