The Magic Quadrant — FinTech Edition

Fintech (Source: flickr)

We don’t know about Rahul Dravid, but the FinTech industry is definitely acting like a “Gunda.”

Cred entered the business in 2018 by offering exclusive discounts and cashback on transactions. These freebies attracted the credit users which expanded their engagement and then cut straight to this —

Official IPL Partner in 2020 (Source: timesofsports)

Similarly, many other fintech companies are growing at the speed of a cheetah. Now let's look at where they fall into our magic quadrant, but before we get into the details; here is a recap…

Gartner’s framework — the magic quadrant aims to achieve exactly this! It divides the market players into the following category.

1. Niche Players
2. Challengers
3. Visionaries
4. Leaders

These are measured against two parameters — completeness of vision and the ability to execute. It captures a snapshot of which company/firm/player is doing well in comparison to its competitors. The segmentation of these players into niche, visionaries, challengers and leaders is decided based on some set standard scores within Gartner.

Source: Gartner

We can use this model to better understand the FinTech startups in India. As we do not have much information about these companies’ financial statements. It would be difficult to make conclusive inferences on their ‘completeness of vision’ or ‘ability to execute.’ Therefore, it would not be wrong to just simplify and pick two parameters that could more or less, project the characteristics of Gartner’s parameters (completeness of vision and ability to execute). We do have access to the following metrics.

1. How much funding do these startups receive? → Completeness of vision
2. What is their operating revenue for a given year? → Ability to execute

So here is some information that we gathered. All values are in ‘million dollars’

Startup revenue and funding (in $ Million)

We can see that Cred has the highest funding to date, which probably explains their creative ads with celebrities.

Now to map these players in the Gartner’s magic quadrant, we can look at the following classification —

1. A niche player has funding of <$ 200 M and revenue of <$ 60 M
2. A challenger has funding of <$ 200 M and revenue of >$ 60 M
3. A visionary has funding of >$ 200 M and revenue of <$ 60 M
4. A leader has funding of >$ 200 M and revenue of > $ 60

It is now R time!

library(tidyverse)
library(ggthemes)
library(ggplot2)
library(ggtea)
# Create table
Revenue<-c(36.53,3.28,9.54,64.54,110.77,50.80,11.59)
Funding<-c(40.9,137,118.4,658.6,375,29,922.2)
Startup<-c("Cashfree","CredAvenue","ZestMoney","Lendingkart","Razorpay","Upstox","Cred")
FinTech<-data.frame(Startup,Revenue,Funding)
FinTech
FinData<-data.frame(Startup,Revenue,Funding)
View(FinData)
Rating=if_else(Funding<200,
               if_else(Revenue<60,"Niche Player", "Challenger"),
               if_else(Revenue>60,"Leaders","Visionaries"))
Rating=if_else(Funding<200,
               if_else(Revenue<60,"Niche Player", "Challenger"),
               if_else(Revenue>60,"Leaders","Visionaries"))
Rating=if_else(Funding<200,
               if_else(Revenue<60,"Niche Player", "Challenger"),
               if_else(Fundinge>60,"Leaders","Visionaries"))
Rating=ifelse(Funding<500,ifelse(Revenue<60,"Niche Player","Challenger"),ifelse(Revenue>60,"Leaders","Visionaries"))
FinTech<-cbind(Rating,FinTech)
#plotting the graph
ggplot(FinTech)+geom_point(aes(Funding,Revenue, col=Startup, size=Funding,group=Startup))+
  facet_wrap(~Rating)+
  labs(title="Magic Quadrant: FinTech Startups in India",subtitle ="Completeness of vision| Ability to execute",y="Operating Revenue (in million dollars)",x="Funding (in million dollars)",caption="FY20-FY21")+
  scale_x_log10()+scale_y_log10()+
  geom_text(aes(Funding, Revenue, label=Startup),nudge_x=-0.1,nudge_y=-0.1,col="#437c80")+
scale_size(range=c(2,10),name="Funding")+guides(color=FALSE)+ggtea::matcha_d()

Here is the graph…

Magic Quadrant for FinTech Startups in India

Conclusion

Charting out these players in the market helps us understand the nature of the industry. We see a lot of these companies lie in the niche area — Upstox, Cashfree payments, ZestMoney, CredAvenue etc. This means that they operate within a smaller market, eventually, they would have to either earn more funding or generate more revenue through innovation and other creative channels.

While we wait for these players to accelerate their growth, here is another Cred ad that takes you back in time while your banks pay forward!