The Indian Finance Market: Decoded By Growth-stage Fintech Fund Founder

The Indian fintech market is one of the fastest-growing in the world.

According to the National Payments Corporation of India (NPCI), the country's fintech market is estimated to be around USD 110 billion.

And the projected growth by 2029? A massive USD 420 billion at a CAGR of 31%.

Needless to say, Indians are adopting fintech solutions, and they're adopting them fast.

For Sagar Agarwal, a fintech expert and entrepreneur, it was in 2019 that he realised that growth-stage fintech companies in the country needed a more tangible push.

He founded Beams Fintech Fund, which became India's first growth-stage fintech and financial services-focused fund.

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FOUNDER AND FUND STORY

Hailing from Mumbai, Sagar Agarwal completed his BCom degree from the Narsee Monjee College of Commerce and Economics.

He then earned his MBA in investment banking from the SP Jain School of Management and also passed the Chartered Financial Analyst exam from the CFA Institute. 

For the next eleven years, Sagar Agarwal actively invested in the fintech and financial services sectors across India, Dubai, and Singapore.

In 2019, Sagar decided to make a fund that was dedicated solely to growth-stage fintech companies, providing them with an ecosystem to pull support from.

Since then, Beams has actively deployed capital to companies and built a support network of banks, financial institutions, and fintech-focused HNIs over and around them.

In 2024, as a specialised manager, Beams had a total of Rs 900 crore in Assets Under Management (AUM).

It has invested in both tech and non-tech companies such as Niyo, Credgenics, Infinity, SK Finance, InsuranceDekho, and ProgCap.

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SAGAR AGARWAL ON THE INDIAN FINTECH INDUSTRY

Startup Pedia sat down with Sagar Agarwal to discuss fintech solutions and his views on what is and isn't brewing in the market right now.

Below is an excerpt from the same conversation:

1. Let us start with what exactly fintech solutions are. For the layman, they're payment platforms that make things easier and faster. What do you think?

Fintech solutions are more than just payment platforms. They can be broken down into four main buckets:

• Payments: These are relatively smaller ticket-size solutions like UPI and QR codes. They solve the problem of accessibility and ease for consumers and the need for a medium to accept consumer payments for merchants.

• Banking: With more than 800 million bank accounts in the country, this bucket is a big one.

• Insurance and wealth: Here, we are seeing Tier I cities of India completely going digital. Tier II and III are on their way to wider adoption.

• Digital lending and credit: Tier I cities are more of digital lending hubs, while Tier II and III are primarily borrowers.

2. Great. So would you say all these buckets are gaining momentum right now?

Fair to say, yes.

3. And what about Tier II cities? Are they increasingly becoming fintech hotspots?

No doubt about it. With the e-commerce boom and rise in disposable incomes, semi-urban regions in India are adopting fintech solutions at a rapid speed. For example, people spending more than Rs 2 lakh annually via credit cards has increased at least four times in smaller cities. In some cases, these numbers are beating the ones we are seeing in metros!

4. In terms of fintech startups being built for semi-urban and rural areas in India, what exactly are they doing that national players aren't able to do?

It's not about whether or not the national players can do it or not. See, if it's fundamentally feasible for national players to solve specific needs in Tier II and III cities in the country, they will do it.

But dedicated fintech startups for Tier II and III cities take a vertical specialisation approach. They enter niche segments, pick unique problems, and create unique products for them. For example, someone is building for the vertical of education, someone might build for microfinance, and others might focus on gold and insurance distribution. New-age players are focusing on driving a large impact by picking a seemingly minor gap to address.

5. That makes a lot of sense. So are investor priorities changing towards digital finance inclusion? And maybe embedded finance? Can you simplify this for our readers?

Embedded finance asks a simple question – during the journey of delivery of a product or service, can you embed a financial services product? For example, if a customer is buying a phone online, can they be offered a financial product that saves them money? Or gives them an option to borrow? Or an investment product? That's embedded finance for you. And it can be implemented in both B2B and B2C businesses.

6. Alright. So basically, coupons, loyalty points, reward programmes, and vouchers…they would all come under the bucket of embedded finance.

Correct. You're basically selling a financial product within a product.

7. Circling back to the point of whether investors are increasingly paying attention to digital finance inclusion… your thoughts on that?

Um, I don't think financial inclusion has ever not been the focus of fintech investors in the country. They might not necessarily talk about the funding happening from that angle, but this point of view is always there. Every time you invest in a fintech company, you're enabling financial inclusion at some level.

8. Are there any companies that Beams has invested in that are advancing financial inclusion solutions to the next level?

Of course. Many. For example, there's Niyo. It is helping at least two million people in the country save significant amounts of money during forex transactions.

Then there's ProgCap, helping 30,000 retailers and 5,000 distributors across the country. They're providing lending and working capital solutions to them.

InsuranceDekho works with 2,50,000 insurance agents and actively assists them in selling better insurance products. Across companies we have invested in, financial inclusion has been at the core.

9. Let's talk about the gaps now. In terms of financial solutions, what are the challenges that Tier II and III cities grapple with?

One of the biggest gaps is the understanding and awareness of what they're borrowing and how they're borrowing.

• People do borrow, people do save, people do invest, but an end-to-end understanding of the financial product they're dealing with is not there. Educating consumers across the country is very important.

Second, a lot of times there is an unavailability of the person's credit history.

• This disadvantages the customer because financial companies and institutions end up charging them more due to the lack of data. This means a customer might be borrowing at a higher rate of interest. The quality of the data repository has to improve. And as the country progresses, it will.

Third, delivering a financial product at a lower cost of capital can be challenging.

• With artificial intelligence, we are on our way to solving it. This will directly mean more financial inclusion across all age gaps.

10. Thank you for your thoughts, Sagar. Our last question – what is next on the list for Beams Fintech Fund?

We are actively working towards forming deeper relationships with financial institutions. These strong partnerships will enable us to support more growth-stage fintech companies.

We are also looking at four major investments in the realms of the wealth market, housing finance, commerce, and banking software. Beams will also expand beyond Mumbai and set up offices in Bangalore and Delhi.

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