India's fintech sector is a heady concoction of potential and peril

(From right) Warren Harris, CEO & managing director, Tata Technologies; fintechs of the future will continue to assist financial institutions to lend faster and better

If you had to bet on one startup sector from which will emerge a thriving global business model, chances are you’d put your money on fintech. The flipside? If you had to pick one startup sector that urgently requires to get its compliance act together, it would be fintech.

Let’s start with the promise. In 2023, global research firm Statista ranked India third among countries with the most fintech unicorns (17), behind the United States (134) and the United Kingdom (27).  Companies like Zerodha, Razorpay, and Billdesk, along with their valuations of well over a billion dollars, are growing rapidly and are also profitable.

Such startups, in areas from mobile payments and online gateways to lending and broking, are generously backed by venture capital. Statista data suggests that of the total funding of roughly $10 billion in Indian startups, fintechs received close to a third.

Data from research firm Tracxn shows fintech funding declined in 2023 over the previous couple of years, but the funding winter—across startups—may be showing signs of thawing. Funding was up by almost 60 percent in the January-March quarter of 2024, to $551 million, over the previous year’s Q1. This may well set the stage for a whole new set of fintech unicorns.

If there’s one smear on an otherwise sunny picture, it’s an apparent lack of statutory and regulatory compliance, transparency and consumer protection. At least that’s how the regulator, the Reserve Bank of India (RBI), sees it.

Early this year, the RBI issued a draft framework for a fintech self-regulatory organisation. The objective is to “maintain the balance between maximising the creative potential of fintechs, while minimising the idiosyncratic risks they pose to the financial system”. The final framework, which will consider feedback from all stakeholders, is expected soon.

It’s against this backdrop of potential and peril that a Forbes India team led by BFSI newshawk Salil Panchal has put together this fortnight’s special fintech package. Incidents like the supervisory action at Paytm Payments Bank and the founder high jinks at BharatPe may be just “pangs of fintech growing up”, reckons Panchal. He also takes an informed gaze into the crystal ball and sees new business models around banking as a service, wealthtech and cross-border payments emerging. More on that in ‘Ready for More’ on page 50. Harichandan Arakali, Rajiv Singh, Samar Srivastava and Fazal Rahim combed the Indian fintech landscape to identity unique business models, future stars and, yes, soon-to-be-unicorns.

On the cover this fortnight is Warren Harris, CEO of a rather unique engineering services company in the Tata group. Tata Technologies operates at the intersection of a range of sectors that are vital pieces of the group’s manufacturing blueprint—including automotive (including electric vehicles), aerospace, defence, software & internet, semiconductors, and telecom.

Yet, Tata Technologies’ ambitions go beyond its parent and home market. Naini Thaker dives deep into an entity that was founded in the late 80s as an outsourced engineering arm of Tata Motors. Harris tells Thaker what convinced him to keep Hinjewadi, Pune, on his radar (although he is based in Detroit, Michigan). “I was taken by the whole Tata story, its value system and the commitment to nation-building.” Auto is core to Tata Technologies, with clients from China and Vietnam (Nio and VinFast), Sweden (Volvo), the Netherlands (Stellantis) and the US (Tesla and Rivian). That’s one way to de-risk the dependency on the parent conglomerate; the other is to serve clients from other sectors like aerospace and industrial heavy machinery. For more on how Tata Technologies is expanding its capabilities, don’t miss ‘Charging Up’ on page 22.

Best,
Brian Carvalho
Editor, Forbes India
Email: Brian.Carvalho@nw18.com
Twitter ID: @Brianc_Ed