The Indian financial services sector has seen massive innovation in the last decade. The country has also witnessed an unprecedented creation of public infrastructure and financial rails to allow scale & inclusivity. The industry seems to have reached a point where collaboration is likely to supersede disruption, and this sentiment could not be more visible in the Global Fintech Fest (GFF) last week.
A massive shout-out to GFF organizers for putting together one of the most significant events of its kind in India. And for bringing together 50K delegates spanning industry leaders, policymakers, entrepreneurs, investors, ecosystem enablers, financial entities, and regulators.
Venture Highway’s portfolio had a great showing as well, with our companies like Cheq, Gripinvest, Fam launching innovative products & sharing market insights.
In this brief article, we capture some of the top learnings and key insights from the various conversations and sessions during the event.
- Fin-techs not looking to ‘disrupt’ incumbents anymore. The name of the game is ‘collaboration’ with BFSI, with each party focusing on what they do well
- Collaboration is more seamless & organic in B2B (selling to BFSI). Alignment on business policies etc., can take longer in B2C
- Embracing regulation is key. Companies should anticipate potential regulations in their respective verticals & boost their systems beforehand
- BFSI / large platforms more likely to partner with such companies
- Regulators taking an early view, as a sector is on the verge of breaking out, can set that vertical up for success & growth in the long term. Case in point: P2P
- ONDC – Open & accessible commerce for everyone
- Published standard guidelines for all, along with a collective feedback mechanism, to build trust
- One platform for all needs, instead of different apps for different use cases
- Meant to empower SMEs & give them a level playing field
- Execution is tricky, along with some structural challenges. Time will tell whether this becomes the next UPI moment or the next Aadhar moment for India
- Indian start-up ecosystem could be insulated from global downturns (like public markets, to an extent) when late stage capital (Series B to D) starts coming from Indian corporates & family offices
- Acceptance of tech in Tier 2+ on the rise:
- A bank app / tech is perceived to be more secure than say an ecom app
- In the next 10 years, every family in India will have at least one member who can access, understand and transact via tech
- Banking needs to be built for Bharat, in partnership with B2B fin-techs
- Vernacular needs a big push
- Push towards proprietary payment stacks (UPI, Rupay, etc.) to continue, with the intention of taking it global. Expect many fin-techs to start building on top of this infrastructure (e.g. credit on UPI)
- Core transactions in payments are only a hook to retain customers & deliver a smooth experience. Real revenue to come from bundling, adjacencies & deeper integrations. Many suites are likely to be built for merchants / B2B to monetize customers
- Monetization for UPI transactions continues to be an active debate. ~90%+ such transactions are driven by fin-techs, with negligible revenue. It remains to be seen whether the regulators will enable a revenue model here
- Digital credit has been driven by digital payment infrastructure. Future growth avenues for digital credit:
- Penetration to Tier 2+ geographies via vernacular solutions & ‘phygital’ models
- Voice commands
- Interoperable KYCs for faster payments
- Maximum monetisation still coming from credit, hence founders are migrating towards it & looking to build innovative hooks
- Credit on UPI
- Trying to capitalize on existing & wide-spread user-behavior of transacting via UPI
- Opportunity to expand credit users from existing ~30M to the entire UPI base of ~300M. Likely to enable micro-credit across demographics
- Built on the Rupay network, will further boost the penetration of India’s proprietary payment stack
- Key questions:
- How to underwrite the UPI users, across demographics, in real-time?
- Those who are eligible for credit, would they not utilize other existing channels?
- What would the collection infrastructure look like?
- Would everyone jump in the fray, like existing UPI apps, BNPL players, stand-alone credit on UPI players etc?
- View from Axis CMD (one of the pioneers in credit on UPI partnerships): Cautiously optimistic
- ABHA ID (unique health ID for all) is touted to be the next game changer in health & insurance. Will connect insurers, healthcare facilities & customers via one switch
- Radical changes being brought in by IRDA. Target is ‘insurance for all by 2047’. Insurance 2.0:
- More dynamic, proactive, responsive & tech-led
- Continuous underwriting & seamless experience
- Personalized offerings. Sachet / bite-sized products
- DIY / self-serve products to cater to young millennials
- Re-imagined retirement plans for non-millennial cohorts living for longer
- Real time data to provide instant claims. No need to file or wait for settlement
- Need more insurers (than the existing 70), more products, more distribution partners & more tech
- Customize for exhaustive needs of MSMEs
- Adapt to new risks – climate change, pandemic, cyber threats
- Lever to grow is simplicity, democratization & passive investing
- Need to reduce cognitive overload in investment decision making
- Can’t operate in regulatory gray areas. Most sub-verticals likely to come under regulatory purview soon
We couldn’t conclude more aptly than how Vijay Shekhar Sharma put it: ‘For the next 10 years, financial services and EV ecosystem are the most attractive sectors to build in.’
If you are building in FinTech, please reach out to me here.