India’s Fintech Revolution: Scaling Digital Infrastructure for 1.5 Billion
India is home to 1.5 billion people, with over 900 million bank account holders. Yet, a striking disparity exists: less than a third of these individuals regularly utilize digital financial services.
Hi there!
This week on Eximius Echo, we turn the spotlight on a sector that’s quietly becoming the backbone of India’s digital economy - Fintech Infrastructure.
With 1.5 billion people and 900M+ bank account holders, India has no shortage of reach. But regular digital financial service usage? That number drops sharply, with 600 million users still on the sidelines. The opportunity is massive, but the challenge is clear: building interoperable, resilient, and secure infrastructure that can scale meaningfully.
The Reserve Bank of India has signaled its intent. From the Cybersecurity Master Directions to the DPDP Act and Digital Lending Guidelines, the compliance bar is rising, and with it, a new wave of infra-native innovation. BFSI tech budgets are expected to hit $15B in 2025, with institutions prioritising modernisation like never before.
If you’re new here, Eximius is a pre-seed VC fund backing bold ideas in fintech, AI/SaaS, and consumer tech. We use this newsletter to share insights, trends, and ideas from the sectors we’re passionate about. Let’s dive in.
India is home to 1.5 billion people, with over 900 million bank account holders. Yet, a striking disparity exists: less than a third of these individuals regularly utilize digital financial services. The challenge isn't merely about reach; it's about unlocking the potential of the remaining 600 million users through robust, interoperable, and secure infrastructure.
The urgency is palpable. Legacy systems are faltering, and the Reserve Bank of India (RBI) is intensifying its scrutiny, cracking down on institutions with outdated or vulnerable technology. This proactive stance, as highlighted by various RBI pronouncements on cybersecurity and tech governance, underscores the critical need for modernization within the BFSI sector. For instance, the RBI's Master Direction on Cybersecurity Framework in Banks <link> mandates rigorous cybersecurity measures, pushing banks to upgrade their infrastructure to meet evolving threats.
Simultaneously, a stable policy bedrock is being forged through initiatives like the Digital Lending Guidelines, the Account Aggregator (AA) framework, and the Digital Personal Data Protection (DPDP) Act. These regulations are not just compliance hurdles; they are catalysts for innovation, encouraging a compliance-driven approach to fintech development. The Digital Lending Guidelines, for example, aim to curb unethical lending practices and promote transparency, leading to the development of more compliant and responsible lending platforms.
Institutions are responding with vigour. CIOs across banks, Non-Banking Financial Companies (NBFCs), and insurers are significantly ramping up their tech spend, with BFSI IT budgets projected to hit an impressive $15 billion in 2025. Investors are keenly following this momentum. Q1 2025 alone saw $461 million raised by Indian fintechs, with more than half of this capital flowing into core infrastructure such as lending pipes, onboarding stacks, and payments rails. This influx of capital signifies a strong belief in the foundational elements of India's digital financial future. As founders build faster, regulators enforce harder, AI is proving to be the quintessential catalyst driving both resilience and scale.
Segment Snapshots: Driving Innovation in Core Infrastructure
A. Onboarding & KYC: AI-Powered Fraud Defence
Price pressures are mounting, yet leaders are leveraging AI-driven fraud analytics to stay ahead. The evolving nature of fraud patterns and the emergence of new technologies are compelling legacy players to innovate during onboarding, while AI empowers challengers to disrupt.
IDfy: A prime example of AI's impact, IDfy recorded INR 145 crore in FY24 revenue, marking a 34% year-on-year growth. They project INR 200 crore in FY25, largely attributed to their advanced fraud detection capabilities. (Source: Company filings and press releases).
Perfios-Karza: This combined entity showcased robust growth, increasing 37% year-on-year to INR 558 crore in FY24, propelled by Karza's API modules that enhance data-driven decision-making in KYC and onboarding. (Source: Company reports).
HyperVerge: Reaching INR 128 crore in FY24, HyperVerge has also made significant strides, notably launching deep-fake detection for insurers, addressing a growing concern in digital identity verification. (Source: Economic Times).
B. Lending Infrastructure: Niche Rails and AI Surge
The lending stack, which has seen over $800 million raised, is undergoing a significant transformation. The shift is moving away from generic Loan Origination Systems (LOS) towards in-house and niche solutions. AI and new data models are revolutionising every aspect of lending, from origination and servicing to management and fraud risk management (FRM), with vertical solutions increasingly outpacing horizontal ones.
Veefin Solutions: Demonstrating this shift, Veefin Solutions reported INR 37.8 crore in H2 FY25, targeting INR 110 crore for the full year, focusing on specialised lending infrastructure. (Source: Company statements).
Credgenics: Credgenics's parent company experienced remarkable growth, up 72% year-on-year to INR 156 crore in FY24, achieving an INR 8.4 crore profit. Their platform services 98 million loan accounts and has successfully expanded into Indonesia, showcasing the scalability of niche lending solutions. (Source: Inc42).
Spocto X: With INR 130 crore logged in FY24, Spocto X doubled its bank clientele through its AI-powered collections platform, aiming for a 2x revenue increase this year. (Source: Business Standard).
C. Payments & Embedded Finance: Cross-Border Growth
While transaction volumes are soaring, profitability often remains elusive in the payments sector. However, cross-border payments have emerged as a key whitespace. New Online Payment Gateway Service Provider (OPGSP) rules and the proliferation of UPI-linked corridors are driving significant growth in this segment. The UPI-PayNow linkage between India and Singapore, for instance, has facilitated seamless cross-border remittances, highlighting the potential of such integrations.
Rapyd: Processed $76.4 billion in payment volume in FY24, with a $610 million acquisition of PayU’s global business. Its Global Payments Network and blockchain integration give it extensive global reach (100+ countries).
Payoneer: Revenue of $900 million in FY24, with 15% growth and support for SMEs in 150+ countries. Its full-stack infrastructure and lending products make it a strong contender, particularly for marketplaces.
D. BaaS & Core Banking Systems: Modernizing Legacy
Over half of India’s core banking systems are more than a decade old, presenting a staggering $15 billion replacement opportunity. Banks are increasingly adopting microservices architectures to integrate with existing legacy systems without requiring a complete overhaul, enabling a phased and less disruptive modernization.
M2P: Despite a 13% revenue dip to INR 382 crore in FY24, M2P is strategically pivoting to M&A for scale, aiming to consolidate its position in the competitive payments landscape.
Zeta: Zeta has maintained its impressive growth streak, posting INR 893 crore revenue and INR 119 crore profit in FY24. However, a notable aspect is that 45% of its revenue relies on a single anchor client, HDFC Bank, emphasizing the importance of diversified client portfolios.
Opportunity Map: Shaping the Future of Financial Services
Innovative infrastructure is fundamentally reshaping how financial services operate across various segments. From payments and lending to wealth management and insurance, new technologies are streamlining processes, enhancing security, and improving customer experiences. While several solutions have emerged in the market to revamp legacy tech, there are significant white spaces where interesting solutions can still emerge.
A. Wealth-Tech Infra
The burgeoning number of 192 million demat holders and 120 million Account Aggregator consents are fueling demand for real-time wealth management platforms. The tripling of retail SIP accounts from 2020-24 further underscores this immense potential. Solutions that can digitize product manufacturing to distribution in a personalized manner are required to meet this growing demand effectively.
B. Gen-AI Fraud & Security
The alarming fact that bank fraud losses hit INR 21,367 crore in H1 FY24 has prompted the RBI's AI-fraud roadmap mandate. This is driving the rapid adoption of advanced analytics platforms for fraud prevention and detection. Solutions are needed to capture the entire value chain of transactions. (RBI Annual Report - Pg 61 - Table IV.14)
C. Core-Bank Moderniation:
CIOs are actively seeking no-code product factories, cloud-based general ledgers, and API-driven solutions with observability stacks to manage increasing data ingestion and outflow. These technologies help significantly cut costs, modernize outdated legacy systems, enable faster product innovation, and improve operational efficiency.
D. Insurance Infra
With penetration below 4% of GDP, the Indian insurance sector is poised for significant growth. The IRDAI's Bima Sugam, set to launch in late 2025, is expected to be a game-changer, boosting claims processing efficiency and overall accessibility of insurance solutions.
(Source: NSE, NSDL, CDSL data, RBI Annual Report).
Industry Trends: Catalyzing Growth and Resilience
Generative AI in BFSI: AI spend in BFSI is projected to grow 2.7x in 2025, with a substantial 43% allocated to Gen-AI. This is being deployed for critical functions like KYC, collections, and cross-selling, leading to a 20% reduction in fraud false-positives and an impressive 18% boost in repayment rates.
Privacy-by-Design: The DPDP Act's consent-manager model is a pivotal force, compelling fintechs to build compliant, API-native data stores with field-level redaction, ensuring data privacy and security from the ground up.
Platform Resilience: The April 2025 UPI outage served as a stark reminder of the imperative for multi-cloud failover and traffic-shaping middleware. The NPCI's August API rate limits are accelerating the adoption of these robust architectural solutions to prevent future disruptions.
Consolidation: The market is witnessing a trend of consolidation, driven by profit-focused players like Perfios, Zeta, and M2P. These entities are actively acquiring niche fraud and issuer-processing capabilities to offer more integrated and comprehensive suites of financial services.
These trends underscore the critical need for infrastructure innovation at the BFSI level. The rapid adoption of Gen-AI, stringent privacy regulations, demands for resilient platforms, and market consolidation are collectively pushing the industry toward more integrated, secure, and scalable solutions. To stay competitive, BFSI institutions must invest in advanced technologies and robust architectures that not only address current challenges but also anticipate future demands, ensuring sustained growth and resilience in an evolving financial landscape.
What makes a company win in this category?
Conclusion: India's Enduring Fintech Foundation
India’s fintech infrastructure story has moved beyond mere hype cycles and fundraising highs. It is now firmly rooted in institutionalization, interoperability, and resilience. The nation has quietly constructed one of the world's most sophisticated financial data and payments backbones: UPI now moves over INR 24 trillion monthly, while Account Aggregator consents exceed 8.5 million per month, enabling everything from real-time underwriting to seamless onboarding.
The regulatory landscape is steadily stabilising. The Digital Personal Data Protection Act (DPDP), the Digital Lending Framework, and upcoming norms around Bima Sugam and climate-related disclosures signal a clear direction: rails that are privacy-centric, open, and designed for monumental scale. Each new regulation is not just a compliance challenge; it is, fundamentally, a monetisable infrastructure opportunity.
Across the ecosystem, capital is flowing more selectively but crucially, it is flowing to the right places - API-first platforms, usage-based billing models, and vendors embedding their services deeply within BFSI tech stacks. As Indian banks increase their IT spend towards $15 billion in 2025, infrastructure players that offer modular, compliant, and intelligent capabilities will be best positioned to capture long-term contracts and durable margins.
For now, the pipes are laid, the data is flowing, and the opportunity is only just beginning!
If you are looking to build in this space, we would love to chat! Please reach out to us at pitches@eximiusvc.com.