New Delhi: According to a study conducted by JP Morgan, only 23 per cent of the elite class of the Indian economy are been catered by the Fintech companies. The lower and middle-income segment, which comprises 47 per cent of the population, remains a potential market.
The study said that there is a huge segment of Lower Middle Income (LMI), which estimates around 600 million people, ranging from $2 to $10 per day for Fintech companies to cater. They can easily tap around 347 million people out 600 million since most of the individuals in this segment belong to urban areas, have smartphones hence are tech and internet savvy, are financially independent, prefer convenience and are willing to pay for the services.
As of now, the wealthy, tech-literate consumers in Tier-1 cities are been catered by the fintech and in this scenario, more than 80 per cent of potential LMI group is been left out. According to the study, “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 population in the LMI segment which is not been catered struggles to adopt and use digital platforms to avail financial services such as payments and transfers, credit or loan products, insurance and savings and investments as well as it prefers convenience over affordability.
Skewed Nature of Fintech Business Highlighted
The JP Morgan study highlights the distorted 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 Bengaluru. Despite so many companies in the business, savings and insurance sector still lag behind the payments and credit which are the most sought after in the fintech business. As far as investments in fintech are considered, it is also too distorted as the figure shows that around 75 per cent of investments are made in 10 fintects and 74 per cent is in credit and payment fintechs.
The paper submitted by an RBI panel which included members from other regulatory bodies such as IRDAI and SEBI read, “India has a large untapped market for financial service technology startups as 40 per cent of the population is currently not connected to banks and 87 per cent of the 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.”
Another fact highlighted in the study also depicts the potential for fintech companies in the LMI segment which says that $11 billion was mobilized in Pradhan Mantri Jan Dhan Yojana and $2.5 billion by self-help groups in 2017.