The UK has been at the forefront of the rapid expansion of the Indian fintech ecosystem in recent years. As per the report by Invest India – National Investment Promotion & Facilitation Agency, with FDI inflows totaling $32.82 billion from April 2000 to September 2022, the UK is the sixth-largest investor in India. Considering the exponential business growth prospects emerging in the Indian fintech market and the vast customer base the nation has, UK-based fintechs have committed to investing more than £100 million in the country, becoming a significant player in the nation\’s financial services sector.
India, on the other hand, has the potential to play a key role in the UK\’s post-Brexit scenario given that the country with 107 unicorns at a total valuation of $ 340.79 Bn is looking to be the largest fintech and startup hub in Asia. Moreover, being one of the fastest growing economies in the world and the vast shared values and experience of working with the UK make it an apt market to fill the Brexit gap.
It’s an established fact that the India-UK Free Trade Agreement (FTA) is a huge milestone that looks to maximise the huge potential of the UK-India trade and investment relationship. And as the FTA nears completion, here’s a look back at why UK fintech companies have been at the forefront of India\’s fintech revolution.
The future looks bright
The biggest fintech segment in India, digital payments, will continue to see strong growth and is estimated to touch $153 billion in transaction value in 2023, $20 billion more than in 2022, according to data from Statista. Neo-banking — the broad umbrella that covers fintech ventures offering financial products and services in partnership with regulated entities, digital banking, etc. will touch $65 billion in transaction value this year, versus $47 billion last year.
According to the Ministry of Commerce and Industry, India is the third largest startup ecosystem in the world, outpacing the rest of the world in the adoption of fintech with a rate of 87 percent compared to a global average of 64 percent.
What makes India an attractive market?
When it comes to UK-based Fintechs, India has emerged as a popular choice among many, because of the digital push that has led to high digital adoption among consumers as well as SMEs. The Indian economy is becoming more globalized- there has been a significant increase in cross-border payments and remittances- both inbound and outbound- over the last few years.
Moreover, it’s not a ‘winner takes all’ market — the fact there are multiple successful fintech businesses focussing on various consumer segments and addressing diverse pain points proves that it’s a huge market with attractive opportunities, ensuring that there is enough operating space for multiple players to have significant business and market share, thus eliminating the scope for monopoly, and fostering an ecosystem where competition is encouraged.
The Aadhaar revolution has been a catalyst for digitisation in the regulatory arena, having helped the industry with access to a central digitized repository of a single identity document for all citizens. Additionally, the regulator– RBI — has been dishing out several forward-thinking policies that are welcome moves for the pro-Fintech ecosystem.
Moreover, India boasts amazing collaboration opportunities and excellent partnership structures in place with all the players (Banks, NBFCs, Schemes) participating in the process. The present government’s policies encourage informal businesses to move towards formalization, thus driving inclusion to foster sector growth. Moreover, the availability of world-class technology, product, and service talent is encouraging several players to set up tech and service centers in the country.
Having said this, UK-based fintechs have been able to leverage their expertise in areas such as payments, digital banking, and financial technology to provide innovative solutions to Indian customers. These companies have also been able to benefit from the Indian government’s push for financial inclusion.
UK-India 2030 Vision
India and the UK\’s respective strengths in the fintech sector make a strong case for bilateral cooperation. The 2030 Roadmap for India-UK vision is a road map for reviving a vibrant relationship between the two countries\’ economies, trade, investments, and technological partnerships. Its goal is to \”Strengthen the UK-India Fintech Dialogue\” to improve financial services collaboration, including facilitating quicker UK-India remittance flows. The possibilities for improving cross-border payments between the UK and India, building on the success of RuPay cards\’ UK launch, are also in the pipeline.
UK businesses have recognised the tremendous progress that has been made to improve the ease of doing business across India and want to continue to work with the Government of India and state governments to achieve even more. However, it is policy certainty and consistency that is key for any new investment, and so are positive reforms that aim to make a positive difference. The two countries also continue to share experience in regulatory reform, tax administration, and trade facilitation through the UK-India Ease of Doing Business MoU.
The FinTech sectors in both the UK and India have grown consistently, and both sides have undertaken several initiatives to further strengthen their existing partnership to support financial innovation and inclusion. Business-friendly policies, their certainty, and consistency, are key factors that help organizations make sound investment decisions. The robust taxation & regulations framework helps businesses knock down the hurdles that they face at the nascent stage while setting up their base in different geographies. All these factors play a crucial part towards achieving the shared goal of benefiting the economy, consumers, and the wider society.
India is forecast to become the third-largest economy in the world and several businesses want to be a part of that growth story. The time is right for the fintech industries of the two nations to work together and gain from one another as cooperation between the two nations continues to expand. India is working to increase financial inclusion and digitize quickly, and UK-based fintechs can assist India by leveraging the most recent technologies and solutions that have already gained widespread adoption in their nation. This will allow the last person standing to fully realise the potential and advantages of fintech solutions in India.
* UKIBC\’s 8th Annual Report on Doing Business in India: The UK Perspective