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In a reality check for Indian fintech startups, Zerodha founder and CEO Nithin Kamath said that Indian fintech startups only have a total addressable market (TAM) of around 10 to 15 Cr people in India.

Talking in a fireside chat at Inc42’s Fintech Summit 2022, Kamath explained how India’s fintech TAM was not 140 Cr, which is India’s entire population.

The Zerodha CEO explained his thought process before reaching the number. According to him, there are only two aspects to fintech – lending and investing.

Talking about lending, Nithin Kamath said, “That is a large opportunity; most of the people in the country don’t have sufficient money. How someone will underwrite this risk is a secondary issue, but that is a large TAM.”

Kamath then talked about investing as the second aspect of fintech, which is also Zerodha’s purview. “In terms of investing products – mutual funds, equities, insurance – you are targeting an audience who has some sort of discretionary spending capability, after meeting their needs. Now, that audience is really tiny. We live in a bubble so we don’t acknowledge that. There are only 5 Cr people that file income tax. If we say there are 5 Cr more who don’t file income tax, that’s 10 Cr.”

Kamath further explained how disproportionately India’s wealth was distributed among the people, making it harder to have a large TAM. “If you take away the top 3% earners of India, the per capita GDP drops to $600. It is just ridiculous. How do you sell any financial product to this audience? It’s impossible,” he said.

“The best case here is that we are closer to 15 Cr, but in reality, I think it’s closer to 10 Cr, that is, an audience who has the discretionary spending capacity to save and invest,” Kamath rounded up, reducing the overall TAM to around 8-10% of what fintech was targeting before.

Kamath had also talked about the TAM for investing-type fintech startups, pegging the current TAM at 3 Cr. He reckoned that the market can grow by 15% CAGR over the next few years, with the total addressable market growing to 7-8 Cr in the next 3-4 years.

It should be noted that according to an Inc42 report, India’s total fintech opportunity stands to rise to $1.3 Tn by 2025, with lendingtech set to be among the fastest-growing subsectors within the fintech space.