Wealth management has found favour with investors and seasoned entrepreneurs. Ashish Kashyap’s INDWealth raised $30 million even before a beta launch, while Satyen Kothari’s Cube Wealth raised $2 million in Series A.
2018 has clearly been the year of fintech. Startups in the sector have so far raised $2.01 billion in equity funding across 125 deals and $186.35 million across 18 deals in debt funding, according to data compiled by YourStory.
While ‘traditional’ verticals like wallets, payments and lending raised the big bucks, there is growing interest in wealth management. Consider this: as of September, close to 11 deals had been closed in the wealth management space, with close to $29.5 million invested. Then in late October, that number went to $32 million. Ibibo Group Founder Ashish Kashyap raised $30 million from Steadview Capital for his new venture, INDWealth, and Citrus Pay’s Co-founder Satyen Kothari raised $2 million for Cube.
A sector with plenty of scope
So why is the wealth management space lucrative? Ashish says even with several players already in the space, the sector is under-penetrated in India.
“It is currently at 10 percent, while fixed deposits and real-estate hold 90 percent of savings,” says Ashish.
Satyen believes entrepreneurs are turning to fintech because the total market size is extremely large. According to a report by Wharton, the Indian fintech sector was pegged at $33 billion in 2016, and is slated to touch $73 billion by 2020.
Sreedhar Prasad, Partner and Head - Consumer Markets and Internet Business, Advisory at KPMG India, says, “The financial technologies ecosystem in the country grew very fast thanks to demonetisation. In the coming quarters, there will be a lot more action in the space as it is yet to completely stabilise. It remains a hot sector, with a lot of opportunity in the B2B and B2B segments.”
Gautam Sharma, COO, Steadview Capital, says financial services in India is significantly under-penetrated across categories such as mortgage, personal loans, wealth management, etc. when compared with other geographies, and thus offers a huge opportunity.
“Trends such as financialisation of savings have picked up pace post demonetisation. As with other sectors, technology has played a key role in driving efficiency, reducing cost to serve, and increasing market penetration. We expect the same to happen in financial services in India and hence we are bullish on the fintech sector,” he says.
With 80 percent of India’s population now holding bank accounts, the necessary infrastructure for financial services platforms to approach these users and create an impact is in place. Oftentimes, though, consumer-oriented thinking is missing.
Technology can bring in transparency
No surprise then, that Ashish and Satyen were drawn to fintech and are looking to bring personalisation to the space such as one sees in consumer technology. Ashish believes wealth management is a sector where AI, machine learning and technology will play the most crucial role in transformation.
Satyen had cracked the enterprise payment bit with Citrus Pay. In doing so, he realised the world of money was much bigger than enterprise.
“There were a couple of things which ran through my head. First, that the wealth management industry was manpower reliant, which is a challenge to scale. Second, was how could I take wealth managers, or the advice, to the masses,” says Satyen, a fifth-time entrepreneur.
Ashish, on the other hand, was looking for a large enough opportunity and a pain point that would have him excited about solving a problem, and the idea of a wealth-tech platform came to him after he had moved out of Ibibo, a year after it merged with MakeMyTrip.
The lack of transparency in wealth management as a bottleneck is something that both Ashish and Satyen agree on; both believe that strong, tech-enabled wealth management platforms can offer a high degree of transparency. Satyen explains that with new-age wealth management platforms, users can compare financial products before buying, track their performance after buying, and review them.
A growing demography
Sanjay Swamy, Managing Partner, Prime Venture Partners, believes that while the wealth management segment looks lucrative, the real deal lies in the differentiation around distribution of products as the products, per se, continue to be the same.
Further, the consumer demography in India is beginning to change. The growing number of millennials joining the workforce are looking at different savings options. “It no longer is about the number of houses, cars or flats you own - investments today are different,” explains an analyst.
“Today, technology can offer access to a much wider range of products and services. This is also applicable to the quality of assets made available to the masses through technology. Individuals, thus, no longer have to be constrained by the options available with the local provider. This is similar to what Amazon did with books in the US - allowing access to a whole lot of products,” says Satyen.