Indian fintech space is attractive and addictive, says venture investor Melissa Frakman of EMVC

Since the clarion call to push towards a ‘Digital India’ about five years ago, the country has seen a spurt in companies that have made it their mission to make financial services easy for its citizens. The-then fledgeling companies like Paytm have since seen exponential growth and users have benefited from using their platforms to make daily transactions. To be sure, financial technologies – or fintech – has brought about a paradigm shift in the way Indians makes financial transactions.

And the excitement around many opportunities in the Indian fintech space continues unabated, particularly within the global investor community. Something Melissa Frakman, Founder and Managing Partner of Emphasis Ventures (EMVC), the $25 million venture capital fund that invests in early-stage fintech startups, told YourStory Founder and CEO Shradha Sharma in an exclusive interview.

Watch YourStory's full video interview with Melissa Frakman of EMVC.

“I saw over and over again how incredible the (Indian) market is, and I've always been completely captivated by how quickly the markets change here. It's insanely addictive to build and work in India because you actually see the results and progress that's happening,” says Melissa.

Vancouver-born Melissa believes that the most exciting trends in the fintech ecosystem are unfolding in India. Fintech – a broad term used to define companies that make technology for financial sectors like banking, insurance, payments, and investments – has seen a slew of new players in the sector in the past few years.

In India, the growth in the fintech sector has been driven by the penetration of low-cost internet, which has transformed the lives and businesses of people across the country’s diverse socio-economic spectrum. The launch of the Unified Payments Interface (UPI) by the National Payments Corporation of India (NCPI) has also fueled the growth in the fintech space.

Also Read: Indian fintech raised $5.4B in equity funding over the last three years, but where is it headed?

The platform allows users to use their bank accounts for digital transactions, and various companies – including global giants like Google and Amazon and homegrown ventures such as Paytm – have zeroed in on this opportunity to capitalise on the ease of transactions on the platform. With the huge growth in the number of internet users in India, UPI payments have taken off, with Google and Boston Consulting Group forecasting digital payments will reach over $500 billion by 2020.

“We believe the most exciting financial technology that's happening is in India, so it's (EMVC) very much an India-focused play but it's a global- and US-based fund that we are looking at. It has really been a long journey and my entire career has been affiliated with India,” says Melissa, who has spent the dominant part of her career in India, mostly focused on the financial services sector.

In fact, during her initial stints in India, as Director of the US-India Business Council, she worked with global Fortune 500 companies, startups, and investors, advising them on their India market strategy. At the time, Melissa focused primarily on technology, financial services, and investment issues.

The many opportunities for fintech innovation

The fintech sector has been traditionally dominated by payments processors so far. But Melissa sees opportunities for innovation and efficiencies in every vertical in the financial services space.

Even within payments, which is currently concentrated on the merchant and consumer side, Melissa says she sees some opportunities in the specific use cases of payments that are still very much cash-based, inconvenient, or high cost.

“But there are opportunities across the board: insurance, how people save and invest, how people borrow money, how people plan for life events, and then the real market infrastructure (related to) how India's capital markets work and the stock market… there's a lot of fintech that can drive innovations and efficiencies on that side as well,” she adds.

For Melissa, being part of this digital development in finance in India has been exciting. Having worked with the consortium of global payments companies at a time when the UIDAI or Aadhaar card was just being implemented, she has witnessed the growth of UPI and payments banks in India.

A lot of the early startups she saw in those early days are now sector behemoths and she is now extremely bullish about the next generation of entrepreneurs. “Some of these 1.0 fintech companies in India are becoming platform plays that will become the platform on which new innovation and technology is built,” Melissa says, adding,

“Part of what gives me this enthusiasm for the next generation of fintech startups in India is seeing what's been possible, and yet that's barely scratching the surface of market penetration or matching the demand of what the market really needs.”

The ‘startup-like journey’ of EMVC

Though EMVC is a venture capital fund investing in fintech entrepreneurs who are transforming India and the world, Melissa says that, for her, building EMVC has been no different than that of a startup journey. 

“People see VC investors and assume you are cushy in your five-star hotel and there's no struggle. But it's absolutely been an uphill entrepreneurial journey and it's been an exciting one,” she says.

In particular, the biggest challenge was that global companies and investors – to their major detriment – still see India as a niche, novelty emerging market, as opposed to a central play in the world, says Melissa.

“So India doesn't have the same mindspace in boardrooms in Silicon Valley or Wall Street or Toronto as China does. And it wasn't the fintech part…but the India piece actually was the challenge – of finding the most progressive leaders and global strategists who wanted to have skin in the game of this growth story for years to come,” she adds.

Also Read: How large banks can effectively engage with fintech startups: in conversation with Deepak Sharma, Chief Digital Officer, Kotak Mahindra Bank

Indeed, EMVC is focused on investing in firms that provide hyperlocal solutions to very Indian problems. While most of the foreign investors look for India’s answer to an Airbnb or a Square, Melissa is more excited to work with lesser-known entrepreneurs who are solving complex problems.

“Our doors are open to all and in fact, one of the many reasons why I’m so excited about building EMVC for decades to come is that many entrepreneurs in India, if they are not sitting in the most popular corridors of Bangalore or in the IIT-Stanford corridors, are sort of invisible to global capital or the right global partners and helping to be that bridge is something that we are doing,” says Melissa.

So, what does success for EMVC look like?

It is about delivering a great fund and building a lasting business, which is global and led by innovation that’s happening in India, says Melissa.

EMVC, she adds, is not a classic, return-motivated VC, but rather one that drives strategic returns in terms of joint ventures, partnerships, interesting acquisitions, and interesting product and platform deployments on Indian start-up technologies around the world.

“What energises me is seeing founders and how incredible they are here and being a helping hand on their journey. I have so much respect for the ecosystem here and there are some insanely impressive investors across the market, but I believe there is still room for diversity of thought and new ideas and fresh, competing perspectives working with founders to build a robust ecosystem,” Melissa says.

The energetic investor is also optimistic about the future of the fintech industry in India. No matter what the outcome of the next elections would be, and no matter who comes to power, everyone across the board agrees that digitisation and entrepreneurship need to continue, Melissa says.

“I'm excited that entrepreneurs have their heads down and are building either way, and the wild buzz of India moves forward no matter what,” she adds.

Also Read: 10 trends that will shape the future of Indian fintech in 2019