How India’s fintech disruptors are designing an inclusion ecosystem
In the last few years, the Indian fintech ecosystem, the third-largest in the world, has seen investments to the tune of $6 billion. And, Niti Aayog predicts that the fintech ecosystem in the country is likely to grow to $31 billion in 2020.
With over a billion mobile connections and biometrics in place, as well as large sections remaining unbanked and underserved, experts agree that the growth and potential for India’s fintech ecosystem is just getting started. At TechSparks 2019, four entrepreneurs, each leading a different vertical in fintech came together to share their journeys, the challenges and the growth drivers that helped them crack the code to success.
From digitising one part of the payment industry to launching many industry firsts, fouders share how they are creating disruptions
Shashank Mehta: We started five years ago as a payments company in India, only to go on and launch many industry-firsts. We were the first payment gateway to launch UPI for businesses. We were also the first to launch subscription payments in India. And, the last two years also saw us expand into other domains like lending and neo banking. Today, we are working towards building products and solutions that help businesses manage their finances more efficiently and effectively. In short, we have been built very heavily in terms of how the industry has been evolving.
Sumit Gupta: We are India’s largest crypto trading platform. We also specialise in crypto enabled fintech services. We believe that the world will slowly gravitate towards crypto enabled services and we want to facilitate that by building products that are primarily driven by crypto and blockchain technology.
Gaurav Kumar: OKCredit is a digital udhaar khaata (credit record) for small and micro businesses in India. A part of the businesses of local neighbourhood stores, tea shops, and small-scale wholesalers in India runs on a credit system. A challenge they face is keeping track of the credit and ensuring that the credit is paid on time. Today, we are helping them plug that loophole by tracking and recording the credit. We recently hit 10 million installs and more than 1 million monthly users. Today, we record more than 50 million transactions worth $5 billion a month. We are excited about digitising this part of the payment industry in India. In the time to come, we are looking at addressing related challenges in the ecosystem through digitising more processes
Gaurav Chopra: IndiaLends is a consumer credit platform. We have consumers on one side who get free credit report, on the other side, we have all the big banks and lenders in India who provide financial products such as credit cards, personal loans, lines of credit, gold loans, two-wheeler loans to users based on their credit histories.
Macro factors that have enabled the growth of the Fintech startups
Shashank Mehta: One of the first macro factors that has enabled our growth has been ensuring that we not only keep pace with the innovation but place ourselves at the forefront. Be it the UPI services or services being developed on top of UPI, the question we asked ourselves is how can we make them available to businesses as quickly as possible and help them make the best use of it? Riding on these innovations helped create the first-mover advantage. The other big enabler has been that today businesses are increasingly focusing on improving end-user experience. This has not only created new use cases but shaping industry trends. And, as a business, we try to capitalise as much as possible on how the industry is shaping up.
Sumit Gupta: Today, people seek instant gratification. People want the fastest way to send money. While UPI has made it possible to transact money across India free of cost, people will soon want to transact money globally too, free of cost. At the moment, it takes anywhere between two to three days and is cost intensive. We believe, blockchain and decentralised payment will pay a key role in making that possible.
Gaurav Kumar: For us, the rollout of GST was one significant factor that helped in the inclusion of small and medium businesses into the formal economy. Second, our users came with some prior experience of using consumer apps, most of which were utility, communication or fintech apps. Which means they had some underlying awareness as well as an expectation that was built. So, by aligning and catering to their expectations and experiences, we are able to create a space to build new use cases, new tools and products.
Gaurav Chopra: On the consumer side, we are witnessing a shift in mindset. Historically, India was a savings-driven economy. A generation or two ago, they would typically save up if they want to buy a car or a house or go on a holiday. But, the current generation has a consumerist ideology. They want to go on that big holiday or buy the latest gadget without having to wait to save the entire amount. Typically, this was a mindset that was common in economies like the UK and the US, where consumer debt to the GDP was very high. And, today we are seeing that happening in India. This hasn’t been a sudden shift but a gradual shift enabled by cross-cultural connect with global counterparts, brought about by smartphone penetration and low data cost.
The role of regulation in shaping the future and growth of fintech economy
Sumit Gupta: What is happening right now across the world, especially among progressive countries is that they have adopted a positive regulation when it comes to Blockchain. India is currently trying to understand the potential better. We strongly believe that in the time to come, we will see the government taking a positive stance when it comes to formulating regulations w.r.t Blockchain and cryptocurrencies.
Gaurav Chopra: When it comes to the consumer lending sector, RBI has been a very progressive regulator. What has happened in the last five to six years is that lending has become like a service. There is talk about instant loans where the money comes to your account in a minute’s time. But, this is possible when you have a proper KYC process in place, when there are enough measures to prevent money laundering and when there is enough security both from a lender’s and a recipient’s standpoint. And, it is here that we see regulations have been factored in to facilitate all phases of lending. With P2P lending becoming big, we see RBI is putting in regulations as well. In short, we see RBI either taking the stand which it deems fit or put together a panel which includes NBFCs, FinTech and related players to voice opinions and come up with a regulatory framework.
Shashank Mehta: I am often questioned about my view on the OTP being sent to verify transactions. I say I love it. Because, in India, where a lot of people are just coming online and making a payment, if they get a message 10 minutes after they had made a payment online saying that the account has been debited with an x amount, they might never come back to do another transaction because they might think it is insecure. To tackle those kinds of scenarios, RBI has actually thought through and put regulations and processes in place. I think the regulations that we have today work well in terms of growing the economy and shaping the fintech sector. That said, there are obviously areas where we could go faster. But overall, in the last five years of Razorpay’s journey, we never had a scenario where a regulation has drastically changed the way we wanted to work.
Growth drivers that helped to scale
Gaurav Kumar: We started building OkCredit for one shop keeper -- the grocery store owner from whom we used to buy our rations. That helped us build the first prototype, which soon grew to become a product. Unexpectedly, our initial users loved the product so much that they referred the product to their circle of family and friends, which in turn helped us with organic bootstrapping of the network. And, on top of that, the dynamics of product use cases created virality, helping us to gain users faster. These two things helped us grow fast.
Shashank Mehta: For us, it was the technology aspect of fintech itself that became our key differentiator. When we started Razorpay, five years back, almost everyone told us that the space was crowded, there were already a number of established players leading the race, and there was hardly any scope left for innovation. But, what we also heard from the market was that their system crashed when they had 10 transactions per second. This, to us, was the opportunity to innovate. Instead of looking at adding new features, we focused on ensuring how our systems could process more transactions than anyone ever could. But, this is just one tiny example of how technology has been the core differentiator for us in our journey.
Gaurav Chopra: In consumer credit, there is no shortage of demand or supply. It’s not a winner takes all market. But, at the same time, you want to differentiate yourself. So, we stuck to the basics of lending - have good control on the creditors. And today, even though we operate as a marketplace, we don’t take any balance sheet risk. We are probably the only player in the market that doesn’t have first loss or second loss guarantees with our creditors.
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