India’s Fintech Revolution: Riding the Unicorn Express.
Weekly Market Snapshot
A Perfect Duo: Fintech and E-Commerce
Behind the Headlines: What happened?
Indian e-commerce and payment solutions provider, Infibeam Avenues, recently released its financial reports for the quarter ending September 2023, showcasing a remarkable 57% quarter-on-quarter increase in net income to Rs 40.9 crore ($5.5 million). The announcement was met with initial enthusiasm in the market, driving the company’s stock price up by 3% to a two-week high of ₹19.95, although it later settled at ₹19.65 by the end of the trading day.
INFIBEAM AVENUES DAY PERFORMANCE ON THE NSE MARKET (02/11/2023)
Source: Business Standard
The stellar financial performance of Infibeam Avenues was largely attributed to a significant onboarding of merchants, particularly small businesses. This surge in merchant activity translated into a higher take rate, which represents the portion of transaction value that the company earns as revenue.
The Inside Scoop:
Fintech is rapidly gaining ground in emerging markets, fueled by the pressing need for financial inclusion and the widespread adoption of mobile phones and internet connectivity. India’s fintech market stands out as one of the fastest-growing globally, driven by proactive government reforms and a tech-savvy young population. This trend is particularly advantageous for small and medium-sized enterprises (SMEs), which play a pivotal role in emerging and frontier markets.
E-commerce has emerged as a critical growth avenue for SMEs, providing them with a platform to access a broader customer base and expand their operations. Fintech companies, like Infibeam Avenues, offer e-commerce solutions such as digital payment gateways and online marketplaces to support SMEs in this endeavor.
Infibeam Avenues, a notable player in this space, offers a comprehensive fintech portfolio in India, encompassing digital payment services, e-commerce platforms, digital lending, data cloud storage, and omnichannel enterprise software. Despite its impressive topline growth, the company’s profitability margins have experienced a decline in recent years, with gross, operating, and net margins falling from 2017 to 2023
Source: TradingView
Connecting the Dots:
In frontier markets, African fintechs have already made significant inroads into the market, boasting estimated revenues of approximately $4 billion, and market projections of $65 billion by 2030, signifying a 13-fold increase over the figures from 2021. Notably, only a handful of fintech companies in the region are currently listed on public stock markets, with most still in their nascent stages. Consequently, venture capital funds play a prominent role in driving the sector’s growth.
In recent developments, Sukhiba Connect, a Kenyan social commerce startup, successfully secured $1.5 million in funding to expand its operations beyond Kenya. This funding round was led by CRE Venture Capital and saw active participation from other notable investors. Sukhiba Connect’s core offering is a B2B conversational commerce tool that empowers businesses to connect with and sell to their customers via WhatsApp. This approach capitalizes on Kenya’s robust WhatsApp user base.
Additionally, Sukhiba Connect initially operated as a community commerce platform but swiftly transitioned to provide enhanced features, including notifications, streamlined order management, and support for local payment options. This strategic shift has made it easier for customers to shop without leaving the confines of the messaging app, thus enhancing the overall user experience and convenience.
The Bottom Line:
Fintech is at the forefront of the digital transformation of emerging and frontier markets, offering innovative solutions that make financial services more accessible, affordable, and convenient. This, in turn, enables people to create value in their lives.
India, with its rapid expansion of the digital population, world-class digital public infrastructure (DPI), and proactive regulatory authorities, is setting a global standard for innovative fintech and financial service models. A recent report predicts that the demand for financial inclusion will drive the revenue of Indian fintech companies to approximately $190 billion by 2030.
Emerging markets, in general, exhibit the highest level of fintech adoption globally. These economies often grapple with limited access to traditional banking services and a substantial underbanked population. Fintech companies are showing promise in addressing these unmet demands, positioning them as pivotal drivers of financial inclusion and economic growth in these regions.
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