India among most vibrant fintech startup hubs, says WEF-Cambridge report

India is among the most vibrant hubs for fintech startups, along with Singapore, the UK, and the US, a report on the future of the sector released at the World Economic Forum in Davos, Switzerland, said.

Fintechs are increasingly expanding operations across borders, mainly in the same region as their headquarters. However, there are some patterns of US and UK fintechs operating in Sub Saharan Africa, where digital payments or remittance business models have a strong presence, the joint report by the University of Cambridge and the WEF said.

About 227 fintech companies operating in digital lending, digital capital raising, digital payments, digital banking and savings, and insurtech across the Asia-Pacific, Europe, Latin America and the Caribbean, Middle East and North Africa, the US and Canada, and Sub-Saharan Africa were surveyed in study, titled ‘The Future of Global Fintech: Towards Resilient and Inclusive Growth’.

“Regional and global fintechs are capitalizing on strong consumer demand for digital financial services to maintain growth momentum, adjusting their business models and product offerings to adapt to the changing and sometimes very challenging environment, and are increasingly expanding the provision of financial services to underserved consumers and businesses while addressing gender and sustainability issues,” Drew Propson, head of technology and innovation in financial services at the World Economic Forum said in the foreword of the report.

As fintechs emerge from Covid-19, their performance remains strong, with customer growth rates averaging above 50% across industry verticals and global regions, the report said

Macroeconomic factors and the funding environment are the primary challenges for fintech growth, a view that is particularly pertinent at a time of high global inflation and interest rates.

The majority of fintechs reflect favourably about their regulatory environment, with 63% rating it as adequate. A total of 38% of surveyed fintechs also cite the regulatory environment as a major supporting factor for their operations and growth. However, a substantial portion find regulatory compliance challenging and the licensing and registration processes to be problematic, the survey said.

Despite a significant drop in funding over recent years, fintechs have varied opinions on how the fundraising environment affects their growth potential; while many see it as a hindrance, 34% view it as supportive of their growth.

Looking to the future, fintechs identify artificial intelligence, the digital economy, embedded finance, and open banking as key drivers for industry development, with AI leading the charge as 70% of fintechs cite it as the most relevant topic for the sector’s evolution in the next five years.