[TechSparks 2020] Experts come together to discuss the challenges and the future of fintech in India

At TechSparks 2020, experts discussed how Indian fintech is preparing not only to scale, but wants to increase its monthly active users both on the consumer and B2B side.

The COVID-19 pandemic has increased the digital adoption in India. India has close to 15 million SMBs and 300 million families that are in need of fintech solutions according to E&Y. As fintechs find themselves in a sweet spot, the current crisis has increased the financial literacy in underserved communities.

The number of fintechs that have been handling the confidential data of users has also increased. Due to this, regulation and compliance have become important. At TechSparks 2020, a panel of experts came together to discuss ‘Digital India dreams: minimising risk, maximising returns’.

They also spoke about the challenges these companies face in the regulatory environment and how can they wade through it and become stronger.

Ravish Naresh, Founder of KhataBook, said: “Cash flow was the hardest hit and that is what our startup is solving. Our transactions were up 2x. We have 9 million merchants on our platform. There is a lot of depth remaining for fintechs to capture the market.”

India is a consumer market that every global corporate is betting on. Amazon and Walmart have already got a foothold in the country. Despite their presence, nearly 90 percent of India still shops offline. Going digital requires financial inclusion and for that one needs to understand how Indians behave when it comes to savings.

Lizzie Chapman, Founder of ZestMoney, said, “About 78 percent of our applications come from small towns. Smaller towns in India are very resilient. India is twenty countries in one and if you look at the way people use our product, they have bounced back well. Consumer sentiment looks positive and it's a good sign that things are coming back to normal and these are very encouraging signs."

"To give you the numbers, 300 million Indians are yet to get any sort of formal credit. But they are borrowing from somewhere informally and they have the cash flow to service the small ticket loans. People need easy form of credit which is contextual and based on their needs. It is simply the biggest market in the world."

As fintechs scale, they have to also think of remaining cash flow positive. They need to understand how micro entrepreneurs are using social media to sell their products and are using digital solutions to reach customers.

Sampath Swain, Co-founder of Instamojo said, "Turning cash flow positive is the key in fintech and we have done this. Most of the matrix is around 2x growth for the industry. I have a view that more and more businesses from Tier II and III cities will come on to our platform, and in the long run they will increase our revenues.”

“Today, we have 12 to 15 million addressable market size for fintech to go after merchants and micro entrepreneurs. Merchants are also creating their own brand destinations. We want to go after these merchants who want working capital loans of Rs 10,000 for three days," he added.

While these SMBs are going to be adding to India's GDP growth, they need services beyond banking.

Rahul Kothari, CBO of Razorpay, said, “Neobanking is all about payout and payroll. The need is also to provide loans to SMBs. We give loans based on the transaction volumes that they (SMBs) have done with us and on this basis it would be a working capital loan of Rs one lakh to Rs 10 lakh that will be provided. We believe only ten million SMBs is the potential target market for the credit business of ours and this number will grow as we see many more entrepreneurs start their own business.”

All these SMB business owners have to eventually fall under the tax bracket and they are all going digital to file their GST.

"About 12 million businesses have registered under GST and they have a minimum turnover if Rs 20 lakh in revenue. 30 million businesses are in the formal economy. The long tail of SMBs is very long in India and their revenues are low. However, there is a lot of digital traffic because of GST registrations during the holiday season. Fintechs compete with legacy products and physical services. We at ClearTax believe digital and cloud adoption is going up. However, I must warn that thanks to the pandemic, revenues are not growing because of the current situation of the economy and it will take time to recover," said Archit Gupta of ClearTax.

With all these entrepreneurs betting big on India, content delivery network and cloud services company Akamai Technologies believes it can help them achieve scale.

Sumant Narayanan, Head of Business, India, Akamai, said: "There is a lot of upside in fintech in India. Akamai can help them scale by ensuring there is no downtime to their service. We are seeing a lot of organisations reorganising their applications to meet scale and the spiky nature of the traffic."

TechSparks - YourStory's annual flagship event - has been India's largest and most important technology, innovation, and entrepreneurship summit for over a decade, bringing together entrepreneurs, policymakers, technologists, investors, mentors, and business leaders for stories, conversations, collaborations, and connections that matter. As TechSparks 2020 goes all virtual and global in its 11th edition, we want to thank you for the tremendous support we've received from all of you throughout our journey and give a huge shoutout to our sponsors of TechSparks 2020. 

Edited by Megha Reddy