As Covid-19 concerns recede and demand rebounds, the country’s population will resume its shift from an income pyramid to a diamond-shaped economy as lower-income households ascend to middle-income levels. Across income levels, consumption is expected to grow from $1.8–$1.9 trillion in FY21 to about $3 trillion by FY26 due to increased demand from an added 4 million affluent and 33 million mass affluent households. Along with households, micro, small, and medium enterprises (MSMEs) will be key to the economy, contributing an expected $1.3 trillion in gross value added by FY26.
Despite this expected growth, both household consumption and MSMEs remain underserved by formal credit. Credit penetration in most living expenditure categories is less than 5% for households.
MSMEs also lack access to formal credit, with more than 60% relying on costly informal sources of credit. This funding gap is expected to provide strategic opportunities for fintechs. Digital financial services are accelerating financial inclusion, democratizing access, and spurring personalization of products and customer journeys.
Unified Payments Interface (UPI) rails, and other positive regulatory frameworks, the pandemic has aided acceleration in digital adoption and provided a fillip to digital FS solutions by incumbents (banks, traditional NBFCs, insurers, etc.) and insurgents (fintechs). With expected growth in smartphone users to approximately 1.1 billion by FY26, up from about 750 million today, and more than 850 million Internet users in FY26, up from about 650 million today, India is shifting towards a mobile-first economy
Capitalizing on strong demographics, increasing digital adoption, maturing data ecosystem, and product expansion in fintech accelerates financial inclusion within the regulatory guardrails. Indian fintechs have made rapid gains in the payments space over the past few years. Digital payments have soared, with UPI monthly transactions reaching a value of approximately $135 billion (as of June’22), a remarkable nine times that of credit cards, which have been around for more than four decades in India.
The scaling ability of Israeli startups is significant. The country is home to some of the world’s famous unicorns, and one in every five is estimated to be fintech-related; including eToro, Payoneer, Lemonade, Rapyd, Pagaya, Earnix, Tipalti, Hippo, Fundbox and Melio. Israel’s small market size and outgoing approach have spurred many of its start-ups into scaling and expanding quickly, with many eventually bringing new solutions to the markets of Europe and the United States.
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