Things one needs to know before starting a startup in financial technology
This story is sponsored by The Finlab
Fintech is the next big opportunity for innovation in India, and foreign banks and accelerators looking for the next big idea have set sight on the subcontinent.
The FinLab, Singapore’s first corporate fintech accelerator and a joint venture between Singapore’sUnited Overseas Bank (UOB) and SGInnovate (SGI), the Singapore government’s startup fund, is one among these.
The accelerator organised a meetup in Bengaluru last week to secure entries for their next batch. At the event, Will Leong, Operations Manager at The FinLab, said they were looking at newer technologies in areas such as Blockchain, Data Analytics, Mobile Banking, Autonomation (AI, machine learning, and automation with financial services) as well as SME solutions.
Speaking at the event, Anuj Kacker, co-founder of India’s first app-based credit line MoneyTap, said, “As newer technologies start to influence financial services, business costs are coming down. With technologies such as Cloud, Big Data and AI powering the backend, there is a massive reduction in operating costs. This has allowed even banks to disrupt faster through mobile penetration, and reduced the dependency on physical infrastructure for acquisition of new customers, making it a level playing field for everyone.”
Anuj shared some more tips with the audience on the following topics:
- Customer Acquisition: Citing the example of MoneyTap which crossed one lakh installs within the first three months of launching their customer-facing app, Anuj advised startups to focus on factors such as cheap cost, sustainability (of cost) as well as a steady flow of customers while drawing up customer acquisition plans.
- Building Trust: Anuj stressed on the fact that by nature all financial service institutions function on trust, and it was highly critical for fintech players to accord the same importance to this quality.
- Duplication: While conceptualising, Anuj says it is essential for startups to understand that they aren’t building another ‘me-too’ product, and to focus on what sets them apart.
- Speed: According to Anuj, while startups need to focus on speed of execution, fintech startups should remember that this may be difficult for them due to their partnerships, either with banks or other financial institutions.
The evening also saw a panel discussion with founders and investors including Manish Kumar, Co-founder and Executive Director of bill discounting platform KredX; Virender Bisht, Co-founder of corporate benefits platform NiYO solutions; Anuj from MoneyTap and Manish Singhal, Founding Partner of early stage technology fund Pi Ventures.
Post-demonetisation, with a large number of users coming onto fintech platforms and adopting digital wallets, one of the key issues discussed was the privacy of consumer data.
Manish from KredX said since there weren’t any clear guidelines set by the government, most companies have to resort to self-regulation.
Virender from NiYO said that as a platform the company does collect data while keeping customers in the loop about this. On the other hand, Anuj from MoneyTap said their platform follows standard android protocols, basically asking individuals before collecting any kinds of data.
After the government’s demonitisation move last November 8, a majority of the panelists agreed that there hasn’t been a better time for fintech startups to get traction.
Anuj from MoneyTap said, “Demonetisation has been generally positive for us so far with the number of informal channels of lending coming down. This gives a boost to the formal sector. Further, with banks having more liquidity, there are higher chances for interest rates to come down, further boosting lending activities.”
Virender from NiYO, which works in distribution of tax saving and corporate benefit cards solutions, said, “Demonetisation forced most entities to stop paying salaries in cash. This is good for companies like us as the sector gets more formalised.”
But there were some challenges that came up as well. Manish from Pi Ventures said the move made it more difficult for investors like them to raise funds.
Another question that came up was whether fintech companies, which essentially function as localised businesses working on geographic regulations and customer sensibilities, were robust enough to go global?
Manish from KredX said their global focus would be Africa and Singapore. “While building KredX, we had little localised elements, as sub-consciously our focus was on globalisation. Primarily catering to the retail sector, we think that segment works similarly across geographies.”
For NiYO, global expansion plans include Singapore, South East Asia, Middle East and the US. But MoneyTap thinks they’re too early to think about scaling to newer geographies.
But Manish from Pi Ventures had a different perspective. He said, “Globalisation might be an abused word. For vertical-specific solutions, scaling globally might be different than horizontal plays. And fintech, as we know it, can be a verticalisaion game. Hence, while thinking of globalisation, it is essential to think about how your solution can be localised in a newer geography, with your solution being horizontal.”
He added that horizontal solutions could include analytics and AI which have a play across sectors and segments, while not being restricted.
However, with foreign VCs and PEs eyeing India, globalisation inherently becomes a part of their business strategy. So how will the scenario change for Indian VCs?
To this, Manish said, “Domestic venture funds are just coming of age. We can assure you that the appetite for local funds is increasing and there is a high transformation in terms of the market share thesis. So VCs will not be investing in companies in terms of market share but on IP lead products which will emerge as a new basis for investment.”
Also sharing her experience at the event was Bhargavi S, Founder & CEO of financial services platform FinMitra, one of the companies that was part of last year’s inaugural batch at The FinLab .
Bhargavi said the partnership between SGI and UOB accords instant credibility to the programme.
Commenting on the Singapore ecosystem, she said, “Singaporeans are very savvy and this is especially good in B2B businesses. We realised that this savviness helped us get paid even while piloting the solution.”
She added that one could be a part of the accelerator without having a solution focused on Singapore markets. It simply requires that a Singapore company to be incorporated, have any existing IP moved into this Singapore entity, and in return for a small equity stake, it provides each startup with S$30,000. This money comes in extremely handy, especially for overseas teams, as it helps to defray a large part of the travel and accommodation costs that they may incur over the course of the programme.
The three-month programme aims to provide legal help, mentorship and early customers to startups, and has a strong corporate network of companies including IBM, Google, Microsoft, NEC, AXA, Deloitte, KPMG and Ernst & Young.
The accelerator is also well connected with various fintech ecosystem builders in South East Asia, including the Thai Fintech Association, the FinTech Association of Malaysia, and Fintech Indonesia, amongst others.