Building Bridges for the next decade of Finance 1

Building Bridges
for the next decade of Finance
AUGUST 2024
JULY 2024

Note: This is an AI generated image. Image generated using DALL.E

Building Bridges for the next decade of Finance 2
Building Bridges for the next decade of Finance 3
Building Bridges for the next decade of Finance 4
Building Bridges for the next decade of Finance 5

Boston Consulting Group partners with leaders in business and Global Fintech Fest (GFF) is the largest fintech conference, jointly
society to tackle their most important challenges and capture organized by the National Payments Corporation of India (NPCI),
their greatest opportunities. BCG was the pioneer in business the Payments Council of India (PCI), and the Fintech Convergence
strategy when it was founded in 1963. Today, we work closely Council (FCC). With GFF, the aim is to provide a singular platform
with clients to embrace a transformational approach aimed at for fintech leaders to foster collaborations and develop a blueprint
benefiting all stakeholders—empowering organizations to grow, for the future of the industry. Over the past three years, GFF
build sustainable competitive advantage, and drive positive has demonstrated its pivotal role by showcasing a 360-degree
societal impact. view of the fintech ecosystem and its ability to drive sustainable
global progress by virtue of its transformative potential. Being an
Our diverse, global teams bring deep industry and functional event of global stature, GFF is a platform where policymakers,
expertise and a range of perspectives that question the regulators, industry leaders, academics, and all major Fintech
status quo and spark change. BCG delivers solutions through ecosystem stakeholders converge once a year to exchange ideas,
leading-edge management consulting, technology and design, share insights, and drive innovation.
and corporate and digital ventures. We work in a uniquely
collaborative model across the firm and throughout all levels of BCG is the official thought leadership partner for GFF 2024.
the client organization, fueled by the goal of helping our clients
thrive and enabling them to make the world a better place.
Foreword

Chairman, Axilor Ventures,

Kris Co-founder, Infosys, and
Gopalakrishnan Chairman, Advisory Board, GFF 2024

The current global macroeconomic scenario Financial InfraTech to drive ethical, innovative delegates and more than 800 speakers from
presents unique challenges as well as solutions for complex, real-world challenges. We ~40 nations.
opportunities. The world is inarguably more envisage the next decade to be more equitable,
unsettled than at any point in recent history. inclusive and “resilient by design”, to be able to At the heart of this event is our annual flagship
Socio-political tensions, fluctuating interest rates, recover quickly from future black swans. An agile report, designed to lead thought leadership
inflation, and tapering growth are creating a and innovative financial ecosystem is the need by uncovering the latest fintech trends across
complex, once-in-a generation challenge. At the of the hour to maintain stability in geopolitically continents and industries. It provides bold
same time, critical and emerging technologies are volatile environments. Collaboration among recommendations on the “Six Bridges” to
growing exponentially enabling us to shape traditional financial institutions, Fintechs, shape the future of global finance”. This report,
a better future. ​ regulators, and policymakers will play reflecting our shared vision, will be updated
a crucial role. ​ annually to align with the evolving priorities of
Against this backdrop, Global Fintech Fest (GFF) our financial ecosystem and the nation at large.
2024 aims to gather the brightest minds and GFF serves as a platform for thought leadership, This presents a unique opportunity for India’s
passionate hearts in Mumbai from August knowledge sharing, and networking, bringing financial sector to become the world’s knowledge
28 to 30. GFF 2024 is more than a conference; together stakeholders from various sectors to capital. In conclusion, we extend sincere gratitude
it is a convergence of visionaries, leaders, and collaborate and innovate. GFF aims to address to each contributor, partner, and visionary who
innovators across the globe. This year’s theme, critical challenges and harness opportunities in has guided this journey, shaping our shared
the financial sector. This year’s fest will feature future. As we navigate the intersection of
“Blueprint for the Next Decade of Finance” paradigm defining sessions on responsible AI, technology and finance, let’s commit to advancing
Responsible AI | Inclusive | Resilient green finance, capital access for Fintechs, central sustainability, innovation, and shared prosperity.
highlights our shared responsibility to shape a bank digital currencies, cross border payments,
financial future that is responsible, inclusive, and and many more. These discussions are designed Reach high, for stars lie hidden
resilient. Artificial intelligence is at an inflection to​inspire and equip attendees with the insights in you. Dream deep, for every
point. Harnessing AI responsibly and blending needed to navigate the next decade. GFF dream precedes the goal
it with human insight can create the next-gen 2024 will be a pivotal event in facilitating this
Rabindranath Tagore
transformation by bringing together over 80,000
Foreword

Managing Director & CEO of National Payments

Dilip Asbe Corporation of India (NPCI)

As we step into 2024, the Global Fintech Fest models and enhanced customer experiences, and As we gather once again at the Global Fintech
(GFF) continues to evolve as a stimulus for surge in mobile banking and digital payments. Fest 2024, we are reminded of the incredible
driving innovation and inclusivity in the financial strides we’ve made in redefining the world of
ecosystem. This year, GFF is poised to set the UPI has revolutionized the payment landscape, finance. The past year has been a testament
stage with the theme “Blueprint for the Next solidifying India’s position as a global leader in to our collective ingenuity, resilience, and
Decade of Finance,” focusing on Responsible fintech innovation. Ever since its inception in unwavering commitment to driving the fintech
AI, Inclusiveness, and Resilience. GFF 2024 2016, UPI has amassed an impressive user base revolution. We have navigated challenges,
will gather thought leaders, innovators, and of over 400Mn active users as of today. In July embraced innovations, and pushed the
policymakers to redefine the financial landscape 2024 alone, UPI facilitated ~14Bn transactions boundaries of what is possible. Our mission to
for the coming decade. worth an astounding INR 20 lakh crores, reshape the Indian financial landscape is stronger
showcasing its robust and ever-growing presence. than ever, and this report encapsulates the
With the fintech sector growing at rapid pace, the This adoption rate within India demonstrates milestones we’ve achieved and the horizons we
Asia-Pacific (APAC) and North American (NAMR) UPI’s maturity and scalability, as evidenced by aim to conquer.
regions are set to become the epicentre of fintech its expansion into seven countries, including
innovation, fuelled by regulatory foresight and Singapore and the UAE. The vision of the
technological advancements. In the APAC region, National Payments Corporation of India (NPCI) is
India stands out as a formidable player in the to extend UPI’s reach to 20 countries by 2028-29,
fintech landscape. The country has witnessed creating a global standard for real-time payments.
a rapid surge in fintech adoption driven by It will be fascinating to see how global economies
Digital Public Infrastructure like Aadhar, UPI, adopt real-time payment systems like UPI and
Bharat Bill Payments, ONDC etc., a supportive how much of the world will eventually run on
regulatory climate fostering digitization, a large NPCI rails. As we look into the future, our goal
underserved population offering opportunities for the next few years is to further strengthen the
for financial inclusion, increased access to capital fintech ecosystem in India, fostering innovation
through various funding channels, the adoption of through regulatory support, and promoting
technologies such as GenAI driving new business financial literacy to ensure inclusive growth.
Introduction

Global Leader - Fintech,

Yashraj India Leader - Financial Services, BCG
Erande [email protected]

We are thrilled to present this year’s edition The first chapter offers a rigorous analysis drive innovation and efficiency. It highlights the
of the flagship report for Global Fintech Fest. of growth trajectories, capital allocation, and need for future-ready technology, emphasizing a
This comprehensive report provides a detailed regional convergence. The Fintech sector is $1Bn investment to modernize India’s financial
exploration of the current landscape, trends, poised to achieve $1.5Tn in revenues by 2030, infrastructure. The report stresses the importance
and future projections of the global Fintech with significant contributions from the APAC of preparing fintech unicorns and soonicorns
industry for the next decade. This year, our report and NAMR regions. We explore the stabilization for liquidity events and IPOs by building strong
is structured into three pivotal chapters, each of global Fintech funding and the convergence equity narratives. The convergence between
offering a unique lens on the industry’s trajectory of investment patterns across developed and traditional financial institutions and fintechs
and its transformative potential. emerging markets. This chapter provides is crucial, promoting partnerships to capture
invaluable insights into the evolving dynamics digital opportunities. Moreover, expanding
Global Fintech Trends: and strategic imperatives for Fintech India’s financial infrastructure and payment
Global trends shaping the Fintech landscape, enterprises worldwide. systems globally is essential for driving growth
offering a rigorous analysis of growth trajectories, and innovation. The report also emphasizes the
capital allocation, and regional convergence. Our second chapter provides an authentic voice importance of governance, risk management,
of the industry, capturing the insights of founders, and addressing the climate financing gap by
Voice of Industry: senior leaders, regulators, and investors within the
Priorities and perspectives of founders, CEOs, integrating sustainable practices to ensure
Indian Fintech ecosystem. Despite recent funding a resilient and inclusive financial future.
and CXOs within the Indian Fintech ecosystem, challenges, Indian Fintechs have demonstrated
highlighting their focus on profitable and Collaboration among policymakers, innovators,
remarkable resilience and innovation, achieving and capital providers is essential to building these
compliant growth, emerging technologies, significant revenue growth and setting ambitious
and regulatory needs. bridges and driving the future of finance.​
goals for international expansion. This section
Building bridges for shaping the next decade highlights the industry’s focus on profitable Through meticulous research, in-depth interviews,
of Finance: and compliant growth, leveraging emerging and our global client collaborations, we have
“Six Bridges“, required between Fintechs, technologies such as Generative AI and API-based crafted a report that not only charts the current
traditional financial institutions, regulators, and open architecture, and addressing the critical state of the Fintech industry but also paves a
investors to drive innovation, efficiency, and need for a robust regulatory framework. forward-looking path for its evolution over the next
sustainable practices for the next decade decade. We eagerly anticipate your feedback and
The final chapter introduces the bridges engagement as we collectively shape the future of
of finance. crucial for shaping the next decade of finance, finance in the coming decade.
symbolizing the collaborative efforts required to
Executive Summary
Diamonds are made under pressure. There is no denying that the Fintech sector has gone through what we would call a
traumatic year, especially on a global scale. The sector felt the heat of justified regulatory and market scrutiny. It lived through the
freezing cold of funding winter. After being subjected to the intense heat and cold, we are seeing the emergence of a more
mature and productive Fintech ecosystem globally. Unlike in the past, where burning equity to acquire customers was the
approach, we find that today’s successful Fintechs are focused on sustainable growth, high quality governance, and economically
rewarding innovation.

There has been a fascinating side effect of the traumatic period for the industry. Incumbent financial institutions globally have
either gone into hyper drive to integrate and partner with the best Fintechs or are incubating in-house Fintechs. Of course, the
regulatory apparatus is also now better refined to facilitate an orderly development of the Fintech ecosystem. As a result, the next
decade of finance is set to unlock immense value for the world.

Nonetheless, there are some very hard lessons learnt which need to remain on the radar of the industry. Governance and
regulation must be taken extremely seriously. They cannot be an afterthought. Equity, and capital in general, must be managed
with hawk eyes. Only the most efficient user of resources – namely, capital and talent – will survive. And innovation is key to
being efficient. Without pushing the frontiers of efficiency, Fintechs do not have a right to exist. DPIs have a crucial role in turbo
charging innovation and increasing market efficiency. However, it is extremely hard to scale DPIs. It requires the convergence of
policy, economics, and technology.

We have spoken to founders and investors, surveyed industry participants, and analyzed extensive data to bring to you this year’s
flagship Global Fintech Fest report. Last year’s flagship report talked about building a Fintech nation and the second wave of
Fintechs. This year we talk about how Fintechs, incumbents, regulators, and investors can leverage the lessons of the second wave
to successfully embrace the next decade of finance.

We talk about building 6 bridges to be ready for the next decade of finance.

We hope you enjoy reading it as much as we enjoyed writing it.

There are three chapters:

• Global Fintech Trends: Rigorous unpacking of global trends through numbers and narratives
• Voice of Industry: Temperature check of the priorities of founders, boards, regulators, and investors in the
Indian Fintech landscape
• 6 Bridges to the Future of Finance: Critical bridges that Fintechs, traditional incumbents, regulators, and investors need to
jointly create to approach the next decade of finance
Global fintech trends: Growth trajectory, capital allocation
and regional convergence
The global Fintech sector is on-track to achieving $1.5Tn in revenues by 2030. This growth is predominantly driven by the Asia-
Pacific (APAC), along with the North American (NAMR) region, generating three times higher revenues than the next set of
regions by 2030.

The last 4 quarters have seen a stabilization in global Fintech funding ($7-10Bn per quarter, after a period of exuberance in
2021-2022). Across Fintech segments, we see much greater convergence in terms of incremental capital allocation when we
compare the developed and emerging markets. In the past, there was a distinct skew in capital allocation across different
Fintech sectors between the different markets. For example, developed markets are increasing their share of investments in
Digital Payments to catch up with the advancements seen in emerging markets. All geographies are driving a similar share of
investments in Wealth Tech, indicating the growing focus on affluent customers across geographies. Analyzing the trends by
specific geographies reveal the following trends:

In the realms of developed economies such as NAMR and Europe:

• Digital Payments sector is dominated by acquiring solutions, followed closely by B2B payments
• Europe and NAMR have 80% share of funding in InsurTech, driven by a mature property and casualty insurance market
• NAMR emerges as the leader in the WealthTech and Financial Infrastructure domains, claiming approximately 55% and 60%
share of funding, respectively. Alternative assets are drawing investor attention; tokenization a key area of focus.

In emerging economies of APAC, Africa, and LATAM:

• Digital Payments sector is predominantly driven by retail payments as an alternative to traditional card payments
• Retail Neo Banks are capturing 70-80% funding, SME Neo Banks have large headroom for disruption
• The financial infrastructure sector, though nascent, is poised for growth, spurred by the innovations of BFSI SaaS Fintechs
• In the lending landscape, APAC, Africa, and LATAM continue to see a substantial share of investments going to unsecured
lending, specifically catering to underserved segments

We are seeing a clear shift in capital allocation towards B2B and B2B2X(x1)-focused Fintechs. Over the past four years, the share
of funding for these segments has increased to 65%. This trend makes sense because B2B and B2B2X(x1) Fintechs can drive
efficiency higher for the overall financial services ecosystem by making their incumbent partners more efficient as well. The
synergy value for both parties is higher.

There is a wall of maturities approaching Fintechs. 20-30% of venture capital and private equity funds sitting on the cap tables
of Fintechs are approaching the end of their investment lifecycle. This is resulting in a greater interest in liquidity events in the
foreseeable future. IPOs are naturally likely to be in favor as long as the public markets can absorb the supply. But interestingly,
the industry participants we spoke to are expecting higher M&A activity as one of the credible paths to exit. M&A activity in the
Fintech sector has surged 1.8 times over the past four years, with North America leading in the number of transactions. Share of
other regions is rising, with India witnessing a notable increase in M&A activity within the APAC region.
1. X = businesses as end customers, x = retail consumers as end customers
Building Bridges for the next decade of Finance 12

India’s Fintech Revolution and Voice of Industry

Globally, India ranks third in terms of the number of Fintechs and Fintech unicorns. Indian Fintechs have demonstrated a remarkable trajectory
in revenues, achieving a 50% growth rate in 2023. This growth trajectory is expected to continue, with Indian Fintech revenues projected to reach
$190Bn by 2030, contributing to 20%+ of all banking revenues. The foundation of the robust Fintech ecosystem in India was laid by the digital
public infrastructure 1.0 (Aadhaar, UPI, etc). The next wave of growth will be powered by DPI 2.0 (e.g., ONDC, National Health Stack etc.) and
DPI 3.0: AI-driven Digital Public Intelligence.

We interacted with Fintech founders from India and conducted a survey to understand how founders are navigating the twin challenges of
exploration and exploitation to chart a path towards sustainable growth and profitability.

80%+ CXOs believe that higher scale is critical for profitability in India, but “Profitable and Compliant growth” is the new mantra, rather than
unbridled growth. Indian Fintechs are demonstrating a path to profitability earlier than what was expected 2-3 years back. As the industry
matures, a collaborative regulatory framework that supports innovation while safeguarding systemic risks will be crucial in shaping the future of
finance. Creation of a Fintech SRO1 will be a key step in this direction.

Founders are increasingly looking to leverage critical and emerging technologies - Generative AI and API-based open architecture are seen as
key drivers of future growth, with applications ranging from customer service automation to fraud detection. Fintechs are increasingly exploring
strategic international expansion. ~25% of Indian Fintechs have more than one-quarter of their revenues from international markets. Middle
East and Southeast Asia East are top choices for international expansion for Indian CXOs.

6 Bridges for the next decade of finance

We are at an inflection point in the global financial journey. To navigate these transformative waters, we need to
construct six bridges:

1) Bridge to Future Ready Technology: Globally, we are finding that some core components of the financial services
infrastructure (the substrate layer) are quite fragile. This is evidenced by the increasing number of data breaches, server crashes,
unplanned down times, etc. We need to build the future on strong foundations. Specifically for India, while it is a global leader in
digitalization for sure, its underlying core also remains fragile, with significant downtimes across major institutions. We estimate
that $1Bn investments are required for the modernization of Indian financial services players in the next 5 years. Creating a
World Class Tech Function will be critical to reap the benefits of the emerging technologies and driving tech resilience.

2) Bridge between Incumbents and Fintechs: The lines between traditional financial institutions and Fintechs are merging.
Most successful incumbents have dedicated ecosystem partnership teams that scout for the right Fintechs to partner with.

1. Self-regulatory organization
Building Bridges for the next decade of Finance 13

Partnerships are either for data or capabilities or customer sourcing. Similarly, progressive Fintechs are actively driving
partnerships through standardized APIs and key account management practices for building deeper relationships. To avoid being
disrupted and seize the growing digital opportunity, it is crucial for incumbents to develop robust digital capabilities. Thus, there
is an ongoing trend of incumbents building “in-house Fintechs” by recruiting ex-founders to incubate teams. This convergence is
driven by the need to capture the digital native opportunity, foster collaboration, and maintain healthy competition.

3) Bridge to Internationalization: Indian financial infrastructure and digital payment solutions are highly mature and scalable,
capable of supporting the exponential digitization needs of global institutions. The global BFSI SaaS market is expected to
exceed $500Bn in the next decade, with North America accounting for around 60% of this market. Indian BFSI SaaS players have
a significant opportunity to expand internationally and are expected to increase their market share in the BFSI SaaS market by
5x in 10 years, and drive $45-55Bn in revenues. An intriguing extension of this is the significant opportunity for a large portion of
the global market to operate on NPCI rails, thereby amplifying the reach and influence of Indian financial
technologies worldwide.

4) Bridge to Capital Access: India’s vibrant Fintech ecosystem with 20 unicorns and 17 soonicorns will soon be gearing up
for large-scale liquidity events with 20-30% of PEVC investments approaching the end of their investment lifecycle. Building
a powerful equity narrative, tailored to the type of potential investors, would be key for Fintech founders looking for IPO exit
opportunities. Pro-moves for founders to build a best-in-class equity story includes alignment of strategic goals with megatrends,
placing multiple bets towards a mega-goal, building high talent density, alignment of incentives (and downside risk) with
investors, etc.

5) Bridge to Regulation, Compliance and Risk Management: Financial institutions need to combat 3 risks – financial,
non-financial, and strategic. Indian FIs needs to significantly ramp up their cyber-defense (India’s cybersecurity spends as
% of revenue is one-ninth of global spends). Cyber issues, further combined with geopolitics, pose an even bigger threat to
the financial institutions, for instance, attacks that can paralyze a country’s payment systems. Non-compliance also leads to
significant value destruction for FIs (we have seen up to 50% value impact within 14 days!). The enforcement actions by the
regulator have also increased by 1.5x in the last year; compliance by design is a key imperative for the Indian financial ecosystem.
Evolution of regtechs have the potential to aid in the regulatory compliance of Indian FIs.

6) Bridge to Brighter and Greener Future: Large headroom for India to improve the quality of fundamental research in
critical and emerging technologies such as AI. Currently, India lags major economies in quality fundamental research, with
the gap widening since 2020. To boost fundamental research in critical and emerging technologies, a 4-pronged approach is
necessary - preferential incentive policies to attract private R&D investments, integrating the corporate ecosystem with academia,
commercialization of university research, and attracting and retaining world-class researchers. Financial institutions have a dual
responsibility to decarbonize their portfolios and manage climate risks. There is a $100-150Bn gap in climate financing in India.
A significant part of this challenge involves the elusive search for concessional funds, essential for closing the financing gap and
supporting sustainable development.

Policymakers, innovators, and capital providers must collaborate to construct these critical bridges that will drive progress and
ensure a resilient, inclusive, and sustainable financial future.
Building Bridges for the next decade of Finance 14
Building Bridges for the next decade of Finance 14

Table of
Contents
Building Bridges for the next decade of Finance 15
Building Bridges for the next decade of Finance 15

01 Global Fintech Trends Pg 16-23

02 Voice of Industry Pg 24-33

03 Six Bridges for the Next

Decade of Finance
Pg 34-92

04 Appendix: Segment-wise
Global Trends
Pg 93-99
Building Bridges for the next decade of Finance 16

01
Global Fintech
Trends
Building Bridges for the next decade of Finance 17

SUMMARY

• Global Fintech revenues on track to reach $1.5Tn by 2030

• APAC set to become the epicenter of Fintech innovation with $600Bn revenue, along with NAMR at $520Bn revenue by 2030, generating
3X revenue of next best region

• Global Fintech funding has stabilized in the range of $7-10Bn in the last 4 quarters (down from an exuberant $20-30Bn quarterly Fintech
funding in 2021-22); accounting for 12-16% of global equity funding across sectors

• Mix of funding across sectors has remained stable over the years
ǟ Financial infrastructure’s share of investments has seen a resurgence in 2024
ǟ Insurtech continues to lose share of investments due to limited use cases demonstrating path to profitability
• Regional capital allocation trends reveal convergence of segmental capital allocation between developed and emerging markets
ǟ Developed world increasing share of investments in payments to catch up with emerging markets
ǟ All markets increasing share of investments in WealthTech, indicating a surge in mass-affluent population across geographies
• Significant shift in investment mix towards B2B and B2B2X focused Fintechs. With their share in funding increasing to 65%, it reflects a
growing preference for business models with steadier income streams and clearer paths to profitability.

• M&A activity in the Fintech sector has surged 1.8 times over the past four years, indicating expectations of path to profitability due to
economies of scale
ǟ North America leads in the number of M&A transactions holding ~40% share
ǟ Share of other regions is also on a rise, with India witnessing a notable increase in M&A activity within the APAC region
Building Bridges for the next decade of Finance Global Revenue 18

Global Fintech 2023 and 2030 Global Fintech revenue by geographies ($Bn)
revenues on track
to reach $1.5Tn
by 2030
APAC NAMR Europe LATAM Africa

$600Bn
$1,500Bn $520Bn

+37% +16%

2030 +24%
$184Bn $190Bn +27%
$125Bn +40%
$66Bn $43Bn $65Bn
$23Bn $6Bn
25% Growth 2023 2030 2023 2030 2023 2030 2023 2030 2023 2030

$320Bn By 2030, APAC on track to become the center of gravity for Fintechs
globally, along with NAMR, with 3X higher revenues than the next best
region; Latin America and Africa to grow at 25%+, from a smaller base
2023

Note: Revenue amount is geographically apportioned basis HQ location of Fintech

Source: Prudence, Profits, and Growth – Global Fintech 2024 Report by BCG and QED; BCG Analysis
Building Bridges for the next decade of Finance Global Revenue 19

Global Fintech funding stabilizes at $7-10Bn; driving 12-16% of global

equity funding

Global Fintech equity funding flow ($Bn)

Funding amount split by quarters of calendar years

Funding in Fintechs has

stabilized in the range
of $7-10Bn
40
38
36
33
28
26

17
15 15 14
11 12 12
Global equity 9 9 10
Fintech funding 8 7
($Bn)

Q1’20 Q2’20 Q3’20 Q4’20 Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24

Total Fintech
equity funding $53Bn $142Bn $85Bn $60Bn
for time period

Fintech equity
funding as a %
17% 19% 17% 15% 21% 25% 22% 20% 22% 20% 16% 16% 23% 16% 12% 16% 12% 15%
of total global
equity funding

Source: CB Insights State of Venture; BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Global Revenue 20

Mix of funding across sectors has remained stable

Annual global Fintech equity funding flow ($Bn)

2023 Spike in Digital Payments driven by the Stripe

mega deal; 2024 spike in Accounts driven by the
Monzo mega deal (>$400Mn)

100%

18% 12%
20% 19% Financial Infra’s share of investments has
28%
Digital Payments 18% seen a resurgence in 2024 with funding
18% 18% distributed across core platforms, regtech,
Financial Infra 19%
13% 9% CRM; sectors demonstrating path to
10% 9% profitability, globally
InsurTech 17% 12% 18%
14% 16%
Digital Lending 16% Accounts/Neo-Banking (Retail and SME
15%
Accounts 16% 23% Neobanks, PFM, etc.), continue to hold
19%
16% share of investments (2024 spike due to
15%
WealthTech the Monzo mega deal) despite regulatory
19% 22% 16% 20% challenges in select geographies.
13%
Significant headroom for disruption
2020 2021 2022 2023 2024 YTD1 continues; traditional BFSI increasingly
augmenting
Global Fintech digital capabilities
53 145 85 43 18
equity funding ($Bn)
Insurtech continues to lose share of
Number of deals 4,564 6,416 4,987 2,850 1,108 investments due to limited use cases
demonstrating path to profitability
(except for B2B2X e.g., claims
solutions for insurers)
1. Includes funding deals till June 2024
Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Global Revenue 21

Regional capital allocation trends reveal the converging needs of a

two-speed world
NAMR re-investing in payments to catch up with emerging markets, all markets investing in
WealthTech, indicating growing affluence across geographies
Cumulative Fintech equity funding flow ($Bn)
Africa &
Global NAMR Europe APAC
LATAM
15% 15% 20%
23%
Digital Payments 32% 9%
19% 14%
Financial Infra 15% 11%
15% 7% 4%
InsurTech 11%
19% 30% 24%
13%
Digital Lending 16%
8%
Accounts 18% 13% 28% 17% 23%

WealthTech 19% 18%

17% 13% 15%

2023-24 2023-24 2023-24 2023-24 2023-24

YTD1 YTD YTD YTD YTD
Fintech equity 13 4
funding ($Bn) 60 30 13

An analysis of regional capital allocation shows that the needs of developed and emerging
markets are converging. Digital Lending is crucial for inclusion, with increased investor
focus in developing regions like APAC, Africa, and LATAM. NAMR is driving a large share
Yashraj Erande of investments towards innovation in Digital Payments, to bridge the gap with emerging
Global Leader - economies. Interestingly, all geographies are driving similar share of investments in Wealth
Fintech, India Leader Tech, indicating growing affluence across geographies. Europe and NAMR lead in Financial
- Financial Services, Infrastructure investments to meet the growing demands of the financial sector; APAC needs
BCG to ramp up share of investments in Financial Infra

1. Includes funding deals till June 2024

Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Global Revenue B2B2X 22

Extended funding winter has led to investments shifting further away

to B2B2X2
B2B2X segment with steadier income streams and clearer path to profitability
Annual global Fintech equity funding for Cumulative Fintech equity funding by geographies
B2B/B2B2X ($Bn) 2020 - 24 YTD1 ($Bn)

39%
58% 50%
60% 67%

59% +6% 65%

61%
40% 42% 50%
33%

Global NAMR Europe APAC Africa &

2020-2022 2023-2024 YTD1 LATAM

B2B/B2B2X Retail

B2B2X2 focused Fintechs have been Large headroom for the B2B2X segment in
steadily receiving an increased share of developing economies of APAC, Africa, and
funding as sector demonstrates recurring LATAM; share of funding for B2B2X focused
revenue and path to profitability Fintechs likely to increase with increasing
formalization of economy

1. Includes funding deals till June 2024 2. Business to Business to everything model that extends traditional B2B approach by involving multiple entities, typically a primary business (B2B) and various
intermediaries or partners (represented by the “2X”), in delivering products or services to end customers.
Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Mergers & Acquisitions 23

M&A activity has surged 1.8X in the last four years, with expectations of
path to profitability due to consolidation

Fintech consolidation continues; expectations of NAMR leads in M&A transactions, however, share
path to profitability due to economies of scale of other regions is rising

Global Fintech mergers & acquisitions by segment (#) Global Fintech mergers & acquisitions by region (#)

1.8x India has the highest share of M&As in APAC which is

also increasing YoY (19% in 2019 to 37% in 2023)
757
665 665 375 451 757 665 665
21%
25% 20%
451 17% 43% 39% 39%
13% 48% 49%
13%
375 14% 13%
25% 14%
26% 14% 13% 15%
15% 34% 38%
15% 16% 33% 32% 36%
14% 15% 13%
13% 15% 14%
8% 18% 17%
10% 20% 26% 15% 13% 14%
22% 21% 19%
4% 6% 7% 9% 7%
2019 2020 2021 2022 2023 2019 2020 2021 2022 2023

Digital Payments Financial Infra InsurTech NAMR Europe APAC Africa & LATAM

Digital Lending Accounts WealthTech

Source: BCG Fintech Control Tower, BCG Analysis

Building Bridges for the next decade of Finance 24

02
Voice of
Industry
Building Bridges for the next decade of Finance 25

SUMMARY

• Indian Fintech funding experienced a dip, falling to $0.3-0.7Bn in the past 4 quarters with ~40% lower funding in H1’24 vs H2’23; only
2 segments of increased funding observed namely, asset-based lending and retail banking and PFM

• Founders’ new mantra: Innovation with “Profitable and compliant growth” key priority for Fintech founders in the next decade; clearer
regulations and fraud control crucial to unlock the next wave of growth

• >80% respondents already profitable or believe that they’ll become profitable in the next 24 months (vs. 20-30% in 2022)

• More than 60% fintech founders see Generative AI and API-based open architecture as key drivers of future growth with applications
ranging from customer service automation, marketing, and customer engagement to fraud detection

• Fintechs are increasingly exploring strategic international expansion; the Middle East and Southeast Asia are top choices for
Indian CXOs

• 70-90% digital payment fintech CXOs bullish on credit products, cross-border payments, and P2M payments for revenue expansion
and profitability

• Digital Lending CXOs most bullish on supply chain financing, personal unsecured loans and cards / BNPL; 94% CXOs perceive a
20-50% annual AUM growth as sustainable
Building Bridges for the next decade of Finance India Funding 26

Indian Fintech funding has settled in the range of $0.3-0.7Bn in the

past 4 quarters
Indian Fintech equity funding flow ($Bn)
Funding amount split by quarters of calendar years

~40% lower funding in H1’24 vs H2’23

H2’23 equity H1’24 equity

funding = funding =
3.0 $1.2Bn $0.7Bn
2.8

1.3 1.6 1.5

1.1 1.0 1.2
0.5 0.7 0.7
0.5 0.4 0.3

Q1’21 Q2’21 Q3’21 Q4’21 Q1’22 Q2’22 Q3’22 Q4’22 Q1’23 Q2’23 Q3’23 Q4’23 Q1’24 Q2’24
India Fintech
equity funding
as % of global 4% 3% 8% 8% 5% 6% 7% 5% 7% 9% 6% 9% 6% 3%
Fintech equity
funding

Equity funding in Indian Fintechs has moderated over the past 4 quarters. Companies
demonstrating strong fundamentals, path to profitability, and thematic focus (e.g., SME,
Neetu Chitkara “Bharat”, “Green”) are likely to attract more interest. Funding will continue to remain
India Leader – Fintech, selective and prudent in the short-medium term. Founders should also explore alternate
Managing Director &
sources of capital like Private Capital and Venture Debt.
Partner, BCG

Source: BCG Fintech Control Tower; BCG Analysis

Building Bridges for the next decade of Finance India Funding 27

India funding by segments | While overall funding pressure continued,

2 pockets witnessed an increase in funding
India Fintech equity funding flow: Jul ‘23 - Jun ‘24 v/s Jul ‘22 – Jun ‘23 ($Mn)
Size of segment boxes proportional to the funding amount from Jul ‘23 - Jun ‘24
(% indicates share of sub-segment in the overall segment)

Digital Lending ($Mn) $6,395.8 Financial Infra2 ($Mn) $5,644.1

36.2% 27.2% Regtech 10.8% Blockchain

AI infra
/

21.9% Core platforms and

other SaaS 15.0% Operations 10.8% (CRM)
B2B/SME loans
50.9% InsurTech ($Mn) $3,990.2
Personal
unsecured loans
16.4% 10.8% 57.0% 21.5% Health insurance
P&C insurance 20.6% Multi-line
insurance
1.0%
Life insurance
Asset-based Other
lending lending Accounts - Neo Banks & PFM1 ($Mn) $7,210.0

Digital Payments ($Mn) $4,707.9

59.4% 40.6%
Retail banking & PFM SME banking

27.2% 9.8%
WealthTech ($Mn) $5,978.1
34.4%
Blockchain-
based payments
Acquiring solutions
Corporate & SME
payments
18.9% 9.7% 38.8% 29.5%
Blockchain-based
14.1% 9.9% 7.7%
Alternative Other Traditional
Digital retail Others Advisory AA assets Wealth tech assets
payments

>10% Investment increase <10% Investment increase (or) >10% Investment decrease
<10% Investment decrease
1. Neo Banks and Personal Finance Management (PFM): Includes financial comparison websites, digital banks, financial educational websites and financial planning solutions
2. Financial Infra: Includes core platform technologies, CRM and operations solutions, data aggregation and Regtech
Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Survey 28

Profitable and compliant growth is the new mantra; clearer regulations

and fraud control critical to unlock next wave of growth

Strategic focus areas for the next 2-3 years1 Top challenges for the next 2-3 years2
(% of respondents selecting below in top 3) (% of respondents selecting below in top 3)

Product innovation 82% Unclear regulatory 63%

environment
Profitability/Cost reduction 53% Increasing fraud and 44%
operational risks
Hiring the right talent 35% Increasing customer
acquisition cost 40%
Governance and 33%
compliance by design
Rising cost of talent 37%
Fundraising 28%
Keeping up with rapid 33%
Investments in cutting 26% tech developments
edge tech and infra
Funding winter 21%
Geographical expansion 25%

Organizational restructuring 4% Economic slowdown 12%

Fintech companies remain dedicated to growth and are driving investments in cutting-edge technology and infrastructure,
especially GenAI. But “prudent and profitable” is the new mantra, rather than unbridled growth.

Founder (Indian Fintech)

1. What are the most important strategic focus areas for you and your business in next 2-3 years? N=36 2. What are the top challenges you foresee for you and your business in the next 2-3 years? N=36
Source: The Global Fintech Union Survey 2024 by BCG and GFF
Building Bridges for the next decade of Finance Survey 29

Fintech path to profitability | Indian Fintechs have embarked on path

to profitability ahead of expectations

Path to profitability1
(% of respondents on when they expect to be EBITDA profitable)

45%

19%

~86%
17%
12%
7%

Already Next 6 6-12 12-24 >24

EBITDA months months months months
profitable
respondents believe that
higher scale is critical for

80%
More than respondents are already profitable/believe path to profitability3
that they’ll become profitable in the next
24 months1 vs 20-30% in 20222

Tech and innovation and employee benefits are the key levers driving profitability. We had the ambition of turning
profitable early and achieved positive PBTs last month.

Founder (Digital Lending Fintech)

1. When do you see yourself becoming EBITDA profitable? N=42 2. As per BCG-Matrix SOFTU Survey’22 3. Do you believe that in the Indian Fintech landscape,
higher scale is critical for path to profitability? N=42
Source: The Global Fintech Union Survey 2024 by BCG and GFF; BCG-Matrix SOFTU Survey’22
Building Bridges for the next decade of Finance Survey 30

CXOs are increasingly leveraging GenAI and API-based open architecture

Key technologies being leveraged by CXOs for Top use cases of GenAI in customer service
organizational success and fraud detection/prevention
(% of respondents)1 (% of respondents)2

API-based Customer service automation 74%

72%
open architecture

Marketing and customer engagement 59%

GenAI 63% Fraud detection and prevention 59%

Document processing and analysis 44%

Distributed
ledger technology 21%
(Block Chain) Credit scoring and risk assessment 41%

1. Which of the following technologies have you leveraged/planning to leverage in your organization? N=43 2. How are you using GenAI in your organization? N=27
Source: The Global Fintech Union Survey 2024 by BCG and GFF
Building Bridges for the next decade of Finance Survey 31

Fintechs target international expansion, the Middle East and SEA

emerge as top choices

23%
Regional preferences of Fintechs for international expansion
(% of respondents choosing in top 3)4

of Indian Fintechs have more

than one-quarter revenues
from international markets2

76%
64%

67% 1 44%
32%
16% 12%
of those not present in
Middle SEA Africa NAMR LATAM Europe
international markets, East
one in two expressed a
desire to expand globally
in the short-medium term3 Middle East and SEA top choices for global expansion4

1. Are you present in international markets? N=42 2. What proportion of your revenues are derived from international markets? N=13 3. Do you have plans to expand internationally? N=28 4. What are your
preferred geographies for international expansion? N=25
Source: The Global Fintech Union Survey 2024 by BCG and GFF
Building Bridges for the next decade of Finance Survey 32

Digital Payments | CXOs focused on credit products and cross border

payments, with plans to leverage UPI for global revenue expansion
CXOs are bullish on credit products, cross-border, and P2M payments1
(% of respondents)
Vivek Mandhata
India Leader – Payments,
Managing Director &
Partner, BCG

94% Payment Fintechs have harnessed India’s digital

payment infrastructure, crafting a robust payment
69% 69% ecosystem. In the current MDR regime, lending
63% 56%
as a cross-sell, credit via UPI, and the cross-
19% border payments emerge as viable pathways to
profitability. Furthermore, a significant opportunity
Credit Cross P2M B2B/M2M P2P Blockchain- lies in the global expansion of these offerings,
products in border based leveraging the interoperable framework established
payment payments by NPCI, thus positioning themselves as key players
in the international financial landscape.

Most lucrative areas for Indian Fintechs in

CXOs have plans to generate revenues
cross border payments3
(% of respondents) from UPI outside India

B2B2X (Marketplace)
payments 40% Yes 73%

P2P payments 33% No 13%

B2B payments 27% NA 13%

1. Which sub-sector within Digital Payments are you most bullish on in your geography in the current environment N=16 2. Rank the options below in order of priority to drive Digital Payments towards
profitability N=15 3. Which of the following are the most lucrative areas for Indian Fintechs in cross border payments? N=15 4. Considering UPI’s international expansion, do you intend to generate revenue
from it outside India over the next 2-3 years? N=15
Source: The Global Fintech Union Survey 2024 by BCG and GFF
Building Bridges for the next decade of Finance Survey 33

Digital Lending | CXOs believe 20-50% annual AUM growth sustainable;

but need to ramp up investments in collections and risk-based pricing

CXOs are bullish on supply chain financing, personal Sustainable rate of annual AUM growth for Digital
unsecured loans, and cards/BNPL1 Lending fintechs2
(% of respondents) (% of respondents)

47% 47%
6%

78% 72% 67% 20-30% 30-50% 50%+

56% 56% 56% 56%
33%
Supply Personal
chain unsecured
financing loan
Cards/
BNPL
Education
loan
Auto
loan
Unsecured
SME loan
Home
loan
Gold
loan
94% CXOs perceive a 20-50% annual
AUM growth as sustainable

Key strategic investment areas for CXOs3

(% of respondents)

67%
56%
39% 39%

Risk assessment and underwriting; Improving Collections (e.g., strengthening Risk-based

leveraging alternate data sourcing quality bucket-wise strategy, etc.) pricing

1. Which sub-sector within Digital Lending are you most bullish on in your geography in the current environment N=18 2. What do you think is a sustainable rate of annual AUM growth for digital lending
fintechs for next 2-3 years? N=17 3. Which of the following capabilities are you investing in? N=18
Source: The Global Fintech Union Survey 2024 by BCG and GFF
Building Bridges for the next decade of Finance 34

03
Six Bridges for the
Next Decade of
Finance
Building Bridges for the next decade of Finance 35

SUMMARY
• India is on the journey to becoming a “Fintech Nation”
ǟ #3 in terms of number of Fintechs and number of unicorns
ǟ Indian Fintechs on track to achieving $190Bn in revenue by 2030 and have demonstrated remarkable growth of >50% in 2023
ǟ Share of Indian banking Fintechs in banking revenues on track to increase to 20%+ by 2030 (vs. 13% globally)

6 bridges to shape the next decade of Finance:

• Bridge to future ready tech in FI
ǟ While digitalization (front-end) in Indian FIs is a global poster child, the underlying core remains fragile with lower IT spends at
~5% vs. ~7% globally
ǟ Holistic approach encompassing core modernization, leveraging GenAI, cloud adoption, and building world-class tech functions crucial
• Bridge between incumbents <> Fintechs
ǟ Lines between incumbents and Fintechs blurring with incumbents building “Captive Fintechs” and Fintechs focusing on governance
and compliance; collaboration and healthy competition to continue to capture the large digital native opportunity
• Bridge to internationalization
ǟ India’s financial infra solutions (including SaaS) are highly mature and scalable to support the exponential digitization needs of the world
ǟ Opportunity for Indian BFSI SaaS firms to reach ~$45-55Bn revenue in 10 years
• Bridge to capital access
ǟ India’s vibrant Fintech ecosystem will soon be gearing up for large-scale liquidity events; building a powerful equity narrative, tailored
to different types of potential investors would be key for Fintech founders
• Bridge to regulation, compliance and risk management
ǟ Indian FIs need to significantly ramp up their cyber-defense (India’s cybersecurity spends as % of revenue is one-ninth of global spends)
ǟ Increase in enforcement actions by the regulator by 1.5x last year; compliance by design is a key imperative for the
Indian financial ecosystem
ǟ Indian regulatory framework perceived to maintain a balance between innovation and safeguarding risks; opportunity to improve
clarity on regulations
• Bridge to brighter and greener future
ǟ Large headroom for India to improve quality fundamental research in critical and emerging technologies like AI
ǟ DPI 1.0 laid the foundations of a strong Fintech ecosystem; DPI 2.0 and Digital Public Intelligence (AI powered) will power the
next wave of growth
ǟ $100-150Bn gap in climate finance in India; blended finance to be critical to meet gap
Building Bridges for the next decade of Finance India Fintech Landscape 36

India – A Fintech Lighthouse

High funding
activity and scale XX No. of Fintechs in the State/UT
Ladakh

#3
12 Jammu and Kashmir

Himachal Pradesh 11
144 Punjab
53 Chandigarh Uttarakhand 37
Haryana 756 Arunachal 3
1.3K Delhi Assam
in deal volume1, with Sikkim Pradesh
42
>5% share of global 398 Rajasthan 852 Uttar Pradesh
Nagaland
funding Bihar 116 Meghalaya
Manipur 6
Madhya Pradesh Tripura
56 Jharkhand
268 6
650 Gujarat Mizoram
40 West Bengal
Deep and diverse Chhattisgarh 456
ecosystem Odisha 88
2.9K Maharashtra

#3
Telangana 631

26 Goa
Andhra Pradesh 92
1.9K Karnataka Puducherry 15
in number of Fintechs Andaman and
17
and number of 282
Tamil Nadu 857
Nicobar Islands
unicorns (at least 1 Lakshadweep Kerala
unicorn across all 6
Fintech segments)

1. Global Fintech funding deals from 2020 - June 2024

Source: Tracxn as of July 2024, BCG Analysis
Building Bridges for the next decade of Finance India Revenues 37

Indian Fintechs have demonstrated remarkable 1.5X growth in 2023

(vs 13% global); on track to achieve $190Bn in revenues by 2030

Indian Fintechs on track to achieve ~$190Bn in Share of Indian banking Fintechs in banking revenues
revenues by 2030, 2023 growth higher than projected on track to increase to 20%+ by 2030

India Fintech revenues projection for 2030 Share of banking Fintech revenues in total
banking revenues
2022 2023 2030
$220-
250Bn Indian banking Fintech
35-40% $50- Revenue upside revenues as % of Indian ~5% ~7% 20%+
60Bn with DPI1 exports banking revenues

Global banking Fintech

+56%
$170 - Projected revenues as % of global ~5% ~6% 13%
190Bn revenue banking revenues
$16Bn $25Bn

2022 2023 2030 Indian banking Fintechs to contribute 25%+

of Indian banking valuations

Indian Fintechs demonstrated a 1.5X growth in 2023 while global Fintech revenues grew
13%, a testament to the strong fundamentals of the Indian ecosystem. Indian Fintechs
Vipin V are on track to contribute to 20% of all banking revenues by 2023 and 25% of banking
India Leader – Tech in valuations. The growth is enabled by our strong digital public infrastructure, regulatory
FI, Managing Director support, and increasing digital adoption among both consumers and SMEs.
& Partner, BCG

1. Digital Public Infrastructure

Note: Banking and Banking FinTech revenues/valuations are excluding Insurance and InsurTech revenues/valuations respectively
Source: Traxcn; Reimagining the Future of Finance - BCG QED Report 2023; Money Control; Trading View; Capital IQ; BCG Analysis
Building Bridges for the next decade of Finance 38

6 bridges to shape the next decade

of Finance

1 2 3
Bridge to Bridge between
Bridge to
Future Ready Incumbents <>
Internationalization
Tech in FI Fintechs

4 5 6
Bridge to Bridge to Regulation, Bridge to a
Capital Compliance and Brighter and
Access Risk Management Greener Future
Building Bridges for the next decade of Finance 39
Building Bridges for the next decade of Finance 40

1 Bridge to Future Ready

Tech in FI

Oakland Bay Bridge, USA

A vital bridge between East Bay and San Francisco, the bridge became susceptible to new seismic activities.
The “core replacement” of the East Span was critical to ensure resilience.
Building Bridges for the next decade of Finance Tech in FI 41

Tech enabled “Future-built” financial institutions unlock

disproportionate value
Case Study
Future built companies outperform peers across key Tech transformations drive business benefits including
financial metrics TSR1; BDO’s share price rose +72% within 2 years

Future-built Stagnating/
emerging Share Price (PHP)

Market share 140 Tech transformation

increase 8.9% 1.9x 4.8% initiated in April 2016
120

Revenue growth 11.4% 1.6x 7.0% 100

Financial performance

80
BDO
Cost reduction 8.4% 1.5x 5.6% 60
2015 2016 2017 2018

EBIT margins 11.2% 1.5x 7.3%

Key results

Enterprise
value increase
12.0% 1.6x 7.7% 72% Increase in share price over 20 months

15-25% Reduction in development cost; freeing up

digital capability budget
EBIT increase
through digital 11.2% 1.9x 6.0%
2x-4x
Acceleration in delivery and speed-to-market
Digital/AI

enabled by frequent release cadence

Average ROI of Customer satisfaction through

AI projects
11.7% 1.6x 7.4%
2x-3x differentiated experience

1. TSR: Total Shareholder Return

Source: BCG digital acceleration index (DAI) - global study 2023
Building Bridges for the next decade of Finance Tech in FI 42

While digitalization (front-end) in Indian financial services is a global

poster child, the underlying core remains fragile
IT spends of Indian financial institutions lower
than global peers RBI bars a leading private bank from certain
banking activities mentioning that the bank is
deficient in operational resilience and IT systems
IT costs1 by Net Revenue2 FY’23(%)

RBI asks a leading private bank to strengthen IT systems

before expanding further; it also temporarily stopped the bank
~5% 7-8% from launches of its digital business generating activities

RBI imposed a penalty on a leading private sector

Indian banking Global banking bank for contravention of RBI provisions, including
spends spends3 provisions related to cybersecurity

RBI observed that there is a significant need to

Only 30% of IT spends on ‘Change the bank’
improve IT systems amidst frequent outages in the
(vs. 40% globally)
mobile banking app at a leading public sector bank

Digital transformation in Indian banks is not just about technology, but a complete change in mindset and culture.
The biggest challenge is the integration of legacy systems with new-age technologies.

Former Chairman (Large PSB)

Imperative for the Indian FI ecosystem to establish actionable guardrails (e.g., % of tech spends, % of
“Change the bank” spends) to meet requirements of the future

1. IT Costs include Capital Expenses and Operating Expenses; 2. Net Revenue is computed as Net Interest Income + Other Income; 3. Global benchmark includes banks and other FIs; $1 = ₹82
Note: Analysis has been made based on 22 banks; 6 banks between $250Mn - $500Mn, 2 banks between $500Mn - $1Bn, 13 banks between $1Bn-$10Bn, and 1 bank above $10Bn
Source: FIBAC Trends and Benchmarks 2023, RBI, Capitaline, Annual Report, Gartner, NPCI Portal, BCG Analysis
Building Bridges for the next decade of Finance Tech in FI 43

5 broad themes to augment tech in financial services

Legacy Data and World class Tech

Cloud
modernization GenAI tech function resilience

• Core • Data platform • Talent build • Cloud strategy • Tech infra

transformation architecture and roadmap availability
• Platform management
• Digital • GenAI platform operating model • Cloud
platforms and architecture and org design architecture • Tech availability,
super apps review stability
• Use case • Ways of working:
• IT architecture implementation: agile, IT/Biz • Cloud operating • Resilience
blueprint and GenAI, governance model
optimization personalization, and demand (Including
etc. management Fin Ops)
Building Bridges for the next decade of Finance Tech in FI Legacy Modernization 44

Core banking transformation can solve 5 key challenges faced by

Indian FIs
~$1Bn spends required for Indian banking core modernization in the next 5 years

Scalability Flexibility Agility Resilience Performance

• Ability to handle • Inbuilt flexibility • Quicker time- • High availability • Advanced

peak time read/ for modern to-market (e.g., built in the systems load balancing
write volumes application needs by 60-70%) with to avoid downtime, techniques
without failures such as support frequent product especially important prevents any
due to the for event-driven release cycles with increasing real single server
presence of architecture (from 3-6 months time transactions from becoming a
autoscaling to 2-4 weeks) and advanced tech bottleneck
features • Enhanced
flexibility to • Distributed
• Micro services configure and architecture
architecture roll-out new enables workloads
allows for products quickly to be spread across
better resource multiple servers or
management and nodes; can handle
scalability failures without
affecting the
entire system

~$1Bn required for the core modernization of Indian banks in the next 5-10 years

Source: FIBAC, IDC, Gartner, BCG Analysis

Building Bridges for the next decade of Finance Tech in FI Legacy Modernization 45

Multiple approaches to manage legacy core

Hollowing/ Replace/upgrade the core

leaning the core
Big bang replacement Migration challenger Standalone challenger

#2 #2 #2

Architectural solve to • Big bang cutover to • Stand up a new core in • Clean stack-focused on
hollow the core new core parallel to legacy new customers, new
• Re-factor products
• Freezes new features • Migrate in a modular
• Develop APIs and while cutting over way over time • Not focused on serving
microservices existing customers
Approach • Move business
logic out

•+ Most popular with •+ Reduces future cost and •+ Easier to implement •+ Easier to implement
least risk complexity significantly with limited risk with limited risk
•+ Economical and easy to • Typically slow •+ Reduced cost and •+ Allows for
implement and expensive complexity in end state experimentation
• Impact constrained • Highly risky with very •+ Allows for • Creates fragmentation
Pros and by the extent of few successes experimentation and duplication
cons de-coupling possible in the industry • Longer time for full • No benefits to existing
scale transformation businesses
A British bank used ‘Hollow Few/no successful examples A US bank partnered with A leading Indian Fintech
the core’ approach to in the industry Finacle for a wave-based company adopted a ‘Build
scale notification service modernization to introduce the core’ approach to
by introducing a layer of a new-age core banking replace a COTS1 system,
notification microservices system through 4 waves. leveraging the public
Successful which interacted with the A new lending product cloud to create a flexible,
examples existing core. It facilitated was launched on the new monetizable platform
personalized notifications at system seven months later, enabling it to launch new
scale and enhanced system leveraging the existing features and innovative
monitoring system of records products quickly
1. Commercial off the Shelf
1.Source:
Commercial
BCG Analysis
Off the Shelf + Pros Cons
Building Bridges for the next decade of Finance Tech in FI Legacy Modernization 46

Modularization of IT architecture through APIs ...

Monolithic architecture
Other
Digital Physical (Branch, ATM, POS systems,
Channels (Mobile, Web, etc.) (IVR, Contact Center, etc.)
3rd party sites, etc.)
Channel services layer

Product Deposits Credit Loans Mortgages Auto Remittance

configuration cards financing

Core banking Account Account Account Account Account Account

capabilities management management management management management management

Postings Postings Postings Postings Postings Postings

Fees and Fees and Fees and Fees and Fees and Fees and
rewards rewards rewards rewards rewards rewards

Settlement Settlement Settlement Settlement Settlement Settlement

and end of day and end of day and end of day and end of day and end of day and end of day

Supporting General Customer info Risk & Authentication and Reporting and
capabilities ledger management compliance authorization analytics

Elements of the core banking platform

Source: BCG Analysis

Building Bridges for the next decade of Finance 47

... and hollowing out the core is the most popular and low-risk approach

Hollow the core

Other
Digital Physical (Branch, ATM, POS systems,
(Mobile, Web, etc.) (IVR, Contact Center, etc.) Channels
3rd party sites, etc.)
Channel services layer

Deposits Credit Loans Mortgages Auto Remittance Product

cards financing configuration

API API

Circuit Service Service Service Configuration Smart

Observability
breaking discovery security mesh management business logic

API API

Data lake Event store AI/ML models LLDS1 Data layer

Customer info management Risk and compliance Reporting and analytics Peripheral
.... capabilities

System of records Core

• Existing core system remains as a system of record
• Enables financial institutions to offer value-added and next-generation Elements of the core banking platform
services to customers while retaining the existing, time-tested core systems
1. Low Latency Data Store
Source: BCG Analysis
Building Bridges for the next decade of Finance Tech in FI Legacy Modernization 48

Blueprint for core banking transformation

Functional capabilities

• Multi-product core as center of new platform, providing product-agnostic (and

product-specific) functionalities informed by multi-product customer journeys
• APIs and microservices enabling product teams to access core functionalities (e.g.,
account opening, closing, restricting; posting credit/debit transactions to accounts;
processing standard interest, fees, rewards; settlement and end-of-day services)
• Functional capabilities designed with domain driven design concepts with clear
bounded contexts and responsibilities (e.g., accounts, postings, fees and rewards,
end-of-day)

Platform enabling capabilities

• Clear platform architecture design, including demarcation of in-house vs. partner-built

components; core integrations with partners in company (e.g., finance, risk, compliance)
• Data integration capabilities for partners across the bank, which could include data
lake integration and/or migration to new databases (e.g., multi-region database)
• End-to-end, automated, continuous testing (e.g., CI/CD pipelines, shift-left approach),
including partner testing with cross-bank teams
• High-performing environments that are easy to provision and streamline SDLC (e.g., for
development, testing, integration, and production)

Team and talent

• Best-in-class talent through recruitment and upskilling; roles include product owners,
cloud developers, reliability engineers, etc.
• New ways of working (e.g., agile teams working in sprints, agile coaching for team
leaders, joint embedded teams with tech partner)
Source: BCG Analysis
Building Bridges for the next decade of Finance Tech in FI GenAI 49

The AI convergence: “Predictive AI” and “Generative AI” to unlock

exponential gains
Predictive AI and GenAI will complement each other

Predictive AI Left brain Right brain Generative AI

Predictive algorithms that, among other things, Generative algorithms that, among other things,
can assign probabilities, categorize outcomes, can create text or images in human-like quality
and support decisions in response to prompts

Text processing (summarization,

Risk models
generation, etc.)

Recommendation engine Multi modal content generation

Natural language
Fraud detection
interaction, instruction

... ...
Predictive AI Generative AI

Personalization reimagined: @Scale and Segment-of-1

Communication Decision engine Content generation

• Digital channels • Customer • Human touch
• “Human-like” segmentation • Multi modal content
channels • Offer decisioning – images, text, voice
• Personalization

Source: Navigating GenAI: An Executive Roadmap for FIs; BCG Analysis

Building Bridges for the next decade of Finance Tech in FI GenAI 50

Both traditional and Generative AI use-cases span a broad range of

opportunities across the banking value chain
Customer CLV Analytical Intelligent Call transcript Early warning RWA
retention modeling banking payment analysis and credit risk optimization
offerings routing insights mining monitoring
HR - AI
Traditional AI

Cross-sell and Personalized

acquisition onboarding Smart payment Collateral risk powered talent
repairs assessment acquisition
Pricing and fee
optimisation Differentiated Optimal
collections Automated allocation
credit of resources
Omni-channel Branch network decisioning
engagement optimization

Intelligent 3 Support and Transaction HR – talent

document proactive needs monitoring retention –
employee
Both

processing and identification

digitization for RM/client sentiment
interactions analysis

6 Hyper- Streamlined Identification Document pre- Investment 4 Customer 5 Knowledge 7 Knowledge

personalization onboarding of emerging population reports and service/contact database for management
of content (incl. KYC) product trends research center support legal teams and analysis
to support synthesis interface and
product teams​ SAR pre-
Initial fact chatbot population Memo writing
Client
acquisition find for a Synthesized,
tailored Automated Ongoing IT - synthetic
chatbots for new client Help users customer
Generative AI

engagement discover reports for document data

customer classification due diligence generation
products
tailored to distribution- and use for
Sales training based on Compliance
needs Policy / monitoring and test cases
for simulating individual contract
client interests documentation
monitoring creation Finance –
conversations 2 Code and synthesis drafting of
generation 1 Document reports and
and review Agent synthesis for planning
coaching and lending reviews
performance
Enhanced
underwriting
Supporting
Marketing Prospecting Product Ops Financial Customer Risk and
corporate
and sales & onboarding development process advice support compliance
functions
Use case
1. Customer 2. Operational 3. Controlling 4. Containing compliance 5. Building workforce 6. Steering and 7. Analytics-based
intimacy excellence credit risks and operational risks and culture controlling products and services
XX details on
next page
Source: BCG Analysis
Building Bridges for the next decade of Finance Tech in FI GenAI 51

GenAI can unlock bottom-line impact for Indian banks and NBFCs
across 7 priority use cases
Use cases Summary Potential opex impact

Document synthesis for lending AI-powered document completion and financial product ~50 bps
reviews and checks monitoring-based on customer data to improve efficiency
and reduce fraud

Supportive programming, developing, Smart code generation and completion to help developers ~35 bps
and documentation code faster and reduce errors using models trained on
best-in-class codebases

Support RMs / FAs with memos, Relationship summary and automated reach-outs to help ~20 bps
analytics, performance monitoring RMs and FAs minimize time spent on data entry while Potential for additional
maximizing personalized interactions ~20 bps revenue uplift

Customer service support interface Chatbots and knowledge interface to support call center ~20 bps
and chatbot and in-branch agents, reducing call handling and
training requirements

Knowledge database for legal teams Support legal teams through interface that creates drafts ~10 bps
and analyzes documents-based on previous work and
best practices

Hyper-personalization through AI-generated personalized and targeted content at scale ~10 bps
creative content generation to drive more efficient marketing campaigns

Knowledge management Natural language queries to rapidly find answers and ~10 bps
and analysis synthesize insights, accelerating decision-making and
improving performance

Source: FIBAC, BCG Analysis

Building Bridges for the next decade of Finance Tech in FI GenAI 52

Deep dive: CollectTech - GenAI applications can strengthen the E2E

collection process by tapping into unstructured data sources
Pre- Late Settlement
delinquency Bucket X Bucket 1 buckets & recovery

Data sources
Early warning
Audio signals

• DM CC calls
Treatment
• Voice bot recorded
strategy
calls
• Field agent Power up models using past conversation data
meeting recordings Content
summarization Real time pivot of strategy basis live info on call
Unstructured text (unstructured to
structured)
• AA data Price
PTP strength
• Process and knowledge estimation
documents
• Reports on economic Knowledge search
trends
• Industry reports at
micro geo level Accurate disposition tracking

Pictures/ videos Near real-time monitoring to detect toxic score

Personalized GenerAItor (WA, email, SMS,
content
Photos and videos video message)
of assets
generator
Persona-based scripts for agents

External data Knowledge Agent Training Content Generation

through APIs generation

Asset price data

Conversational Customer facing voicebot
(e.g., scrape websites
interface
like Carwale) Data analytics Dashboards for customer cuts
and visualization

Source: BCG Analysis

Building Bridges for the next decade of Finance Tech in FI Cloud 53

Globally, banks and new digital attackers are capitalizing on the

benefits of cloud across the entire stack

Online
70% of value from public cloud banking Backed
No brick Brick and
100% by large
and mortar
mobile financial
Private cloud Public cloud startups mortar institutions
branch
% value derived % value derived locations Mobile locations
apps

30% 30% 40%

Greenfield Digital bank Traditional
Cost containment Increased Increased access banks spin-off banks

Banking models
and faster infra-agility and to innovation
time-to-market management and enhanced Grab DBS digibank Physical
bandwidth customer exp Singtel mBank banking
N26 ING DiBa locations;
Revolut TMRW brick-and-
Lower DC costs Increased agility Integrate 3rd party
YouTrip mortar
across facility, due to minimal data sets
KakaoBank heavy
network, firewall up-front investment
Access new
High automation Higher service levels customers through

Banking tech stackhosting model

leading to lower from increased partners and new
FTE costs automation channels

Faster time-to- Improve credit Cloud vs. on-premise

Cost reduction due Cloud pure- Preference Majority
market for new decisions through
to usage-based play; (almost) for public on-premise;
products, features embedded AI/ML
pricing entire bank cloud; typically commencing
and services
Deliver hosted on a characterized by migrating
Detect and prevent omnichannel cloud platform existing legacy consumer
fraud in new and experience with adherence applications engagement
innovative ways to improve to financial hosted on systems to the
onboarding and regulations premise Cloud
service
Source: BCG Analysis
Public Cloud On-premise
Building Bridges for the next decade of Finance Tech in FI Cloud 54

Regulations on cloud and data privacy supportive in India, but

responsibility remains with Regulated Entity (RE)

Data transfer permitted,

Outsourcing permitted, but
but privacy remains the
with appropriate safeguards
responsibility of the bank
Key implications

Outsourcing regulations Data transfer

Banks don’t require prior Can transfer personal data
approval from the RBI to within or outside India,
Supportive regulatory
outsource cloud-related financial given no restriction by the environment for banks to
services for both Indian and central government outsource cloud services
foreign service providers
Additional checks1 defined by
the Data Privacy Bill, Aug’23
Risk assessment
Corporate governance guidelines should be
Banks outsourcing any financial Restricted to India defined by the RBI;
activities should have a Rules on sensitive data transfer currently open ended
comprehensive outsourcing are limited in jurisdiction to
policy approved by the board Indian bodies2, and do not apply
to bodies abroad
Banks to recalibrate their
cloud stance basis the
Risk management Data privacy data privacy bill
Banks can shift non-critical and Banks are responsible for the
critical business applications actions of their cloud service
to cloud-based platform basis providers including
extensive risk assessment confidentiality and recovery
of customer information

1. Central govt. may restrict transfer of personal data to outside India but no changes yet on applicability of any Indian law that provides a higher degree of restriction 2. Corporate or legal entities
Building Bridges for the next decade of Finance 55

While FIs are increasingly adopting cloud in India, 6 challenges persist

Regulatory compliance: Absence of concrete standardized protocols and guidelines for

the effective adoption of public cloud solutions

Security and data privacy concerns: Apprehensions on the ability of cloud service providers
to meet the stringent security and compliance requirements of the data involved

Resource availability: Lack of cloud literacy; no existing experience on skill

requirements to cope up with the transition to cloud

Change management: Lack of majority stakeholders’ buy-in on migration to public

cloud; resistance to new technology adoption

Legacy system integration: Major FIs operate on legacy systems, which increases the
complexity of managing multiple interfacing requirements

Lack of internal strategy: Maturity of cloud implementation is at a nascent stage; no clear

roadmap for tackling potential discrepancies; unclear estimation of migration efforts

Source: Interviews with tech and IT teams of Financial Services firms; Cloud committee report; Discussion with cloud committee members
Building Bridges for the next decade of Finance Tech in FI Cloud 56

Four key enablers to help FIs drive their cloud blueprints to reality

Define goals
Ramp-up people Accelerate the Invest in
and build an
and organization transition of building resilient
integrated
readiness data to cloud infrastructure
business plan

• Drafting of bank specific • Setup of cloud strategy • Current infrastructure • Cloud provider selection
cloud adoption policies team for prioritization assessment to identify basis bank expectations
and guidelines of migration of applications and right partnership
applications for migration ecosystem
• Clarity on regulations
for compliance and • Support function • Data migration plan • Formulation of an
security standards integration to bring to ensure minimal active exit plan in
expertise from finance, disruption and maintain case of unavoidable
• Risk assessment to procurement, etc. data integrity circumstances
identify and mitigate
potential challenges • Skill empowerment • Data security protocols • Ongoing monitoring
through training on encryption, access to assess cost,
and upskilling of IT control, and monitoring system security, and
workforce mechanism performance

• Embed culture change • Stringent testing to • Prioritize use-cases

agenda through detect and address for implementation,
exhaustive plan to drive any potential (e.g., personalization,
digital mindset migration issues customer service,
fraud prevention)

Source: Discussions with FS IT and tech teams, Gartner Report, BCG Analysis
Building Bridges for the next decade of Finance Tech in FI Cloud 57

Imperative to control transition cost to cloud

Comprehensive framework to control cloud costs

Optimize cloud costs by 20-25%
Allocation Optimization
Optimize tech
Detailed overview of Usage of resources Talent build
used cloud components architecture
Rates
Tagging strategy • Built/bought cloud native • Onboarded cloud
Usage of cloud native
applications experienced team for
Chargeback components
• Leveraged micro-services, planning and usage
containers, etc., to reap optimization
100% cloud benefits • Setup finOps (finance +
Transparency Forecasting
• Optimized network costs devOps) team
Budgets and tracking Budget forecasting

Dashboards and reporting TCO calculation

Proper planning and Structured monitoring
Taxonomy Cost benchmarking
purchase strategy and governance
• Right sizing basis • Rationalization of licenses
Culture Governance expected utilization • Snoozing of non-production
• Reserve instances for servers
Collaboration Operating model baseline usage • Ramp-down of capacity
• Rationalization of core infra while not required; leverage
Cost accountability Upskilling and training auto-scaling

Business value
decisioning Playbooks

Centralized finOps Organizational design

Transparent reporting
20-25% reduction in cloud costs

Source: BCG Analysis

Building Bridges for the next decade of Finance 58

2 Bridge between
Incumbents<>Fintechs

London Millennium Footbridge, UK

The bridge, a brainchild of traditional engineers, modern architects and sculptors, is an example of
modern architecture blending seamlessly with London’s historic landscape.
Building Bridges for the next decade of Finance Traditional BFSI <> Fintechs Cloud 59

Traditional institution <> Fintech lines are blurring to capture the

digital India opportunity at scale

Fintechs with incumbent’s

Fintechs within incumbent
functional capabilities and trust

• Responsible growth • Digital assets

• Regulatory compliance • Open architecture
• Strong governance • E2E digital customer
• Path to profitability journeys
• Functional capabilities • Use of alternate data
(e.g., collections) for underwriting
• Best-in-class
customer service
• ....
Fintechs are hiring for leadership roles (from
legal firms and ex-officials of the RBI) to
strengthen legal and compliance teams

As Fintech and Traditional BFSI collaboration matures, the line between them continues
to blur. Fintechs are augmenting core capabilities (e.g., lending players strengthening
Tirtha Chatterjee collections), enhancing governance, and prioritizing profitable growth. Meanwhile, incumbents
Co-Lead, GFF-BCG are increasingly building tech-first capabilities, particularly in customer-facing areas
Thought Leadership, (e.g., D2C journeys), and amplifying the use of analytics and GenAI across the value chain
Principal, BCG

Source: BCG Analysis

Building Bridges for the next decade of Finance Traditional BFSI <> Fintechs 60

Incumbents are building digital-first capabilities to acquire or defend

primary customer relationships and create moats
Non exhaustive

Leading wealth manager Leading private bank Leading NBFC

• Leading wealth • A leading private sector • D2C Digital Lending offering

management firm built bank launched a mobile with both cross-sell and
the first digital led end-to- banking super app with open market capabilities
end wealth management hyper personalization as
platform in India to cater a key feature to increase • Fraud control suite and
to the underserved customer onboardings system circuit breakers
$1-5Mn segment by 10Mn in 3 years built in–house; capabilities
transferred horizontally
• First to India ability to • The app was launched across business units
create a portfolio digitally in response to changing
with automated support customer behavior in • Super-app architecture;
preference of digital future-ready for
• Modular, scalable tech stack offerings (95% incremental ecosystem play
with capabilities at par with onboarding for credit cards,
latest Fintechs deposits, and personal loans
is digital)

Source: CB Insights State of Venture; BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Traditional BFSI <> Fintechs 61

Fintechs and traditional institutions continue to collaborate; however,

need to harmonize ways of working to unlock full potential

60%
Traditional institutions collaborating

90%
with multiple Fintechs1
% Traditional institutions in partnership
with Fintechs1

Traditional institution CXOs

Traditional institution
CXOs have existing 20% believe that partnering with
60% 10%
partnerships with one Fintechs has given/will give access
or more Fintechs1 5+ 3-5 1-2 to population to which they were
not initially catering to2
No. of fintechs in partnership

Growth projections, track record of other partnerships Tech maturity, regulatory nuances, and ways of working
and founder profile biggest reasons for partnerships bottlenecks for traditional institutions while partnering

Top reasons for traditional institutions to partner with fintechs Key challenges in Fintech-traditional institution partnerships
(% of traditional institution CXOs selecting below in top 3 reasons)3 (% of traditional institution and Fintech CXOs selecting below in
top 3 challenges)4

1 2 3 1 2 3

60% 60% 60% 70% 56% 47%

Robust growth Founder Track record of Tech Ways of Regulatory
projections profile other partnerships maturity working challenges

1. How many Fintechs are you in partnerships with across product segments? N=10 2. Do you believe partnering with Fintechs has given/will give access to population to which you were not catering to?
N=10 3. What do you look for in Fintechs when you partner with them? N=10 4. What is/will be the biggest challenge for you while partnering with Traditional banks / Fintechs? N=43
Note: Traditional Institutions include Banks, NBFCs, Asset Management and Insurance companies
Source: The Global Fintech Union Survey 2024 by BCG and GFF
Building Bridges for the next decade of Finance Traditional BFSI <> Fintechs 62

RBIH a key enabler in boosting Fintechs’ readiness for banking

partnerships and fostering collaboration with incumbents

4 key initiatives by RBIH to augment Fintech capabilities

Rajesh Bansal
CEO, Reserve Bank
Masterclasses on bank partnerships: Fintechs Innovation Hub
connect with mentors from banks who guide
them through banking ecosystem, regulatory and
Fostering a robust partnership between
operational expectations. fintechs and banks is essential for driving
financial innovation. While banks have
shown a strong interest in collaborating
with fintechs, it has typically taken ~18
Mentorship on Bank Readiness: Fintechs learn about months to establish these partnerships due
to various internal and external challenges.
bank-compatible products and APIs, onboarding and
approval processes facilitating smooth integration. To overcome these hurdles, creating
streamlined linkages is crucial. At RBIH,
we play a pivotal role in developing the
capabilities that banks expect fintechs to
have for sustainable partnerships. Our
Market Access via Bank-Fintech Demo Days: Platform recent ‘Bank-Fintech Demo Day’ was a
significant step forward achieving the
for fintechs to pitch solutions to numerous banks and following:
NBFCs, accelerating partnerships and POCs.
6X reduction in TAT (from 12 to
18 months to 2-3 months) for
confirmation of POCs
16 POCs in pipeline within 2 months
Mixers and Roundtables: Monthly networking events of Demo Day
for fintechs to network and pitch their products to 50% of participating Fintechs received
potential banks and partners. at least 1 POC within 2 months

This success marks the beginning of

a deeper collaboration journey in the
Source: Discussions with the RBIH team, BCG Analysis
financial sector.
Building Bridges for the next decade of Finance 63

3 Bridge to
Internationalization

Bosphorus Bridge, Turkey

Linking Europe and Asia and facilitating trade, the bridge represents globalization
Building Bridges for the next decade of Finance International markets 64

Financial Infra with maximum opportunity for internationalization of

Indian Fintechs, followed by Digital Payments

• Interoperability with local banks and networks a challenge; but UPI interoperability creating
new opportunities
Digital • Cross-border payments with positive unit economics; lucrative if executed effectively
Payments • Multiple tailwinds including fast growth in global e-commerce, rise of freelancers, etc.
• Large cross-border payment pools (e.g., overseas education payments ripe for disruption)

• High complexity in integrating with local banking tech stacks, identity stacks, bureau, etc.
Digital • Difficult to get regulatory approvals; local players preferred for lending licenses
Lending • Opportunity exists for B2B solution providers (e.g, CollectTech)

• Emerging market WealthTech solutions in early stages; mature markets with advanced solutions
WealthTech • Customer trust and brand recognition critical; stiff competition from local players

• High complexity in integrating with local legacy insurance systems

• Limited path to profitability for InsurTech globally for B2C segment
InsurTech • Difficult to get regulatory approvals; local players preferred for InsurTech licenses
• Opportunity for B2B players (e.g., Insurance SaaS platforms, GenAI and data in claims and
customer service, etc.)

Accounts/ • Building trust against long standing financial institutions is difficult

Neo- • Evolving regulations for Neobanks across geographies
Banking • Difficult to get regulatory approvals; local players preferred for Neobanks licenses

Financial • India’s Financial Infra solutions highly mature and scalable to support the exponential digitization
Infra needs of the world (e.g., real-time digital transactions in India more than US, China, and
(including Europe combined)
B2B SaaS) • Easier to get regulatory approvals for infra solutions across all segments Deep-dive

Source: BCG Analysis Degree of Opportunity for Indian Fintechs

Building Bridges for the next decade of Finance International markets 65

Total addressable market for BFSI SaaS to reach $500Bn+ by 2033

Total addressable markets across regions and verticals (in $Bn) Major factors contributing
to growth
2023 2033
Sectoral drivers:
$100-130Bn $500-550Bn • Focus on e-banking
• Contactless payment methods
and digital lending
NAMR Europe APAC LATAM MEA • Increased tech enabled
monitoring
285-295 • Regulatory & risk management,
• 60%+ of the BFSI SaaS opportunity in NAMR; but existing and security using AI
long-term licenses limit entry opportunity for Indian players
70-75 • GenAI driven customer support,
• However, large number of BFSI SaaS contracts expected to
regulatory reporting, etc.
expire in the next 2-3 years, presenting a lucrative opportunity
for Indian players

SaaS advantage:
130-135 • Lower barriers to entry in • Fast speed to market enabled
APAC and LATAM and by modular re-usable
95-105 90-100 MEA markets components
• Enables BFSI players to focus
60-70 45-50 on core capabilities
55-60
15-20
• Cloud native SaaS solutions
80-85 20-25
25-30 20-30 20-25 12-15 enable rapid scale-up and high
10-15 10-15 5-10
15-20 25-30 10-15 20-25 1-5 1-5 reliability
• Reduced total cost of
2023 2033P 2023 2033P 2023 2033P 2023 2033P 2023 2033P
ownership: SaaS proven to be
fast and effortless, reducing
Banking Investments Insurance TCO by 20-25%

Source: IDC, Gartner, BCG Analysis

Building Bridges for the next decade of Finance International markets 66

Large US opportunity for Indian Financial Infra players; differentiated

approach needed for national and regional players
Differentiated GTM required across products and type of FI
Large US opportunity across segments
Mortgage:
• High share of national players → opportunity for Indian Fintechs to
Products by presence on balance sheet of depositories/
build solutions that can cater to significant addressable market
NBFIs (in $Tn) • Process and cost optimization top priority for regional FIs to counter
6-7 15-16 higher CAC and TAT
Commercial:
1-2 0-1 • High share of national players → opportunity for Indian Fintechs to
1-2 build solutions that can cater to significant addressable market
2-3 • Complete end-to-end automated journeys are currently not provided
3-4 by any player in the segment
Auto:
• 80% sourcing through complex indirect ecosystem needing
Commercial
Mortgage

Auto

Credit Card

UPL2

Others

Total integration with network of dealers to build share of wallet

Credit card:
• National players hold ~50% of the share → opportunity for
Indian Fintechs to build solutions that can cater to significant
Nationals1 Community1 addressable market
Regionals1 Credit Unions Personal:
• Fintechs commanding major share, targeting near and low prime
Captive Finance andNBFIs
segments → limited opportunity for Indian Fintechs

Though the US is the largest market for BFSI SaaS, the market characteristics vary a great
deal by states, products, and banks. Differentiated opportunity exists across segments.
Sreyssha George National players have large IT budgets and onboarding one marquee client can drive large
Managing Director & revenues, regional players are looking to leapfrog in digitization looking for cost-effective
Partner, BCG partners given limited budget and tech capabilities.

1. Segment by assets: Nationals - >$1Tn; Regionals - $50Bn to $1T; Community - <$10Bn

2. Unsecured personal loans: UPLs by NBFIs appear on balance sheet of banks who extend credit to them Opportunity for Indian Financial InfraTechs
Source: S&P Capital IQ; investor reports; BCG Analysis
Building Bridges for the next decade of Finance International markets 67

Indian BFSI focused SaaS Fintechs expected to generate $45-55Bn in

revenues in 2033

Revenue projection for Indian BFSI focused

We see a massive opportunity for ourselves in
SaaS players the retail assets and business banking areas
worldwide. With our recent funding, we aim to
$44-55Bn strengthen our product offerings and establish
Potential a strong footprint in the US market.
revenue
upside of Founder (Leading B2B SaaS)
+35-40% additional
$15-20Bn
with DPI
exports
Africa represents a significant growth market
for us. Our focus will be on leveraging our
$2Bn advanced analytics and credit decisioning
$1Bn solutions to help financial institutions. We are
committed to supporting financial inclusion
and fostering economic growth in the region.
Founder (Leading B2B SaaS)

2022 2023 2033

Southeast Asia and the Middle East are

dynamic regions with immense potential for
% Market share 2% 9-10%1 digital transformation in identity verification
and fraud detection. We aim to bring our
cutting-edge technology to these markets.

Founder (Leading B2B SaaS)

1. India to gain 9-10% market share excluding DPI export potential

Source: IDC, Gartner, BCG Analysis
Building Bridges for the next decade of Finance International markets 68

Opportunity for Indian Fintechs to leverage 4 models for international

expansion

Hero product Anchor client

Zeta Initiated with payment BaaS Intellect started as a core Intellect

solutions, subsequently banking solution provider
expanded to related products with a large foreign bank.
Currently has lending, Citi
Mambu Started with lending BaaS treasury, brokerage, core
solutions, now serves a banking, payments, wealth,
diverse customer base etc., as a service
Models for
international
expansion
Partnership led Inorganic growth
growth through acquisitions
Razorpay Razorpay has a partnership Pine labs acquired Fave Pine labs
with Paypal to enable MSMEs in 2021, a southeast Asian
and freelancers to accept Fintech allowing customers
Fave
Paypal payments from over 200 to pay merchants via a QR
markets across the world code to expand its presence
in international markets

Source: Press search, BCG Analysis

Building Bridges for the next decade of Finance 69

4 Bridge to Capital Access

IPO Readiness Revolutionizing “India for the World”

Golden Gate Bridge, USA

The bridge which boosted San Francisco’s economy during the Great Depression is a testament to the
centrality of capital access for growth
Building Bridges for the next decade of Finance Capital Access IPO Readiness 70

20-30% of VC/PE investments in Fintechs approaching the end of their

investment lifecycle; large-scale liquidity events expected

Significant share of Fintech investments are approaching the end Large Fintech ecosystem gearing up
of their investment lifecycle for liquidity events

Venture capital investment vintage (% investment value)

59%
Start-ups in Fintechs
46% 44% with 20 unicorns (e.g.,
28%
22% 23% 25%
34%

17%
35+ CRED, Razorpay, Groww,
Yubi, Acko, etc.) and
17 Soonicorns (e.g.,
Mobikwik, Oxyzo, etc.)
<3 years 3-5 years >5 years

Private equity investment vintage (% investment value)

73%
67% Years is the average age
of unicorn Fintechs in
~3
55%
India and it takes ~3.5
29%
25% years for unicorns to file
22%
16%
8%
for an IPO
6%

<3 years 3-5 years >5 years

Global APAC India

Source: Preqin, Tracxn, BCG Analysis

Building Bridges for the next decade of Finance Capital Access IPO Readiness 71

Preparing for a successful IPO journey and beyond involves focusing

on 3 key stages

Journey to IPO IPO window Journey beyond IPO

18-24 months pre 6-9 months pre 3-6 months pre

Stakeholder management
Strategic planning and • Select merchant bankers Market integration
structural decisions • Ensure key stakeholders • Establish analyst coverage model
• The Why? “Go” or “No go” decision benefits are covered • Ensure that the right investors are
• The Where? Domestic • Plan analyst engagement in advance in our stock
or international
• The When? Market
Financial readiness
conditions and readiness
• Establish expected valuation
• The What? Investor study,
• Conduct necessary pre-IPO rounds Performance tracking
peer reference
• Internal scorecard with key metrics • Establish TSR equation for 3
and 5 years
Risk management • Settle into ‘guide-beat-rhythm’
Equity story development
• Corrective actions (organic and with markets
• Develop unique value proposition
tailored to investor profile with a inorganic) to strengthen narrative
convincing investment rationale • Forecast first two
• Prepare a sound business plan with quarters’ performance Ongoing risk management
a long- term vision • Prepare for major risks • Manage negative overhang
• Identify and mitigate risks • Prepare IPO checklist

Market preparation Operational monitoring

Financial planning • Monitor IPO fund utilization
• Determine required participation
• Plan use of IPO capital • Ensure on-track delivery of
• Understand strengths
• Define target valuation first quarter
and weaknesses
• Define MOIC and TSR targets • Maintain visibility into next
• Investor roadshows to generate
interest and gauge share demand four quarters

Source: BCG Matrix SOFTU Report 2024

Building Bridges for the next decade of Finance Capital Access IPO Readiness 72

Critical to tailor equity narrative basis company’s investors base; adjust

for risks to ensure strong upside potential of stock

Fintechs can draw inspiration from successful Expert tips to design a great stock
Indian narratives to drive premium

1• High multiples are inherently intertwined with grand,

Leaders in long-term trends high-growth macro trends. Position your opportunity to
HUL in India consumption, Jio in resonate with a prominent macro trend.
data and digital • As companies evolve, investors favor teams that
2
place multiple bets on grand opportunities, creating
optionality and reducing risk of a single point of failure
Leaders in consolidating industry
Jio, Tatas through acquisition 3• Cultivate a rich talent density and a high-performance
culture to amplify your chances of success
• Lavishly invest, more than competition, in assets critical
4
New player with strong parent for forging unique IP and ensuring victory—such as
data, algorithms, UX design, and strategic partnerships
Tata Power renewables unit
• Remain accessible to stakeholders—analysts, key
5
media, regulators, etc. —and provide them with the apt
level of disclosure for them to do their job properly
Repositioning towards higher multiple
• Align your incentives with investor incentives (even
Bajaj Finserv as Fintech, Havells as 6
downside) - this symmetry ensures all parties share in
consumer company both the rewards and the risks
• Understand what to anticipate from investors—will they
7
support you or exit at the first hint of risk? It depends on
Leader in organizing a sector
the role your investment plays in their portfolio
Udaan in retail

Source: BCG Analysis

Building Bridges for the next decade of Finance Capital Access Revolutionizing “India for the World” 73

GIFT City and IFSCA revolutionizing “India for the World”

GIFT-IFSCA well-positioned as a Global Fintech Hub

Favorable regulatory framework

• Unified regulatory authority: No need for separate approvals from multiple regulators; focus on transparency and
streamlined licensing
• Streamlined accounting standards: Permitted to adopt International Financial Reporting Standards (IFRS) in line with
global parents
• Innovation sandbox: Innovation and inter-operable regulatory sandboxes for testing ideas and solutions
• Ease of doing business: Single window IT system for all regulatory approvals and clearances

Tax advantages
• Ten-year tax holiday: No taxes on profits for ten years, along with relief from commodity, security, and dividend taxes
• Zero GST: No Goods and Services Tax on transactions within IFSC exchanges, nil customs duty for all goods imported
into SEZ

Capital access
• Access to global investors: Access to PE/VC funds and angel investors (e.g., 70+ FMEs have launched 60+ funds/schemes
in GIFT already)
• Foreign currency transactions: Deemed offshore status; units in IFSC can freely transact in foreign currencies allowing
ease of capital movement

Talent Pool
• Located near educational institutions like IIM Ahmedabad ,IIT Gandhinagar, Gujarat National Law Univesity ensuring
availability of skilled professionals
Building Bridges for the next decade of Finance Capital Access Revolutionizing “India for the World” 74

Opportunity for GIFT-IFSCA to accelerate reverse flipping of Indian

Fintechs
Indian start-ups reverse flipping to capture “India Key recommendations for IFSCA to accelerate
opportunity”; however, key challenges exist reverse flipping

G Padmanabhan
Former Executive Director, RBI
Groww Razorpay PhonePe Pine Labs Meesho

I believe GIFT-IFSCA is uniquely positioned to facilitate

Tax burden the reverse flipping of Indian startups. To address the
• When a foreign holding company merges into an Indian challenges startups currently face in reverse flipping,
entity, it can trigger capital gains tax liabilities in India we have provided a list of recommendations to enable
and abroad offshoring at GIFT-IFSCA.
• Startups that reverse flip may lose the ability to offset
accumulated losses against future profits Some of the key recommendations include:
• Simplified incorporation processes for holding
companies
• Ensure tax neutrality to avoid adverse tax consequences
Operational complexities for offshore holding companies
• GIFT IFSC considered as “person resident outside India” • Exemptions on capital gains tax on transfer of shares
preventing investments by India’s AIFs and Mutual Funds
• Exemption of angel taxation provisions
• Migrating employees to a new India-level ESOP plan
• Carry forward losses or extend tax holiday period
can be complex
beyond 10 years
• ….

Regulatory framework By amending the current statutes, GIFT-IFSCA can offer

• Setting holding companies in India poses several a favorable regulatory and tax environment, making it an
regulatory challenges such as, compliance and attractive destination for Indian startups to return, grow,
disclosure requirements, corporate governance and help realize the vision of an ‘Atma-Nirbhar Bharat.’
standards, etc.
Source: IFSCA Committee Report, BCG Analysis
Building Bridges for the next decade of Finance 75

5 Bridge to Regulation, Compliance,

and Risk Management

Risk management Regulations

Compliance

Iron Bridge, UK
An exemplar of durability and safety in architecture, the bridge exemplifies principles that ensure trust and mitigate risks
Building Bridges for the next decade of Finance Regulation, Compliance & Risk Management Risk Management 76

Financial institutions need to combat a myriad of risks

Non-financial risks
Data Fraud Outsourcing Other operating Cybersecurity Regulatory Financial
risk risk and vendor risk risks risk compliance risk crime risk
• Data integrity • Application • External • Legal risk
risk fraud risk outsourcing risk • Reporting risk
• Data gov. risk • Credit fraud • Vendor risk • Model risk
risk

Financial risks Risk

category
Credit Market Liquidity and
risk risk funding risk • Risk subcategory
• Obligor risk • Interest rate • Interest rate
Deep dive ahead
• Counter-party risk risk
risk • Market • Market
• Securitization liquidity risk liquidity risk
risk
• Concentration
risk

Strategic risk
Business
risk
• Forecasting risk
• Inorganic growth risk
• Investor relations risk

The next decade of finance presents novel opportunities as well as risks. Many of these
categories of risk are unprecedented. Financial institutions must keep pace with these
developments, and risk management departments need to work cross-functionally to
Abhinav Bansal
APAC Leader – Risk in understand and mitigate exposures. Risk management changes that will help succeed in
FI, Managing Director crisis include centralizing risk management activities, embedding risk management into
& Partner, BCG overall strategy post management buy-in, and intensifying the usage of data and analytics.

Source: BCG Analysis

Building Bridges for the next decade of Finance Regulation, Compliance & Risk Management Risk Management 77

Cyber threat is real, especially for FIs

It’s not a question of if, but when a cyber incident Cyber incidents result in significant impact for
will happen organizations as well as entire countries

RBI has increased the risk from cyber

>2.5Mn customers were impacted by a data breach
security incidents from medium to high
at a leading stock broking company leading to
leakage of sensitive information like bank account
number, names, email, Aadhaar, PAN, etc.
High
Medium
2024 ~3.5Mn user accounts were compromised in one
2023 of the largest cyber attacks in India at a leading
payment processor

>$10Bn damages recorded across 64 countries

Indian banks spend significantly less on
in a global cyber attack originating from an
cyber security
accounting software
Cyber security 0.9% 0.1%
>$80Mn embezzled from the National Bank of an
spend as % of
revenue (2022) Asian country by infiltrating the SWIFT network
Global banking Indian banking reflecting vulnerabilities in payment systems
Spends Spends

Massive increase of cyber incidents due to

“attack as a service”
Financial institutions must dedicate
substantial efforts to protect customer
information and ensure that vulnerabilities Emerging tech adoption (e.g., accelerated digitization,
exposing customers to risk are promptly cloud transformation, GenAI) amplifying exposure to
identified and addressed new risks

Governor (RBI) Increasingly critical external threats (e.g., geopolitics,

regulations), especially for financial institutions,
allowing no room for missteps
Source: RBI Systemic Risk survey, Cyber Security in post pandemic world report, Press Search, BCG analysis
Building Bridges for the next decade of Finance Regulation, Compliance & Risk Management Risk Management 78

Opportunity for FIs to realize business benefits while mitigating

cyber risk

Cyber posture Cybersecurity Advanced Secure by Zero-trust Cyber Third-party Crisis

and strategy cost cyber risk design: security operations and ecosystem management
optimization quantification GenAI, Cloud architecture cyber risk and resilience

1 2 3 4

Proactively Optimize your budget Invest in cyber capabilities to enable strategic growth Be ready to act
manage cyber
risk exposure

20% 30% 20%

Reduction of cyber risk exposure Reduction in fraud losses, at Reduction of average likelihood
at a leading global bank a leading European bank of successful attack

Source: BCG Analysis

Building Bridges for the next decade of Finance Regulation, Compliance & Risk Management Risk Management 79

Imperative for FIs to protect “inside out”

Protect inside out, not outside in Cyber security architecture needs to be optimized across 7 key
layers for protecting the core

A Infrastructure security • Data center security (DCS)

Ensuring IT infrastructure • OS and platform patch management
Laptops security

Regular
B Network security • Network DLP • Firewall
Ensuring network access is • WAF • IPS, APT
ERP
Mobile devices
employee accounts controlled and managed and • DDOS • NDR
VMWare Cloud control planes known attack types at network • Network access • Proxy servers
Customer databases level are addressed control • Network forensics

Backup platforms
Active Directory
C Identity and access • Authentication
Email management • PIM
… Priv. accounts
Managing user authentication • Single sign-on
Payroll
Payment channels and authorization • IDAM

D Data security • Encryption

USBs …
Data protection (rest and in • Endpoint DLP
motion) with information • DRM
management & malware protection • Server antivirus
Tier 0: Core business critical assets
Compromise or disruption at this layer has the potential to
E Endpoint security • Endpoint antivirus
cause organization wide outage or pervasive compromise Data, information, and
of other systems, affecting business viability. E.g., Active • EDR / XDR
malware protection on
Directory,Azure AD, VMWare, other key identity systems, etc. • Mobile device management (MDM)
end-user devices
Tier 1: Secondary business critical assets
Disruptions at this layer impact one or more business
F Monitoring • Vulnerability • Threat
Anomaly detection and assessment Simulation
processes and can cause significant loss of value
analysis through continuous • Threat • SOAR
Tier 2: Supporting business assets monitoring intelligence (TI) • SIEM
Disruptions at this layer cause additional work for IT teams
and lead to productivity loss; can also be stepping stones G Application security • Code Quality management
for more disruptive events Security related tools in the • Static and dynamic security
application layer testing

Note: OS – Operating system, DLP: Data loss prevention, WAF: Web application firewall, DDOS: Distributed denial-of-service, IPS: Intrusion prevention system, APT: Advanced persistent threat,
NDR: Network detection and response, PIM: Privileged identity management, IDAM: Identity and access management, DRM: Digital rights management, EDR: Endpoint detection and response,
XDR: Extended detection and response, SOAR: Security orchestration, automation, and response, SIEM: Security information and event management
Source: BCG analysis
Building Bridges for the next decade of Finance Regulation, Compliance & Risk Management Regulation 80

Indian regulatory framework promotes innovation while protecting risks;

opportunity for collaborative approach to improve clarity and consistency

% CXOs selecting below in top 3 enablers1 3 key asks for regulators from the ecosystem

1 64% 2 46% 3 42%

Foster more collaboration
Safeguards Future oriented Offering a level Facilitate more dialogue among Fintechs,
systemic risks and pro innovation playing field regulators, and other related industry
participants. A Fintech SRO in India will
be a key step in this direction.
The digital lending guidelines were a step in
the right direction. It provided clarity to the
ecosystem and ensured a level playing field
CXO, (Digital Lending Fintech) Predictability
Publish long-term roadmaps to ensure
predictability and consistency as to
% CXOs selecting below in top 3 painpoints2 where we are heading rather than the
current black box way of working

1 46% 2 42% 3 41%

Needs more Needs more Bureaucratic and Agile regulatory adaptation
clarity consistency time consuming
Consistently monitor and adapt the
regulations basis need since regulations
There is still some ambiguity in the may suddenly become outdated owing
regulatory framework. The landscape is to advancements in technology or rapid
rational in the long-term but unpredictable
changes in consumer behavior, or both
in the short-term
Founder, (Digital Lending Fintech)

1. What are the best features of the regulatory environment in your business area? N=59 2. What are the biggest pain points of the regulatory environment in your business area? N=59
Source: The GFF Survey 2024, BCG Analysis
Building Bridges for the next decade of Finance Regulation, Compliance & Risk Management Compliance 81

Non-compliance leads to significant value destruction for FIs

Regulatory action has intensified over the last 2 years Regulatory action impacts stock price as well as
disrupts business
14-day impact
Fine value (INR Cr) on stock price
1

1.3x RBI ordered one of India’s

86
payment banks to stop accepting
deposits or top-ups after major
irregularities in KYC
50%+
65

RBI directed to stop extending

FY’22 FY’23
fresh gold loan at a leading Indian
financial and investment services 35%+
company due to LTV challenges

No. of instances
3
RBI barred a leading Indian

20%+
investment banking firm from
189 1.5x 281 providing any form of financing
against shares and debentures,
including loans against IPO

Source: RBI Annual Report, RBI Press Release, Moneycontrol, BCG Analysis
Building Bridges for the next decade of Finance Regulation, Compliance & Risk Management Compliance 82

While outlook for Fintech governance has slightly improved, conscious

efforts required from Fintechs

% respondents who believe Fintechs are at par with % respondents who chose this step to improve
incumbents in terms of governance1 governance standards over the last year2

Set up stricter internal controls

83%
and risk management systems

25-30% 28-33%
Enhanced readiness for regulatory
72%
compliance and reporting

Improved
65%
2023 2024 cybersecurity systems

Improved data handling and

47%
Some form of compliance certification can management capabilities
be evolved for Fintechs. Scale based audit
mechanisms can also be thought about, based
on revenue, customers, etc.
Establishing an advisory
board and ensuring board 42%
CXO (Fintech) independence and composition

1. Q: Fintechs are at par with incumbents in terms of governance mechanism? N=51, 2. Q: What has your business done to improve governance standards over the last year? N=60
Source: BCG Matrix SOFTU Survey 2023/24, BCG Analysis
Building Bridges for the next decade of Finance 83

6 Bridge to a Brighter and

Greener Future

Fundamental Research Digital Public Infrastructure Sustainable Financing

Helix Bridge, Singapore

The Helix Bridge stands as an architectural marvel, showcasing a blend of innovation and sustainability, constructed from 100%
recyclable duplex stainless steel and inspired by the intricate structure of DNA
Building Bridges for the next decade of Finance Brighter and Greener Future Fundamental Research 84

Large headroom for India in quality fundamental research in critical

and emerging tech (e.g., AI)
India lags behind China and US in fundamental research in computer Research quality low vs other
science, especially AI; gap has widened since 2020 major economies

H-Index1
No. of journals published in % contribution towards (computer H-index
computer science AI journals (2023) Country science) (AI)
100% United States 1404 647

United Kingdom 700 360

45%

China 678 403

India needs Germany 640 287

to improve
50%
18% private and
Italy 453 219
HEI2 R&D
spend;
15% currently at Japan 400 211
40% and 9%
7% resp. vs. Israel 393 186
5% 65-80%
4%
4% and 10-20% India 369 211
0% 1% 2%
globally
2016 2017 2018 2019 2020 2021 2022 2023 Malaysia 240 134
China United Kingdom Japan
United States Germany Malaysia Opportunity to improve quality of
research vs other major economies
India Italy Israel

1. The H-index captures research output-based on the total number of publications and the total number of citations to those works, providing a focused snapshot of an individual’s research performance.
2. Higher Educational Institutes
Source: SCImago, Department of Science and Technology India, BCG Analysis
Building Bridges for the next decade of Finance Brighter and Greener Future Fundamental Research 85

Key imperatives for the Indian ecosystem to boost fundamental

research in critical and emerging technologies

Roll out preferential incentive policies Drive integration of corporate ecosystem with
to attract private R&D investments academia to reduce knowledge asymmetry

Lower corporate taxes, low-cost loans, and tax exemptions on Establish industry-led R&D centers on campuses to bridge the
innovative products gap between academia and commercial researchers

E.g., 15% corporate tax in China for High and New Technology E.g., State University of New York’s College of
Enterprises (HNTE) vs. 25% standard tax Nanotechnology Science and Engineering has setup Albany
Nanotech Complex with R&D centers of 10+ semiconductor
E.g., Dutch Innovation Box offers 60-70% tax benefit on profit firms like IBM, ASML etc. within college campus
derived from innovation

Enable the commercialization of Attract and retain world class researchers

university research to build a robust R&D ecosystem

Spin off companies to commercialize innovations while Launch talent attraction programs to attract and retain world’s top
providing them funding, mentorship, and facility support R&D talent, through incentives such as best in class compensation
packages, support services for researchers and families, etc.
E.g., Legend computers (Lenovo) was spun off from the
Chinese Academy of Sciences E.g., China’s Thousand Talent Program targets researchers with
lucrative incentives such as 1Mn RMB one-time bonus; 1-3Mn
RMB startup grant, subsidized housing and transport, job
offers for spouses etc.

Source: World Bank, Deloitte, Business.gov.nl, Press search, BCG Analysis

Building Bridges for the next decade of Finance Brighter and Greener Future Digital Public Infrastructure 86

DPI 1.0 laid the foundation for a strong Fintech ecosystem, DPI 2.0 and
Digital Public Intelligence (DPI 3.0) to power the next wave of growth

Digital Public Intelligence (DPI 3.0) Multiple AI powered DPI use cases emerging

DPI Open Network for Digital Commerce

2.0 Assisted Language Learning piloted in
ALL 500 schools and used over 45,000 hours
Open Credit Enablement Network
Central Bank Digital Currency
450K teachers, 130K schools, 17Mn
Account Aggregator Saral students (UP)
National Health Stack
National Agri Stack Hello
6,500 calls since Sep 2023 launch
…and more UPI

DPI UPI Kisan

>10 lakh users over mobile and web
1.0 eMitra
Aadhaar
Goods and Services Tax (GST)
Developing AI models tailored to specific use cases is
DigiLocker crucial, rather than creating generalized models. I believe
that small, targeted AI models trained on relevant data can
…and more produce better results and have a more significant impact
on people’s lives. This approach aligns with the philosophy
of digital public infrastructure, which aims to make
technology accessible and beneficial to the common man.
Deep dive ahead
Nandan Nilenkani (Co-Founder and Chairman of Infosys)
Source: Discussions with industry leaders, BCG Analysis
Building Bridges for the next decade of Finance Brighter and Greener Future Digital Public Infrastructure 87

ONDC driving a two-fold strategy: Democratization of commerce and

financial inclusion in India

Financial offerings in ONDC

DMI Finance
Hrushikesh Mehta
Lender Aditya Birla Capital Buyer Easy Pay Senior VP, Financial
Services, ONDC
Banks (251) Consumers
Tata Capital Axis Finance The goal at ONDC is two-fold: Democratizing
Credit Aggregators
HDFC Bank Kotak e-commerce and financial inclusion. ONDC
Tata Digital
Mahindra
Bank Paisabazaar continues to offer small sellers market access,
provide buyers with greater choices, and reduce
commissions to redistribute profit more equitably
Insurers (191) ONDC along the supply chain. In financial services,
Bajaj Allianz Digit
Insurance Aggregators Open Network For ONDC is offering the full suite of services: Credit,
Kotak Aditya Birla Digital commerce
General Capital Insurance and Investments
Insurance Dekho
Insurance We envisage an explosion of rich underwriting
data to be available as network effects kick-in.
Mutual funds (101) We are collaborating with ecosystem partners
HDFC MF DSP MF to pilot use cases using alternate data to serve
Investment Investment
Aditya Birla Edelweiss Platforms underserved segments through our network (e.g.,
Capital MF
Appreciate ATX Labs
Absolute, Stellapps)**

Unlocking full potential of the ONDC will require

Five pillars for ONDC to drive financial inclusion regulatory and policy support:
• Standardization of KYC norms
Commercial Policy and across industries
Access Affordability Cost efficiency regulatory • Implementation of real time credit
viability
alignment reporting
Develop Lower cost and size Keep operational Create a Advocate for • Incentive to onboard on sachet sizes
standardized APIs of finance products costs and toll sustainable policy changes • Standardization of legal contracts, LSP
for manufacturer- prices low incentive model for and regulatory and distributor agreements
distributor linkage distributors collaboration
ONDC can also drive value-added-services for the
overall ecosystem e.g., single 3rd party audit for
each LSP, accessible for all

1. Includes sellers in pipeline to be onboarded

Source: Discussions with industry leaders, BCG Analysis ** Deep dive on next page
Building Bridges for the next decade of Finance Brighter and Greener Future Digital Public Infrastructure 88

ONDC partners with tech-first players to drive use cases with alternate
data, to provide financial access to underserved segments

Upaj, a digital agri value chain solution from Absolute Stellapps is an end-to-end value chain company,
uses proprietary data to underwrite farmers for agri enabling access to payments, credit, insurance,
and insurance solutions and savings for dairy farmers through their
mooPay Fintech platform
Proprietary data used to guide the credit decisioning process
Milk flow
Point of
14Mn (10% of
organized 3.5Mn Farmers 40K+ presence
milk)
• Mandi prices pan India and near
farm locations
Market Customer acquisition
• Market accessibility of Mandi locations Access to farmers via collaboration with dairies and lenders
dynamics and
insights • Earning estimations on the district
Credit underwriting
Assessment using milk pouring data – quality, quantity and
income-based analytics and unique statistical credit-risk scorecard
“mooScore” (sample below)
• Yield estimation of a crop
• Satellite-based crop identifications Risk management
Farm level • Cropping pattern for location Ability to digitally monitor daily milk pouring and cattle productivity
insights data for early risk detection capability
• Ground water level
Sample Model Output
Min Score Max Score Bad Rate1
300 456 14.3%
Comprehensive 456 505 6.15%
Farmer farm 505 525 3.27%
shares performance 525 532 3.39%
interest score generated 532 536 2.74%
for loan on to guide credit 536 544 2.39%
Upaj app decision 544 551 1.99%
551 633 1.21%
633 732 0.55%
732 900 0.15%
1. Ever 60 days past due
Source: Press search, BCG Analysis
Building Bridges for the next decade of Finance Brighter and Greener Future Sustainable Financing 89

Tackling climate change is a key priority for India both from financial
impact and global political diplomacy

During 2021-
2050, 70% of
India’s districts
are projected
to experience
temperature rise Deg C
0 0.1 0.5 0.9
Deg C
0 0.5 1.0 1.5 2.0 2.5 3 3.5
by more than
1.5⁰ C
Maximum temperature trends Maximum temperature trends

(1991-2019) (2021-2050)
Note: 1. The graphs highlight maximum summer temperature trends under RCP 8.5 scenario 2. Changes in temperature were computed as a difference between
projected 30-year period (2021–2050) and the historical 30-year period (1990–2019) in consensus with the World Meteorological Organization’s approach.
Source: CSTEP (2022) Climate atlas of India: District-level analysis of historical and projected climate change scenarios, BCG Analysis
Building Bridges for the next decade of Finance Brighter and Greener Future Sustainable Financing 90

FIs have a ‘double materiality’ relation with climate; approach to

decarbonize portfolio and manage risks to yield longer term rewards

Banks’ activities have an

impact on climate

Banks’ activities are

• Banks financing to emission
dependent on climate intensive activities such as
mining, oil production, etc.

• Portfolio emissions of global

• Extreme weather events can financial institutions over 700x
increase the cost of capital, larger than direct emissions:
disrupt value chains, and create CDP analysis
market volatility

• These lead to increased risk of

portfolio delinquency, losses on
corporate loans and increased cost E.g., Financing hard to abate industries
of refinancing without assessing emissions intensity
of operations

E.g., Shut-down of thermal power plants

due to water scarcity, leading to rising
NPA for bank
Building Bridges for the next decade of Finance Brighter and Greener Future Sustainable Financing 91

Significant gap in India’s climate financing requirements; blended

finance can be a key unlock
Significant capital shortfall anticipated in India’s Blended finance would be critical to meet credit gap
target to achieve NDC1 commitments

Annual climate financing ($Bn) • Merges private and public capital, maximizing
the impact of investments, thus mobilizing
significant private investments
Annual climate 170-200
finance need • With structures like first loss capital,
guarantees, and insurance, blended finance
reduces the overall risk for private investors
Annual flows 5 40
• Interest subsidies can lower the cost of
capital encouraging in sustainable and high-
impact projects
Annual 100-150
financing gap

Public Private
Vivek Adhia
Associate Director, BCG

India’s sustainable future hinges on mobilizing and deploying capital at an

Need for private sector investments to step unprecedented scale. Bridging climate finance gaps requires aligning financial
flows with overall economic development, climate resilience, and low-carbon
up green financing in India transitions. This will scale-up funding in underfunded green sectors. Financial
institutions creating innovative instruments through blended finance, strategic
lending tie-ups, and derisking measures like guarantees and carbon credit
prefinancing, can significantly move the needle

1. Nationally Determined Contribution

Note: The annual climate finance requirements and the gaps thereof are based on CPI’s 2022 estimates.
Source: CPI, Business Standard; World Economic Forum; Council on Energy, Environment and Water
Building Bridges for the next decade of Finance Brighter and Greener Future Sustainable Financing 92

Transition finance - the next frontier in green financing

For reducing emissions in hard-to-abate sectors or sectors lacking suitable green alternatives

Hard to abate sectors facing unique challenges Examples of transition financing

Case study: Textile MSME cluster products in India

• For most MSMEs in the textile sector, energy costs account for Leading South East Asian bank
nearly 20-30% of opex
• Operating on thin margins, most MSMEs in India resort to
Current low-cost fuel and energy solutions leading to rampant usage of
Loan provided to one of the largest
situation coal fired boilers
Indian sugar and green energy
producers to expand biofuel business,
support sugarcane farmers, and adopt
sustainable and climate smart farming
• As a part of their Scope 3 supply chain decarbonization, most
apparel brands globally have committed to eliminate fossil fuels
Transition risk from their supply chains
that came in
Leading Indian Steel company

A leading Indian steel company

For an MSME to comply with such requirements, there are typical
raised $500Mn transition finance,
barriers like:
via sustainability linked bonds,
• Less ability to make upfront investments into a low
with a KPI hinged on reduced
carbon product
Barriers to • Residual life of an existing coal fired boiler, not fully depreciated
steel emission intensity by 23%
transition and therefore challenging from cost-economics angle
• Lack of availability of alternative solutions

Leading Indian Cement company

To address these barriers, transition financing products come
to the fore:
• Ability to further seek interest subventions or other incentives by A leading Indian cement company raised
plugging in carbon credits, biodiversity credits, etc. $400Mn transition finance, via GHG-
Potential • More targeted use of proceeds, enabling bankers and FI’s to linked bonds, with a KPI hinged on
solutions showcase clear impact reduced cement emissions intensity

Source: Press research, BCG Analysis

Building Bridges for the next decade of Finance 93

If you are good at building

bridges, you will never fall
into the abyss!
Building Bridges for the next decade of Finance 94
Building Bridges for the next decade of Finance 95

04
Appendix:
Segment-wise
Global Trends
Building Bridges for the next decade of Finance Global Funding 96

Global Digital Payments | B2B and digital retail payments resurgent;

acquiring solutions continue to dominate in NAMR / Europe
Global Digital Payments equity funding

By segments ($Bn) By geography (cumulative - 2020-24 YTD1 ($Bn)

24% 15% 23% 26% 25% 18%

31% 31% 31% 27%
13%
14% 7% 10%
19% 29% 19%
30% 47% 29%
40% 66% 41% 49%
33% 26% 39%
26% 37%
13% 4% 28%
6% 13% 18% 10% 13% 12% 5%
4% 9% 5% 2%
7% 2% 6% 8% 4% 2% 5%
2020 2021 2022 2023 2024 Global NAMR Europe APAC Africa &
YTD1 LATAM

Total
funding $11Bn $27Bn $15Bn $12Bn $2Bn $67Bn $31Bn $15Bn $15Bn $6Bn
($Bn)
B2B (corporate, SME & Digital retail Acquiring solutions Blockchain-based Others (fraud, security
cross border) payments payments (POS & PSP)2 payments and value-add services)

• B2B payments has seen a rise in share of funding, with • Funding in developed economies (NAMR and Europe)
increasing digitalization and formalization of SMEs dominated by acquiring solutions followed by B2B
(E.g., Ramp in USA, Bezahl.de in Germany) payments; limited share of investments in digital retail
payments as card usage and closed-loop wallets prevalent
• Digital retail payments have seen a resurgence in share
of funding, especially in leading markets of APAC, Africa, • Funding in APAC/Africa currently dominated by digital retail
and LATAM payments, as an alternative to card payments

1. Includes funding deals till June 2024 2. Point of Sale and Payment Service Provider
Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Global Funding 97

Global Digital Lending | Personal unsecured loans continue to capture

>50% of global equity funding
Global Digital Lending equity funding

By segments ($Bn) By geography (cumulative - 2020-24 YTD1 ($Bn)

39% 29%
49% 49% 51% 60% 46% 50% 49%
64%
25% 36% 5%
19% 16% 11% 19%
27%
18% 9% 38%
23% 26% 24% 29% 24% 18%
13% 19% 21%
9% 10% 12% 9% 10% 10% 17% 9% 7% 2%
2020 2021 2022 2023 2024 Global NAMR Europe APAC Africa &
YTD1 LATAM
Total
funding $8Bn $21Bn $14Bn $7Bn $3Bn $52Bn $18Bn $13Bn $15Bn $6Bn
($Bn)
Personal unsecured loans Asset-based lending B2B/SME loans Others2

• Personal unsecured loans continue to drive more than • As the asset-based lending matures in NAMR, the next wave
half the share of investments in Digital Lending; driven by of growth is likely to come from APAC, Africa, and LATAM
increased availability of alternate data, enabling catering ǟ Asset-based lending gaining share of investments in
to underserved segments (E.g., Avanse in India) Africa & LATAM driven by mortgage and vehicle financing
• Share of asset-based lending is gradually increasing due ǟ Despite initial promise (especially in Gold loans), asset-
to increased usage of alternative data sources, digital based lending has gained limited traction in APAC;
customer interfaces, etc. tokenization can be a key unlock
• High share of investments in unsecured lending in Europe
(driven by the surge of BNPL players) and APAC, Africa, and
LATAM (catering to underserved segments)
• Investment-based crowdfunding rising in NAMR

1. Includes funding deals till June 2024 2. Others: Includes Credit Score Management, Investment-based Crowdfunding and Donation/rewards companies
Source: BCG Fintech Control Tower: BCG Analysis
Building Bridges for the next decade of Finance Global Funding 98

Global WealthTech | Advisory segment revitalized by GenAI; alternative

assets (esp. blockchain-based) continue to attract investors
Global WealthTech equity funding

By segments ($Bn) By geography (cumulative - 2020-24 YTD2 ($Bn)

20% 25% 22% 11%

28% 28% 27% 32% 4%
37% 7% 44%
2% 14% 16%
22% 15% 17%
24% 42% 35% 12%
36% 41% 76%
38% 37% 31%
20% 20% 34%
14% 9%
12% 9% 6% 12% 11% 17% 8%
16% 16% 9% 9% 16%
7% 3% 5% 4% 1%
2020 2021 2022 2023 2024 Global NAMR Europe APAC Africa &
YTD1 LATAM

Total
funding $7Bn $28Bn $19Bn $7Bn $3Bn $64Bn $34Bn $13Bn $12Bn $5Bn
($Bn)

Advisory Traditional assets Blockchain-based AA2 Alternative assets Others WealthTech3

• Advisory gaining share of investments since 2023;

• WealthTech funding dominated by NAMR with ~55% share,
GenAI likely to enable disruptive growth in this segment
funding in emerging economies to grow with
(especially for mass and mass-affluent segments) (E.g.,
increasing affluence
AlphaSense in the USA, Vortexa in the UK)
• Blockchain-based WealthTech platforms driving investor
• Blockchain-based AA maintain share of investments with
attention, with tokenization use cases on the rise (E.g.,
increasing shift towards digital assets and tokenization
BitGo and EigenLayer in the USA)
use cases

1. Includes funding deals till June 2024 2. Blockchain-Based Alternative Assets 3. Other WealthTech: Includes trade lifecycle management, collaboration and communication, clearing and settlement, risk
and compliance, syndication and structuring and core trading tech
Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Global Funding 99

Global InsurTech | P&C continues to drive >50% of InsurTech funding,

dominated by NAMR and Europe
Global InsurTech equity funding

By segments ($Bn) By geography (cumulative - 2020-24 YTD3 ($Bn)

17%
51% 50% 54% 54% 52% 52% 55% 14% 47%
71%
10%
29% 26% 19% 19% 29% 24% 68%
33% 10% 43%
15% 20% 23% 25% 17% 20% 14%
7%
4% 4% 4% 2% 2% 4% 4% 5% 2% 0%
2020 2021 2022 2023 2024 Global NAMR Europe APAC Africa &
YTD1 LATAM

Total
funding $9Bn $15Bn $8Bn $5Bn $2Bn $38Bn $22Bn $8Bn $7Bn $1Bn
($Bn)

P&C2 insurance Health insurance Multi-line insurance Life insurance

• Funding in InsurTech dominated by developed economies

• P&C and health InsurTech, with shorter policy durations of Europe and NAMR with ~80% share and high interest
continue to drive largest share of funding (E.g., Tractable in P&C
in the UK)
• Funding skewed towards multi-line insurers in emerging
• Low share of investor interest in life InsurTech; mature economies (APAC, Africa and LATAM), owing to lower
market globally penetration across segments and lower maturity of
P&C market

1. Includes funding deals till June 2024 2. Property & Casualty

Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Global Funding 100

Global Accounts1 | SME Neo Banks lead in NAMR; retail Neo Banks
thrive in APAC, Africa & LATAM
Global Accounts equity funding

By segments ($Bn) By geography (cumulative - 2020-24 YTD2 ($Bn)

38% 41%
59% 54% 51% 55% 54%
69% 69% 78%

62% 59%
41% 46% 49% 45% 46%
31% 31% 22%

2020 2021 2022 2023 2024 Global NAMR Europe APAC Africa &
YTD2 LATAM

Total
funding $8Bn $27Bn $14Bn $7Bn $4Bn $59Bn $23Bn $18Bn $11Bn $7Bn
($Bn)

Retail banking & PF SME banking

• Retail NeoBanks’ resurgent in share of funding; especially • Retail Neo Banks with lower share of investments in NAMR
driven by emerging geographies of APAC, Africa, and LATAM as traditional banks amp up digitization; to fare better in
• SME Neo Banks continue to attract fair-share of funding; emerging economies with headroom for financial inclusion
B2B model shows potential for generating a scalable, sticky • SME Neo Banks with lower share of investments in APAC/
client base to generate steady profits Africa/LATAM, offering opportunities for disruption

1. Includes financial comparison websites, digital banks, financial educational websites and financial planning/savings solutions
2. Includes funding deals till June 2024
Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance Global Funding 101

Global Financial Infra1| Core platforms and SaaS lead investments;

blockchain / AI infra on a decline
Global Financial Infra equity funding

By segments ($Bn) By geography (cumulative - 2020-24 YTD3 ($Bn)

30% 32% 31% 33% 24%

35% 36% 44% 42%
26% 82%
31% 25% 20% 25% 29% 25%
13% 25% 22%
11% 14% 6% 13%
17% 10% 10% 16% 12% 11%
14% 11% 14% 10%
10% 22% 22% 15% 25% 8% 12%
11% 18% 8% 19% 9% 16% 5%
2%
2020 2021 2022 2023 2024 Global NAMR Europe APAC Africa &
YTD3 LATAM

Total
funding $10Bn $27Bn $16Bn $6Bn $3Bn $61Bn $38Bn $14Bn $7Bn $2Bn
($Bn)

Core platforms Regtech SaaS Customer relationship Smart ops Blockchain/AI infra
& other SaaS2 management (CRM)

• Core platforms remain steady in the mix of funding, likely to • Funding dominated by NAMR with >60% share due to
increase as BFSI SaaS Fintech platforms drive global digital increased investments in next-gen technologies
maturity (E.g., Solaris in Germany, Perfios in India)
• Nascent space in emerging economies of APAC, LATAM &
• Blockchain and AI Infra’s share in investments declining Africa with ~15% of funding; poised for breakout growth as
gradually as investors wait to see evolution of sustainable BFSI SaaS Fintechs (esp. India) drive innovation (E.g., Idfy,
business models Perfios, Lentra in India)

1. Financial Infra: Includes core platform technologies, CRM and operations solutions, data aggregation and regtech 2. Other SaaS: Includes supporting infra/SAAS for Digital
Payments and Lending Infrastructure Fintechs 3. Includes funding deals till June 2024
Source: BCG Fintech Control Tower; BCG Analysis
Building Bridges for the next decade of Finance 102
Building Bridges for the next decade of Finance 103

Acknowledgements
This report is a joint initiative of Boston Consulting Group (BCG) and Global Fintech Fest (GFF). The authors would like to thank the members
of BCG and GFF for their contributions to the development and production of the report.

We thank all the participants of the Survey – “Voice of Industry”, 1-on-1 discussions, panel discussions, and podcasts for their valuable
contributions towards the enrichment of the report.

In addition, the authors are extremely grateful to the following leaders for their guidance and inputs through 1-on-1 discussions

Aakarsh Naidu G Padmanabhan Gaurav Chopra Gopal Srinivasan Harshvardhan Lunia

Head of Fintech & Startups, Former Executive Director, Senior Vice President, IAMAI & Chairman & Managing Director, Co-founder,
RBIH Reserve Bank of India Executive Director, PCI and FCC TVS Capital Fund Lendingkart

Himanshu Chandra Hrushikesh Mehta Isha Oswal Jayant Prasad Kunal Shah
Co-founder, Senior VP, Financial Services, Chief Executive Officer, Executive Director, Founder,
Progcap ONDC JISA Softech Pvt. Ltd. cKers Finance Cred

Miten Sampat Noopur Chaturvedi Praveena Rai Pravin Jadhav Puneet Agarwal
CEO,
Building CRED, Chief Operating Officer, Founder and CEO, Co-founder,
NPCI Bharat BillPay Limited
CRED NPCI Moneyview Moneyview
(NBBL)

Rajesh Bansal Sandeep Jethwani Sandeep Jhingran Sanjiv Singhal Shilpa Rao
CEO, Co-founder, Director, Founder & COO, Head of Partnerships and
RBIH Dezerve Fintech Convergence Council Scripbox Gender & Finance, RBIH

Sreyssha George Srinivas Jain Sumit Maniyar Vineet Sukumar

Managing Director & Partner, Executive Director and Head Founder and CEO, Founder and Managing Director,
BCG of Strategy, SBI Mutual Funds Rupeek Vivriti Capital

The authors would also like to thank BCG teams for their valuable contributions to this report. In particular, they thank analysts from the
Knowledge Team,the Fintech Control Tower Team, the Editorial, PR, Marketing, and Design teams.

We also extend our appreciation to Abbasali Asamdi, Aman Mansuri, Gaurav Singhal, Guglielmo De Stefano, Jasmin Pithawala, Kalyan Biswas,
Mridushmita Bose, Nadir Kanthawala, Nidhi Yadav, Nopur N, Preet Nair, Saanchi Chatwal, Saroj Singh, Saurabh Tikekar, Seshachalam Marella,
Shivani Agarwal, Sonakshi Mathur, Subhradeep Basu, Sujatha Moraes, Tanya Borbora, Vaishnavi Sinha, Vijay Kathiresan, Yashika M, and
Yashit Shukla for their contributions.
Note: All the names are in alphabetical order
Authors

Yashraj Global Leader - Fintech, India India Leader - Fintech,

Neetu
Leader - Financial Services, BCG Managing Director and Partner, BCG​
Erande Chitkara
[email protected] [email protected]

Co-Lead, GFF-BCG
India Leader - Tech in FI,
Tirtha Thought Leadership,
Vipin V Managing Director and Partner, BCG
Chatterjee Principal, BCG
[email protected]
[email protected]

Advika Consultant, BCG​ Lakshay Senior Associate, BCG​

Gupta [email protected] Verma [email protected]
Building Bridges for the next decade of Finance 105

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