To innovate and scale in fintech, pay attention to social indicators, say experts

6th Oct 2018
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Fintech has been the buzzword in India for the past five years now. From its humble beginnings in 2012 to reaching close to 300 million Indians in 2018, fintech is a phenomenon waiting to take flight.

According to Nasscom, the Indian fintech sector is expected to grow at a CAGR of 22 percent in the next five years. Another report by KPMG states that the transaction value for the Indian fintech sector was estimated to be approximately $33 billion in 2016 and is expected to reach $73 billion by 2020.

At YourStory’s flagship event TechSparks, the top brass of some of the key players in the Indian fintech industry said that for fintech startups to innovate and scale, we need a deeper understanding of the kind of products that different segments of the society need and would love.

The panel discussion on ‘Payments Innovation and the Future of Fintech’ saw the participation of Vikram Vaidyanathan, Managing Director, Matrix Partners, Pravin Jadhav, Director, Paytm Money, Harshil Mathur, Co-founder & CEO, Razorpay, Vasanth Kamath, Founder & CEO, Smallcase, Pankaj Gupta, Director of Engineering, Google Pay, and Nithin Kamath, Founder & CEO, Zerodha.

Today, India has the lowest penetration of finance in the world. According to the Securities Exchange Board of India (Sebi), there are only 23 million retail investors in the country.

(From L to R) Suma Ramachandran, Editor, YourStoryCo; Vikram Vaidyanathan, Managing Director, Matrix Partners; Pravin Jadhav, Director, Paytm Money; Harshil Mathur, Co-founder & CEO, Razorpay; Vasanth Kamath, Founder & CEO, Smallcase; Pankaj Gupta, Director of Engineering, Google Pay; Nithin Kamath, Founder & CEO, Zerodha


The overall industry AUM was up 22 percent in financial year ended March 31, 2018, at Rs. 21.36 lakh crore, with the equity AUM increasing 48 percent to Rs. 9.95 lakh crore.

Vikram Vaidyanathan, Managing Director, Matrix Partners, says:

“We have to figure out how payments work for different industry verticals. Yes, KYC from Aadhaar cannot happen anymore. But, the fintech companies have so much other data that makes banks wanting to work with fintech companies. Look at Kotak Mahindra Bank, they are looking to becoming a fintech company now.”

He says that fintech continues to remain an underpenetrated industry across all levels. The question that people are asking is how to drive greater penetration.

Also Read: India's UPI transactions cross 400 M in September; Paytm claims 137 M of them

The panel agreed that fintech products for consumers today have to be created after finding out what users want, whether it is a micro-loan or micro-insurance product, as at the moment these products cater largely to the top 100 million customers in India.

Pravin Jadhav, Director, Paytm Money says,

“There is an intent and high amount of interest in adapting digital currency and buying financial products digitally. Fintech companies are innovating and are investing in customer experience. The need of the hour is to make payments simpler and banks have to work with fintech startups.”

Consumers are the biggest stakeholders and there is a growing need to build products based on social indicators. After all, how many people are employed in the formal economy? It must be noted that cash flow problems differ considerably for Indians and, as such, there's a definite need for products that suit their needs, the panellists said.

According to Ernst & Young (EY), the fintech adoption index in India is the second highest and 59 percent higher than the global average.

At the same session, Nitin Kamath, founder and CEO, Zerodha, said “If you look back six years, things have not changed much. Even now, very few people invest in the stock market. We have legacy issues to deal with because stock markets are outperforming stocks.”

"Let me talk about mutual funds. They depend on the market's growth and it's a push product, and people still don't sign up with it. People must believe in stock market returns,” says Nitin, adding that Zerodha wants to build products for Tier II and Tier III cities in India.

And yet, Nitin agrees that digital penetration has helped. He says,

"We had 70,000 customers in five years and just this year, we signed as many customers in a month and this is all thanks to the growth of the digital ecosystem".

Technology has also made customer on-boarding easy, he adds.

Lending is a massive opportunity for fintech firms, according to YES Bank - India Fintech Opportunities Review (IFOR). The report states that Rs 26.5 trillion of the SME debt demand that is unmet by formal channels presents a huge opportunity for fintech firms. Further, it highlights that MSMEs often do not have access to formal lending channels and rely on the informal sector, where interest rates are as high as 30 percent. Moreover, smaller businesses have limited financial history and might not have detailed documentation available at hand, all major hurdles in the loan disbursement process.

The proof of concept and early stage funding is also limited. Fintech funding in India rose from $300 million in 2016 to $2.7 billion in 2017. The report also states that fintech firms have shown a 34 percent year-on-year jump in 2017.

Harshil Mathur, Co-founder, Razor Pay, says:

“The success of fintech shows that banks can work with us. Payments are yet to go to small towns, and when that happens, there will be scale. We are focusing on businesses in smaller towns and we will see an impact in the next two years.”

Also Read: SC verdict on Aadhaar Act may make operations expensive for fintech players

Let there be a social cause

Google Pay was built completely on UPI and others have been curious to understand how it was built in India. The inter-operability has to be commended and the banks are implementing it. Google says it is working with banks to enhance its user experience and security.

Speaking at TechSparks, Pankaj Gupta, Director of Engineering, Google Pay, says:

“We partner with SBI, Axis Bank and HDFC Bank and we see banks are taking risks to be part of the fintech ecosystem and reach as many customers. It's on us to work together and change India.”

While startups are changing the country in terms of education and healthcare, fintech has made the biggest impact so far.

Vasanth Kamath, Founder, Small Case, says: “Today, what has changed is that users want simpler digital experiences and we are making that impact.”


YourStory's annual extravaganza TechSparks brings together the best and the brightest from the startup ecosystem, corporate world, policy makers, and of course, the investor community. Over the years, it has grown to become India's most loved tech and startup platform for knowledge sharing and networking. The ninth edition of TechSparks also marks YourStory's 10th anniversary. A big thank you for all your support over the years and keep reading and watching YourStory.


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