Kris Gopalakrishnan on Five Trends That Will Shape the Future of Fintech in India Infosys co-founder and Chairman of Axilor Ventures spoke about the future of fintech and why he is optimistic about India, in an exclusive interaction with Entrepreneur India

"I'm very optimistic that the startup ecosystem in India will continue to grow. While many will get acquired, many others will become tomorrow's large enterprises. That is also required for India to become a developed economy. We are talking about $5 Tn to 10 Tn here. I myself am talking about $20 Tn. I believe it is possible. We have grown five times in the last 25 years and if we grow five times we will be 15 Tn," said Kris Gopalakrishnan, Infosys co-founder and Chairman of Axilor Ventures during an exclusive interaction with Entrepreneur India on the sidelines of Global Fintech Fest in Mumbai.

With over 9,000 fintechs, India holds the third-highest global fintech count and targets $400 billion in value creation by 2030. The fintech ecosystem is expected to reach a scale of $70 billion in annual revenue by FY30, accounting for 18–20 per cent of the addressable financial services revenue pool, according to a report by Elevation Capital and McKinsey India.

Ritu Marya, Editor-in-Chief, Entrepreneur Media (APAC & India) in conversation with Kris Gopalakrishnan, Infosys co-founder and Chairman of Axilor Ventures

Experts believe that key factors underpinning this growth are increased internet penetration, digital adoption and a strong digital public infrastructure. According to Gopalakrishnan, India is probably the best place for startups to be in, for an entrepreneur to look at, because of the high growth. If we continue to grow at 6% to 8%, there is no better place than India, he said.

Gopalakrishnan also shared with us the key trends that will shape the future of fintech in India.

Collaborations between startups and established financial institutions

He believes that there is a possibility of collaboration or cooperation between established financial services entities or banks with the startup ecosystem. "The best possible exit for a startup is an acquisition because that's the route most startups will take. Very few will go for an IPO," he said. In his observation, globally, one of the ways in which an established enterprise looks at innovation is to work with startups.

"And because they can wait till the startup goes up to a series B or C funding stage when most of the risk is reduced, they can acquire them. I feel that our banks should explore this route. And it's a good option for a startup. Now, some banks already have established incubators within their organization and support the startups. So I think we need to we need to leverage this or we need to grow this collaboration," he said.

Many new fintechs from adjacent areas

Talking about where we will be seeing new fintechs emerging, he said, "In adjacent areas clearly. When we look at inclusion very broadly, looking at things like unserved markets and segments of the population, at providing services in vernacular languages again, that's something that we need to encourage." He also quoted the example of UPI and that one of the reasons it took off was it provided a QR code, which doesn't require knowledge of English. And, the responses in the local language that the money has been credited is an added advantage. "So, we need such innovations in other segments, such as healthcare and insurance as well," he said.

Rise of more entrepreneurs with long-term vision

To create a large enterprise, one needs a long-term vision and sustainable profitable growth. "Because you will have to reinvest that profit back into growing the business rather than growth through equity route or through funds. etc. So long-term vision is required. It's, a marathon, it's not a sprint. Most startups only think about the next round of funding or the short term, but at least some of them are thinking of establishing themselves over a 25-year horizon," he said.

"I believe there are startups that are thinking long-term, and many of them will end up becoming large enterprises."

FBetter funding and the need to build a pool of domestic capital

While on one hand fintech adopters are increasing by the day, there is also a slowdown in funding. Sharing his thoughts on how the funding will change in the next few years, Gopalakrishnan said, "Yes, a lot of the funding is coming from outside the country, especially beyond Series C. And hence, what you will find is that whenever there is a global slowdown, it impacts the funding in India, that is what we are seeing today," he said. He believes that this is the reason we will see ups and downs in the short term, including in funding, but in the medium to long term, there is no better place than India," he said.

"We have to build a pool of domestic capital and family offices need to be very active in the startup ecosystem," said Kris Gopalakrishnan

More opportunities with transition to a middle-income country

Another factor to consider when we look at the growth of fintech startups is emerging technologies, which Gopalakrishnan believes, will allow new leadership. "It is in these transitions, that newer minds and new leadership come out. New companies and new opportunities will arise. So I'm very optimistic about India," he said.

Wrapping up the interview, Infosys co-founder and Chairman of Axilor Ventures reiterated that India is the best place for entrepreneurs to be in. "India is also a low-income country. As we transition to a middle-income country, the opportunities for many types of startups are only going to increase," he said.