India Fintech 3.0: UPI, lending, compliance, and GenAI with Sanjay Swamy, Srikanth Rajagopalan and Anshul Rai

Sanjay Swamy who is currently the managing partner at Prime Venture Partners, a leading fintech entrepreneur himself, helmed roles such as chairman and co-founder, Ezetap by Razorpay) and CEO, mChek, earlier.

Srikanth Rajagopalan is currently the CEO of Perfios Account Aggregation, an off-shoot of the Perfios legacy. A veteran of India’s payments domain, he set up and scaled businesses at Amazon, American Express, and Nokia, as well as seed-stage startups such as ngpay (which was later acquired by Flipkart).

Anshul Rai is the co-founder and ex-CEO of Happay; his claim to fame is Happay’s celebrated exit to CRED for $180 million.

In this episode, the three fintech stalwarts chat about the impact of UPI’s 10 billion-12 billion transactions per month, the India Data Privacy Act, compliance for fintech startups, and the potential opportunities and impact with AI taking over. A special bonus tip is on the RBI Sandbox and its features that will benefit every fintech entrepreneur in India today.

Opportunities for future fintech entrepreneurs

Swamy says, “There’s a $500-billion credit gap in India today.” Rai describes the SME segment as a big opportunity; he mentions that only $250 billion is met out of the $500 billion-$600 billion credit requirement. 

Rai explains, “I strongly believe that there is a large opportunity for a product-led, SME-focused digital lending company which uses all the public infra now available to digitally underwrite the SME instantly, give a credit line, and then solve that gap.

“It’s very hard for banks to do it right, as their DNA is not tech first and, of course, the tech service providers will try to solve that gap. But the problem with the tech service providers is that they don’t have their ear on the ground. They are not talking to most of the customers directly, so there is a big gap.”

Swamy adds, “One thing that’s different in the whole lending space is, unlike payments, these are not a winner takes all opportunities. If a company has solved a problem and is a successful lender, it does not mean that another company cannot start and solve exactly the same problem.

“Rather, they can solve it probably a little better, maybe in a different geographic region, targeting a different sub-segment of the customer base, etc. So I think lending to me is like the ‘Akshay Patra’, it’s this gift that keeps on giving from an opportunity perspective, and it’s up to entrepreneurs to do that.”

How can Indian companies sell fintech to international markets?

Rajagopalan provides a detailed purview on this crucial startup strategy for startups.

The Perfios journey

"In our experience, we invested in an international team about three to four years back. That team has grown significantly and we’re seeing significant revenue starting now. There is a three-to-four-year lead time between the time that you say yes; I want to press the button on international and then you find the right team, the right partnerships, the right kind of … you know … product partnerships, revenues come, you know, three to four years down the line. So if somebody is going international, the first word of advice I would have is: have a lot of patience. Choose your adjacent markets well and get the right partnerships in place."

Importance of partnerships

"What we figured out and what we learned through experience was that you need very strong local partnerships. Specifically, partners who understand the regulatory environment there and are able to guide you in a way that is compliant and also meets the regulator's requirements. One of the biggest costs that you realise when you go to a different market with a B2B SaaS product is really GTM, that’s where partnerships really help."

The sales process

"The arithmetic works out both from an ARPU perspective and the roadmap to growing that adoption. You should start with one or two products per customer and then build from there and deepen further and further into the workflow. So the trick really is, once you’ve acquired a customer and this is like the basics, right. Once you’ve acquired a customer, an enterprise customer you can then sell three, four, five products for that customer so that you monetize your CAC far better.

So I think the game in markets where there are fewer customers than what we’re typically used to in India is to deepen, to go deeper and deeper and find use cases that you never imagined would have existed. And that goes back to the point of knowing, trying and finding the right partners who can be in the customer's face, you know, week in and week out, and make this happen.”

Compliance, RBI, SEBI

Rai describes in the most crisp manner, “Fintech entrepreneurs have to think compliance day zero, that's the cost of doing business!”

Rajagopalan believes, “Compliance will have a kind of a Darwinian impact on people in the industry. The cost of compliance is going to go up, definitely, but what that means is that people who survive will be the winners in the long term. There will be a natural attrition of people who either don’t have or don’t want to invest that much into staying compliant and building these systems. So I think the net outcome is going to be positive.”

Swamy adds, “I generally look at regulation always and say, look, regulations are black and white. If it’s not stated, it’s black.”

To conclude, Rajagopalan provides a golden tip for all fintech entrepreneurs who are unsure about the regulations. He talks about the ‘RBI Sandbox Program’ that helps entrepreneurs understand the various compliances and supports startups to become regulated entities. He highly recommends every fintech startup to check it out.

Timestamps:

0:00 - Gaps/opportunities for future fintech entrepreneurs

10:42 - Global expansion strategies and data privacy

14:36 - When should fintech startups think of compliance?

23:42 - Regulations, RBI, Sandbox

29:26 - Favourite movies, sports person and conclusion