Money in motion: Enabling the evolving finance sector with wealthtech

Exploring evolving financial sector in India through wealthtech trends.

In brief

• The Indian wealth management sector is expected to grow at a CAGR of 12% to 15% over the next five years¹. 
• The Indian financial landscape is going through a significant transformation, with a shift from investing in physical assets to financial assets.
  
• Wealthtech in India is witnessing trends such as, hyper-personalization of advisory, a highly competitive landscape with a dynamic mix of new entrants and established players, and dynamic demands of new client segments.
  

India's wealth management sector is evolving due to demographic shifts, wealth transfer and millennial influence. Wealth creation is spreading to nearly 100 towns and cities, with clients seeking to broaden their investment knowledge. Indian financial landscape is transitioning from a "one-stop shop" to specialized wealth management services. 

The wealthtech market is growing rapidly, and expected to reach $63 billion by FY25, up from $20 billion in FY20². Wealthtech in India includes robo-advisors, digital brokerage platforms and portfolio management tools, as well as B2B software services that improve the efficiency and inclusivity of the sector.

The financialization phenomenon

India's high savings rate is influenced by cultural factors, economic conditions and the absence of a comprehensive social security system, prompting individuals and households to save significantly for future needs. Traditionally favoring physical assets like gold and real estate, the market is shifting towards financial assets, driven by better financial awareness, market returns, ease of investment management and government initiatives for financial inclusion and education.

The investment landscape is changing, with managed investments and portfolio management services gaining popularity due to professional management and potential for higher returns and risk diversification. Despite this, financial products are underpenetrated in India, with mutual funds reaching less than 5% of the working-age population. This gap indicates significant growth potential for the financial services industry.

India's investor base is diversifying, with a growing middle class and new high-net-worth individuals emerging from the startup boom and entrepreneurship. Retail investors are increasingly participating in the capital market, facilitated by digitalization, financial literacy, regulatory reforms, and accessible financial products. Wealth management services are expanding to meet the needs of these investors, focusing on personalized financial planning for the middle class and sophisticated advice for wealthier clients.

Financial technology advancements are making wealthtech solutions popular in tier 2 and tier 3 cities, where there is a demand for investment opportunities beyond traditional assets. Wealthtechs are working to build trust and increase financial literacy to strengthen their customer base in these regions.

Wealth management in the digital age: the power of tech transformation

The digital transformation has reshaped wealth management in India, with AI and big data enabling robo-advisors to provide accessible, personalized investment services.

The tech-savvy Indian population, backed by initiatives like Digital India, is increasingly using digital wealth management platforms. India's digital infrastructure, including UPI and Aadhaar, along with a supportive regulatory environment and startup ecosystem, is driving the growth of the wealthtech sector. Millennials and Gen Z demand hyper-personalized services, leading wealthtech platforms to use AI for customized investment strategies and client engagement.

While robo-advisors offer convenience and automated services, many clients prefer a hybrid approach that combines technology with personal advisor expertise.